Post on 21-Jul-2020
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
Ivan Glasenberg
Chief Executive Officer
Wonderfontein coal, South Africa
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
4Notes: (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.
Sustainability and governance
Safety
• 4 fatalities from 4 incidents YTD, 3 at focus assets (Kazakhstan/Bolivia)
• 155,000 employees and contractors at the end of 2016
• 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
Environment
• Set group wide emission intensity reduction target of at least 5% on 2016 levels by 2020
• Publication of our second climate change considerations report
• Achieved Level 4 ranking in investor-led Transition Pathway Initiative
• Improvement in sector performance analysis recognisedby CDP
Governance
• Publication of our second payments to governments report
5
2.79
2.54
2.07
1.89
1.60
1.341.40
1.00
2010 2011 2012 2013 2014 2015 2016 2017 H1
LTIFR(1,2) 2010 to June 2017
64% reduction
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
Steven Kalmin
Chief Financial Officer
Koniambo Nickel, New Caledonia
H1 2017 Financial highlights
7
Capital allocation
policy to maximise
value creation
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
… underpinned by
our low-cost, high-
margin industrial
asset portfolio(1)
2016 extensive cost
efficiencies / savings,
sustained into H1 2017. Some
volume and FX variances
offset by higher by-product
credits
Strong H1 2017
financial
performance …
Capital structure
further strengthened
Net debt down 11%
to $13.9bn
Targeting strong BBB/Baa;
underpinned by maximum
through the cycle leverage of
2x, augmented by a Net debt
cap of c.$16bn
Strongly cash
generative at spot
prices(3)
Underpinned by robust
margins in key asset segments
combined with resilient
marketing earnings
74%ND/Adj.EBITDA (x)
FFO/ND (%)
1.07x
2013 2014 2015 2016
Maintain strong
BBB/Baa
Equity cash flows
$1bn fixed distribution
in 2017
M&A + Other
Cu Zn
Ni Thermal
Coal
88c/lb
240c/lb$32/tmargin
Adjusted
EBITDA
+68%
$6.7bn
Adjusted
EBIT
+334%
$3.8bn
Marketing Adj.
EBIT
+13%
$1.4bn
Net
Income
(-$369M H116)
$2.5bn
Funds from
operations
+88%
$5.2bn
Net
funding
-7%
$30.2bn
Net
debt
-11%
$13.9bn
Committed
Avail. Liquidity $14.5bn
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
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
-9c/lb16c/lb pre Au
H1
2017
Fixed and variable
payout basis
commences from
2018
H1 2017 Marketing Adjusted EBIT up 13% to $1.4bn
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
• Up 15%, reflecting improved coal marketing conditions. 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 $214M, reflecting the impact of a record Australian crop on local origination and Viterra handling operations. Grain, oilseeds, cotton and freight marketing all performed well in a generally challenging pricing environment.
8
852
1,048
252
291115(2)
107(3)
H1 2016 H1 2017
Metals and Minerals Energy ProductsGlencore Agriculture Corp and Other
(1)
Marketing Adjusted EBIT ($M)
1,368+13%
1,210
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.
2017 Marketing guidance of $2.4-$2.7bn Adjusted EBIT(1)
• 2017 marketing guidance increased a further $100M to $2.4-$2.7bn
• reflects supportive market conditions, resulting in YTD 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 capex requirements underpin resilient and high returns on equity
• Marketing earnings are generated from the handling, blending, distribution and optimisation, in substantial scale, of physical commodities, augmented by arbitrage opportunities
9
0
500
1000
1500
2000
2500
3000
350020
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17F
Long-term guidance range:
+2017: $2.2-$3.2bn
Marketing Adjusted EBIT ($M)
H1 $
1.4
bn
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.
