2016 Global Metals, Mining & Steel ConferenceMiami, 10 May 2016
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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
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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 Annual Report 2015.
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
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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
Summary
• Commodity prices now close to pre-supercycle levels
• Record low sector margins are setting the scene for the next price upswing
• Current margins cannot sustain current production levels over medium-term
• Top 5 Diversified capex has fallen from a peak of $71bn in 2012 to $24bn in 2016F
• Structural deficits are returning, led by zinc
• Supply challenges for copper and zinc remain due to resource quality and scarcity at current prices
• We should all reflect on lessons from last cycle
• Return on the $1 trillion invested 2003-15 will be dictated largely by management actions from now
• Growth needs to be redefined as cash flow per share, not production volume
• Glencore is well positioned for the future
• Ongoing de-leveraging is progressing to plan
• Free cash flow >$3bn(1) at spot prices
• Our industrial business is competitively positioned for current low prices
• Our cash flows are underpinned by our unrivalled marketing business
• We produce the “right” commodities
3Notes: (1) Based on industrial unit costs on slide 14 and associated volumes as footnoted on slide 14; mid-point of marketing guidance on slide 12 plus $200M of
marketing D&A. Prices as of 26 February 2016, after taxes and interest of $1.5bn, industrial capex of $3.5bn and $0.1bn of marketing capex. Excludes working capital
changes.
Where are we?
Where are we?
5
0%
10%
20%
30%
40%
50%
60%
70%
Jan 03 Feb 06 Mar 09 Apr 12 May 15 2003 2005 2007 2009 2011 2013 2015
Industry margins are at record lows(1) … … along with commodity prices(2)
Copper
AluminiumNickel
Met Coal
Iron ore
Thermal CoalZinc
Notes: (1) Bernstein European Metals and Mining – January 25, 2016, Mining Industry Average EBITDA Margin. (2) Indexed to 2003, Source: Citi, Morgan Stanley,
Bloomberg, Wood Mackenzie
2003 to 2015
average: 38%
Indexed: 2003=100
How did we get here?
6
0
200
400
600
800
1000
2003 2005 2007 2009 2011 2013 2015
Diversifieds: $470bnBulks: $140bnBase Metals: $196bnPrecious: $199bn
2003 2005 2007 2009 2011 2013 2015
The sector invested > $1 trillion of capex ($b)(1)
Supply in most commodities has increased materially since 2003(2)
Notes: (1) Cumulative capex from 2003 segmented by company type, Source: Citi Research, Morgan Stanley. (2) Annual supply indexed to 2003, Source Citi,
Morgan Stanley, Wood Mackenzie, USGS
+110% Aluminium
+80% Iron ore+79% Thermal coal
+72% Lead
+79% Coking coal
+47% Copper+47% Nickel+45% Zinc
Indexed: 2003=100
How did we get here?
7
… helping to lower mining unit costs(1) … But less than $350bn has been generated in free cash flow as volume driven price declines more than offset lower costs
Notes: (1) C1 cash costs (50th percentile) indexed to 2003, Source Bernstein, Wood Mackenzie, Morgan Stanley. (2) Sector annual free cash flow from 2003 to 2015
- defined as operating cash flow less reported capex. Source Citi Research, Factset.
-20
0
20
40
60
2003 2005 2007 2009 2011 2013 20152003 2005 2007 2009 2011 2013 2015
Copper
Iron ore
Zinc
Thermal
coal
Indexed: 2003=100
$ billion operating cash flow less capex
How did we get here?
8
-4%
-2%
0%
2%
4%
6%
Alu
min
ium
Coppe
r
Zin
c
Le
ad
Nic
kel
Iron
Ore
Cokin
g c
oal
The
rma
l C
oal
2003-2015 CAGR2016F
-600
-400
-200
0
200
400
600
800
Alu
min
ium
Coppe
r
Zin
c
Le
ad
Nic
kel
Iron
Ore
20152016F
Demand is still positive for base metals(1)… … helping to rebalance supply with demand(2)
Notes: (1) Annual demand growth, Source: Wood Mackenzie, Morgan Stanley, Citi Research, Glencore estimates. (2) Market balance of refined supply and demand
for Al, Cu, Zn, Pb and Ni, Source: Morgan Stanley, Citi Research
Surplus
Deficit
Market balance kt (Mt for Iron ore)
The future can be different
• Sector fundamentals remain attractive
• Capex of $1 trillion has generally been invested in long life assets
• Sector has reasonable barriers to entry
• Miners have far greater flexibility on growth capex than any other sector
• Long-term demand outlook for commodities remains positive
• Current reinvestment is insufficient to maintain current production levels over the medium term
• Top 5 Diversified capex has fallen from a peak of $71bn in 2012 to under $24bn in 2016F