FY
:$2.4
-$2.7
bn
2012 2013 2014 2015 2016 2017
Marketing
Adjusted EBIT
Indexed(2)
Marketing earnings resilience (Indexed 2012=100)
Industrial
Adjusted EBITDA
Indexed(3)
H1 2017 Industrial Adjusted EBITDA up 95% to $5.3bn
Industrial Adjusted EBITDA up 95%, reflecting the significant margin expansion due to higher commodity prices and our attractive low-cost structures. Relatively minor offsets from FX and other cost categories
• Metals and minerals
• EBITDA mining margin of 38% vs 28% in H1 2016
• Up 54%, in line with significantly higher prices over the period (cobalt +109%, zinc +49% and copper +22%). Modest offset from lower production and the associated impact on costs, and the weaker US dollar against various producer currencies
• Energy Products
• EBITDA coal mining margin of 41% vs 17% in H1 2016
• Up 227%, on the back of higher coal prices, margins and production. Realised H1 2017 thermal coal prices were up 50% to 70% period-on-period. Offsetting impact from fuel related inflation, higher royalties and adverse FX movements
10
2,365
3,639
571
1,869
H1 2016 H1 2017
Metals and Minerals Energy Products
Corp and Other
Industrial Adjusted EBITDA
by segment ($M)(1)
5,282
+95%
2,706
Note: (1) Following the sale and deconsolidation of Agricultural Products, Glencore’s proportional share of Glencore Agriculture is now reported through Marketing (-$7M in H1 2016)
2,706
3,527
157
330169 171
158
34 5,282
H1
201
6E
BIT
DA
Price
Volu
me
Co
st
Infla
tio
n
FX
Co
al H
edg
ing
Oth
er
H1
201
7E
BIT
DA
Industrial Adjusted EBITDA
Bridge ($M)Volume: Mutanda weather,
Alumbrera end of mine variability
and oil field depletion
Cost: including lower
grades at Antapaccay
and coal portfolio mix,
in addition to higher
fuel and other energy
costs
FX:
ZAR: -14%
KZT: -8%
AUD: -3%
COP: -6%
Development of industrial mining unit cash costs/margins
11
CuCosts (c/lb)(1)
ZnCosts (c/lb)(1)
CoalThermal
derived
Costs ($/t)(1)
NiCosts ($/lb)(1)
136 87 89 88 86
250
221
261
290
2015A 2016A 2017Guidance
H1 2017A 2017Updated
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.
269 265 248 240 213
516
436 442470
2015A 2016A 2017Guidance
H1 2017A 2017Updated
41
-5 -10 -9 -9
16 10 16 16
8795
122 129
2015A 2016A 2017Guidance
H1 2017A 2017Updated
40 39 44 45 46
1618
28
32 31.0
2015A 2016A 2017Guidance
H1 2017A 2017Updated
$/t Margin
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
• 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
Spot LME c/lb
Ex AuEx AuEx Au
Ex Au
0
2
4
6
8
10
12
14
20
06
20
07
20
08
20
09p
f
20
10p
f
20
11p
f
20
12p
f
20
13p
f
20
14
20
15
20
16
20
17
H1 2017 Industrial capex of $1.6bn; FY 2017 guidance of $4bn maintained
• H1 2017 Industrial capex(1) of $1.6bn
• $1.2bn sustaining capex; $0.4bn expansionary capex
• Expansionary capex focused on Katanga, Mopani and Koniambo
• FY 2017 Industrial capex(1) guidance of c.$4bn
• c.$1bn of expansionary capex primarily progressing Katanga Whole Ore Leach commissioning by end 2017, Mopani’s concentrator/multiple shaft sinking projects and Koniambo rebuild
• Total Industrial capex guidance at c.$4bn per annum over the next three to five years • Including c.$3bn of sustaining capex
• No large greenfield expansion projects
• Well capitalised assets requiring modest capex going forward
• More than $38bn of expansionary capital (c.$66bn total capital) invested in the combined Glencore/Xstrata asset base since 2009
• Heavy capex program now essentially complete
• Technology/infrastructure upgrades at Katanga and Mopani provide permanent capex (and opex) reductions
12
Total Industrial capex ($bn)(2)
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 $9M of Corporate and other capital expenditure
377
36
923
247
Metals &
Minerals
expansionary
Energy
expansionary
Metals &
Minerals
sustaining
Energy
sustaining ($M)
H1 2017
$1.6bn(3)
FY
c.$4bn
Balance sheet further strengthened
• Repositioned capital structure solidifies balance sheet strength and flexibility
• Net funding and Net debt reduced further by $2.4bn and $1.6bn respectively to $30.2bn and $13.9bn over H1 2017
• Committed available liquidity of $14.5bn at 30 June
• RCF refinanced and resized in line with lower funding needs
– 1yr RCF $7.335bn (was $7.7bn) with a borrower’s term-out option (to May 2019)
– 5yr RCF $5.425bn (was $6.8bn) extended by 24 months to May 2022
• 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 through the cycle, augmented by a upper Net debt cap of c.$16bn, being 2017’s opening Net debt position
• Robust cash flow coverage ratios at 30 June(1):
– FFO to Net Debt of 74%
– Net debt to Adjusted EBITDA of 1.07x
• Optimised capital structure provides less risk, more flexibility and stability of distributions
13
Net debt ($bn)
FFO to Net debt
28%
29% 29%
33%30%
26%25%
50%
74%
H12013
FY2013
H12014
FY2014
H12015
FY2015
H12016
FY2016
H12017
34.8
35.8 37.6
30.5
29.6
25.923.6
15.513.9
10
15
20
25
30
35
H12013
FY2013
H12014
FY2014
H12015
FY2015
H12016
FY2016
H12017
49.2
52.2 54.4
49.847.3
41.239.0
32.6 30.2
H12013
FY2013
H12014
FY2014
H12015
FY2015
H12016
FY2016
H12017
Net debt to Adjusted EBITDA
Net funding ($bn)
2.8
2.7
2.8
2.4
2.7
3.02.9
H12013
FY2013
H12014
FY2014
H12015
FY2015
H12016
FY2016
H12017
1.07x
Targeting maximum
2x augmented by
Net debt cap of
c.$16bn
Manage around
Net debt cap of
c.$16bn
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
H1 2017 Capital allocation
Maintain strong
BBB/Baa
Equity cash flows
$1bn fixed distribution
in 2017
M&A + Other
• Our capital allocation framework balances the 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)
– $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 Industrial free cash flows
• Fixed and variable distribution components to be confirmed 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
– 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
14Notes: (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.
(2)
(3)
End ND: $13.9bn (down $1.6bn)
• 1.07x ND/Adj.EBITDA
• 74% FFO/ND
• Baa2/BBB
Start ND:
$15.5bn
• 1.51x
ND/Adj.EBITDA
• 50% FFO/ND
• Baa3/BBB-
Distribution: -$0.5bn
• $0.5bn second
tranche to be paid in
September
(1)
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
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
Ivan Glasenberg
Chief Executive Officer
Raglan Nickel, Canada
• Not all commodities are equal; differentiation is increasingly important
• Key emerging markets are maturing
• The early cycle commodities that 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
• Our “Tier 1” commodity portfolio of metals, thermal coal and agricultural products is well placed to benefit from this transition
16
0
20
40
60
80
100
0 5 10 15 20 25 30 35 40 45 50
$US GDP per capita (real 2010)
Mid cycle
Late cycle
GLEN Peer 1 Peer 2 Peer 3 Peer 4
Early Cycle Mid Cycle Late Cycle
Iron O
re, C
okin
g c
oal,
Manganese
Cobalt,
Oil/
Gas, P
GM
s
Dia
monds, T
herm
al C
oal,
Agricultura
l pro
ducts
Copper,
Zin
c, N
ickel,
Alu
min
ium
, Lead
Glencore most exposed to mid
and late cycle commodities(2)
Illustrative commodity intensity
curves(1)
Early cycle
Com
moditie
s w
eig
hte
d b
y contr
ibution to 2
018F
EB
ITD
A
Notes: (1) Stylised intensity curves based on developed countries, indexed to 100 at maximum. (2) Source UBS, commodities weighted by contribution to 2018F EBITDA
The commodities that fuel maturing economies are changing
Supportive fundamentals for our key commodities
• Near-term
• Most synchronised global economic growth environment in the last six years
• Solid demand and limited/no supply growth has underpinned a more favourable pricing environment
• Ongoing expansion in global manufacturing activity indicates supportive conditions for commodities into H2 2017
• The “greening” of the global economy is underway, underpinned by policies to curb greenhouse gas emissions and air pollution
• The government led Electric Vehicle Initiative(1) has set a goal for 30% electric vehicle market share for passenger cars, light commercial vehicles, buses and trucks by 2030.