• Supply challenges for copper and zinc remain underpinned by resource quality and scarcity at current prices
• Structural deficits returning, led by zinc
• Recipe for better returns
• Recognise damage done when capital is mis-allocated
• Accept impact of production volume growth on pricing
• Accept that volume growth cannot be an end in itself
• Redefine “growth” to mean cash flows/earnings, not production volumes
• Focus investment decisions on actual cash flows not merely NPV
• Properly align management incentives to encourage rational behaviour
• Identify more cooperative opportunities (infrastructure) to increase overall capital efficiency
9
We are well positioned for the future
Prepared for current and even lower prices
11
Copper 25%
Zinc 12%
Nickel 5%
Coal 23%
Oil 2%
Marketing metals 14%
Marketing energy 9%
Marketing agri 6%
Corp and other 4%
Notes: (1) Source: 2015 Annual Report, commodity segmented by EBITDA, geography segmented by destination of the sales counterparty (2) See notes from
Preliminary results presentation 1 March 2016 on Slide 17 and Slide 12
Americas 19%Europe 32%Asia 38%Africa 4%Oceania 7%
Earnings diversified by commodity(1) …• Decisive management of our balance sheet and asset portfolio:
• repositioning our capital structure for a lower price environment – improvement to c.2x ND/EBITDA by year end
• maximising cash flow from our suite of low-cost industrial assets
• Earnings underpinned by our highly cash generative marketing business
• Free cash flow >$3bn at spot prices(2)
• And we remain comfortably cash flow positive at materially lower prices
• Our production cuts preserve the value of our resources for the future
• Significant low-cost optionality in the right price environment: +300kt Cu, +400kt Zn, +100kt Pb, +15Mt coal
• Not all commodities are equal
• Our key commodities are in deficit or transitioning towards deficit
… and geography
Long-term
guidance
range:
$2.7-3.7bn
Historical
guidance
range:
$2-3bn
Unrivalled marketing business and geographic footprint
• Marketing earnings are generated from the global handling, blending, distribution and optimisation of PHYSICAL commodities, augmented by arbitrage opportunities – all of which are less sensitive to flat price movements
• Minimal fixed assets/capex required
• Relatively low effective tax rate
• 2016E EBIT guidance range of $2.4 to $2.7bn
• A unique, low-risk defensive earnings driver
• Working capital’s correlation with commodity prices ensures cash flow is insulated in periods of lower prices
• Average VaR (1 day 95%) of $35M in 2015, representing less than 0.1% of shareholders’ equity
Marketing EBIT ($M)
12
299
295
342
283
227
153
Interest
expense
allocation ($M)
0 1'000 2'000 3'000 4'000
2008
2009
2010
2011
2012
2013
2014
2015
2016F Guidance $2.4-2.7bn
• Targeting 2016 Net funding and Net debt of $32-33bn and $17-18bn respectively
• We remain focused on preserving our investment grade credit ratings
• Targeting BBB+/Baa1 capital structure over the medium term
• Scope and commitment to do more if required
13
Debt bridge ($bn)
Repositioning our capital structure – asset sales on targetD
ec-1
4
Net re
ductio
n
Dec-1
5
An
tapaccay s
tream
Fu
rther
asset
dis
posals
Reductio
n in
WC
and L
T lo
ans
Fre
e c
ash f
low
Dec-1
6 E
Dec-1
7 E
Net
funding
$49.7
Net
funding
$41.2
Net
debt
$25.9
Net
debt
$17
-18
RM
I $15.3
Net
funding
$32-33bn
RM
I $15
Net
debt
$30.5
RM
I $19.2
$1
$4-5
c. $3
$0.5
Net
funding
<$30bn
RM
I $15
Net
debt
c.$
15
$8.5
• $2.6bn of asset disposals announced in April 2016:
• $2.5bn for 40% equity stake in Glencore Agricultural unit
• $100M for disposal of Komarovskoye mine in Kazakhstan
• Completion of remaining sales processes expected this quarter – likely proceeds include a mixture of:
• Cobar and Lomas Bayas copper assets
• Additional precious metals monetisation
• G Rail infrastructure in Australia
• Cash proceeds expected in H2
14
Debt bridge ($bn)
Notes: (1) 2016E copper unit cost calculated on forecast production of 1.24Mt (excludes c.150kt of copper produced as by-product by other divisions (zinc and nickel)). Costs include a credit for
custom metallurgical EBITDA. Costs include TC/RCs and freight. (2) 2016E zinc unit cost calculated on forecast production of 1.03Mt (excludes c.65kt of zinc produced as by-product by other
divisions) adjusted for 85% payability, resulting in payable production of 876kt. Zinc cost includes benefit of Kazzinc averaging as well as a credit to account for custom metallurgical EBITDA. (3)
NEWC adjusted for portfolio mix. Margin can be applied across the full forecast production of 130mt. (4) 2016E nickel unit cost calculated on forecast production of 100kt, which excludes Koniambo.