– This represents more than 26 million vehicles based on 2016 passenger and commercial vehicle sales of c.87M units(2)
• The electric vehicle/energy storage system transition is expected to unlock material new sources of demand for enabling underlying commodities including copper, cobalt and nickel
17
56.3
52.1
56.6
58.1
51.4
50
Jul-16 Apr-17 May-17 Jun-17 Jul-17
0.1
0.2 0.4
0.7
1.3
2.0
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
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.
2 million electric cars so far (battery and plugin hybrid EV)(5)
Estimated electrification impact
per vehicle (avg NMC battery)(6)
China: 0.65M
USA: 0.56M
Japan: 0.15M
Key commodity prices
(Indexed Jan 2016)(4)
Global Manufacturing
expansion (PMI indices)(3)
80
130
180
230
280
330
80
130
180
Jan-16 Jul-16 Jan-17 Jul-17
Cobalt (RHS)
Copper
Germany
China
Japan
USA
EurozoneNEWC thermal
coal
Zinc
Million
vehicles
40-50kg
Ni5-15kg
Co
50-75kg
Cu+ Cu for charging
point
+ Cu for grid
access
2012 2013 2014 2015 2016 2017
Marketing
Adjusted EBIT
Indexed
Well positioned for the future
18
Earnings diversified by
commodity and geography(1)
North
America
South
America
South Africa
CIS
Australia
Europe
Other Africa
Coal
Copper
Zinc
Nickel
Ferro
alloys
Oil
Marketing
The right commodity mix to
feed the changing needs of
maturing economies
Outstanding costs for our
key commodities – 2017F(2)
Significant low cost
growth potential:
Well capitalised asset base:
c.$38bn expansionary
capital since 2009
Resilience of marketing
earnings (3)
Maximizing value creation
through capital allocation
Highly FCF generative at
spot annualised prices (4)
Cu+c.400ktpa
Zn+c.500ktpa
Cu
Ni
Zn
Coal
$4.8bn
$2.6bn
$0.5bn
$4.1bn
Spot EBITDA $15.0bn
Spot FCF $7.1bn
Maintain strong
BBB/Baa
Equity cash flows
$1bn fixed Marketing distribution
Min. 25% Industrial
distribution
M&A + Other
Cu Zn
NiThermal
Coal
86c/lb
213c/lb$31/tmargin
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
• 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
20
06
20
07
20
08
20
09p
f
20
10p
f
20
11p
f
20
12p
f
20
13p
f
20
14
20
15
20
16
+201
7
c.$4bn
• plus multi-commodity brownfield
growth options when the time is right
-9c/lb16c/lb pre Au
Ind.Other $0.3bn
Mktg $2.7bnIndustrial
Adjusted EBITDA
Indexed
Q&A
Appendix
Katanga Whole Ore Leach project, DRC
H1 2017 industrial mine costs/margin reconciliation
21
Copper Feb Guidance(1) Actual H1(2)
Total copper production (kt) 1355.0 642.9
By-product production from other Depts (kt) -142.0 -75.3
Mopani production (kt) -66.0 -15.0
Net relevant production (kt) 1147.0
Implied H1 production kt (1147/2) 573.5
Actual H1 relevant production (kt) 552.6
Average H1 Cu Price (c/lb) 261 261
Full cash cost (c/lb) -89 -88
H1 Margin (c/lb) 172 173
H1 Margin ($/t) 3793 3815
Implied EBITDA ($M) 2175 2108
Less African Cu (ex. Mutanda) losses(3)
Implied from FY2016 (280/2) ($M) -140
Actual ($M) -173
Adj. EBITDA ($M) 2035 1935
Inventory adjustment and other ($M) -98
Reported H1 Adjusted EBITDA ($M) 1837
Zinc Feb Guidance(1) Actual H1(2)
Total Zinc production (kt) 1190.0 570.8
By-product production from other Depts (kt) -123.0 -59.0
85% payability (kt) -162.0 -76.8
Net relevant production (kt) 905.0
Implied H1 production kt (905/2) 452.5
Actual H1 relevant production (kt) 435.0
Average H1 Zn Price (c/lb) 122 122
Full cash cost (c/lb) -9 -9
H1 Margin (c/lb) 131 131
H1 Margin ($/t) 2885 2881
Adj.EBITDA ($M) 1306 1253
Reported H1 Adjusted EBITDA ($M) 1253
Nickel Feb Guidance(1) Actual H1(2)
Total Nickel (kt) 120.0 51.2
Koniambo (kt) -18.6 -8.0
Net relevant production (kt) 101.4
Implied H1 production kt (101.4/2) 50.7
Actual H1 relevant production (kt) 43.2
Average H1 Ni Price (c/lb) 442 442
Full cash cost (c/lb) -248 -240
H1 Margin (c/lb) 194 202
H1 Margin ($/t) 4283 4459
EBITDA ($M) 217 193
Inventory adjustment and other ($M) 18
Reported H1 Adjusted EBITDA ($M) 210
Coal Feb Guidance(1) Actual H1(2)
Total Coal (Mt) 135.0
Implied H1 production Mt (135/2) 67.5
Actual H1 production (Mt) 61.1
Average Cal17 NEWC price ($/t) 78 78
Portfolio mix adjustment ($/t) -6 -1
Full cash cost ($/t) -44 -45
H1 Margin ($/t) 28 32
Implied EBITDA ($M) 1890 1977
Less coal economic hedging
Implied from FY2016 MTM (225/2) -113
Actual ($M) -158
EBITDA ($M) 1778 1819
Reported H1 Adjusted EBITDA ($M) 1819
Notes: (1) Refer to slides 11,21 and 22 in the Preliminary Results 2016 presentation for February guidance on 2017 full year costs and production. (2) Refer to 2017 Half-year Production Report for actual H1
2017 production. (3) Pending delivery of major transformation projects at Katanga and Mopani.
Illustrative “spot” annualised cashflows
22
Copper(1) Aug
Guidance
Total copper production (kt) 1330.0
By-product prod other Depts (kt) -145.5
Mopani production (kt) -63.0
Net relevant production (kt) 1121.5
Spot Cu price (c/lb) 290
Cost guidance (c/lb) -86
Margin (c/lb) 204
Margin ($/t) 4488
Illustrative EBITDA ($M) 5033
Less African Cu losses(9)
Estimated ($M) -250
Spot annualised Adj. EBITDA ($M) 4783
Zinc(2) Aug
Guidance
Total Zinc production (kt) 1130.0
By-product prod other Depts (kt) -125.2
85% payability (kt) -150.7
Net relevant production (kt) 854.1
Spot Zn Price (c/lb) 129
Cost guidance (c/lb) -9
Margin (c/lb) 138
Margin ($/t) 3045
Spot annualised Adj. EBITDA ($M) 2601
Nickel(3) Aug
Guidance
Total Nickel 115.0
Koniambo -20.0
Net production 95.0
Spot Ni Price (c/lb) 470
Cost guidance (c/lb) -213
Margin (c/lb) 257
Margin ($/t) 5664
Spot annualised Adj. EBITDA ($M) 538
Coal(4) Aug
Guidance
Total Coal (Mt) 132.0
Average Cal17 NEWC price ($/t) 83
Portfolio mix adjustment ($/t) -6
Cost guidance ($/t) -46.0
Margin ($/t) 31
Spot annualised Adj. EBITDA ($M) 4092
$bn
Copper EBITDA(1) 4.8
Zinc EBITDA(2) 2.6
Nickel EBITDA(3) 0.5
Coal EBITDA(4) 4.1
Other industrial EBITDA(5) 0.3
Marketing EBITDA(6) 2.7
Group Adj. EBITDA 15.0
Estimated cash taxes, interest + other -3.8
Capex(7) -4.1
Illustrative spot free cash flow(8) 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 mid-
point 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
2017 Production guidance
23
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
Distribution timetable
24
H2 2017 distribution timetable Jersey Johannesburg Hong Kong
Exchange rate reference date: 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 6 September
Last time for lodging transfers in Hong Kong: 4:30 PM, 7 Sep
Final Distribution record date: 8 September - Close 8 September - Close 8 September - Open
Deadline currency election (Jersey): 11 September
Removal of shares between Jersey and JSE: From 11 September
Exchange rate reference date: 13 September 13 September
Final Distribution payment date: 26 September 26 September 26 September
25
Power generation, Raglan Nickel, Canada