(5) See notes from Preliminary results presentation 1 March 2016 on Slide 17 and Slide 12 for calculation
Repositioning our capital structure – annualised cash flow generation remains >$3bn at spot prices(5)
Dec-1
4
Net re
ductio
n
Dec-1
5
An
tapaccay s
tream
Fu
rther
asset
dis
posals
Reductio
n in
WC
and L
T lo
ans
Fre
e c
ash f
low
Dec-1
6 E
Dec-1
7 E
Net
funding
$49.7
Net
funding
$41.2
Net
debt
$25.9
Net
debt
$17
-18
RM
I $15.3
Net
funding
$32-33bn
RM
I $15
Net
debt
$30.5
RM
I $19.2
$1
$4-5
c. $3
$0.5
Net
funding
<$30bn
RM
I $15
Net
debt
c.$
15
$8.5
143136
104
2014A 2015A 2016E
• Marketing and Industrial Asset operational and cost performance in line with expectations and cost guidance over Q1 2016
• Impact of a stronger US$ over the year to date largely offset by higher by-product credits
• Ongoing focus on cost efficiencies / reductions via supplier / contractor rates, labour optimisation, consumables reviews etc.
41 41
27
2014A 2015A 2016E
47
44
39
2014A 2015A 2016E
310
269295
2014A 2015A 2016E
Copper costs (c/lb)(1) Coal cost ($/t)(3)
Nickel costs (c/lb)(4)Zinc costs (c/lb)(2)
The future can be different
The future can be different, but the ultimate outcome will be heavily influenced by actions from here onwards
• Capital has not been lost, only the return is uncertain
• Earnings potential can be vastly improved by accepting lessons from 2003-15
• Accept that volume growth adversely impacts price – focus on average not marginal NPV
• Accept that volume growth is not an end in itself – value creation requires cash flow
• Capital allocation need to be more conservative and based on actual cash flows
• Starting point should be that doing nothing on growth is often best outcome
• Shareholders have a vital role to play in this process
15
Q&A
Glencore background
Glencore at a glance
18
Metals and minerals Energy productsAgricultural
products
• Copper
• Zinc/Lead
• Aluminium
• Ferroalloys
• Nickel
• Iron Ore
• Coal
• Oil
Grains
Oils/Oilseeds
Sugar
Cotton
Exploration
Mining /
producing
Processing /
refining
Logistics
Marketing &
trading
Traditional
miners Traders
Exploration
Mining /
producing
Processing /
refining
Logistics
Marketing &
trading
Key facts and figures
• Leading integrated producer and marketer of commodities, with worldwide activities in the production, refinement, processing, third party procurement, storage and transport of those products
• More than 90 offices in over 50 countries; operations comprise around 150 mining and metallurgical sites, oil production assets, farms and agricultural facilities. We employ approximately 160,000 people, including contractors
• Listed on London, Hong Kong and Johannesburg Stock Exchanges
• Current rating BBB- (stable) / Baa3 (stable)Key competitive strengths
• Scale and commodity diversity
• Unique business model, fully-integrated along the supply chain
• Ability to respond to changing industry dynamics
• Core competence in commodity marketing, logistics, risk management and financing
• Leading industrial asset portfolio of diversified operations with strong growth prospects
• Diversified position across multiple commodities, suppliers and customers
• World-class management team, entrepreneurial culture and track record of value creation
2.74
2.49
2.06
1.88
1.58
1.32
2010 2011 2012 2013 2014 2015
Sustainability and governance
Safety
• Regrettably 8 fatalities from 2 events (10 fatalities from
7 events in 2015)
– 2 fatal events both at “Focus Assets”
– Katanga Copper Mine, 7 fatalities in the slope failure
event
• Q1 LTIFR 1.17 (1.32 in 2015), 11% improvement
• Q1 TRIFR 4.55 (5.06 in 2015), 10% improvement
• Continued effort on ensuring leading practice input at
our “Focus Assets”
Governance
• Significant enhancements in our approach to
sustainability and governance implemented in 2015,
including Water Strategy, the Group’s HSEC strategy
and corporate policies and our Crisis and Emergency
Management Policy
External recognition and memberships
• Joined the Plenary of the Voluntary Principles on
Security and Human Rights in late March
• ICMM, UN Global Compact, EITI, PACI (Partnering
Against Corruption Initiative – World Economic Forum)
19
LTIFR(1) 2010 to 2015
Note: (1) Lost time incidents (LTIs) are recorded when an employee or contractor is unable to work following an incident. In the past Glencore recorded LTIs which resulted 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 (historically, prior to merger). From 2014 Glencore records LTIs when an incident results in lost days from the first rostered day absent after the day of the injury. The day of the
injury is not included. 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.
52% reduction
Where we operate
20
Our values
Safety
Our first priority in the workplace is to protect the health and
well-being of all of our people. We take a proactive approach
to health and safety; our goal is continuous improvement in the
prevention of occupational disease and injuries
Entrepreneurialism
Our approach fosters the highest level of professionalism,
personal ownership and entrepreneurial spirit in all our people
while never compromising on their safety and well-being. This
is important to our success and the superior returns we aim to
achieve for all our stakeholders
Simplicity
We aim to achieve our key deliverables efficiently as a path to
industry-leading returns, while maintaining a clear focus on
excellence, quality, sustainability and continuous improvement
in everything we do
Responsibility
We recognise that our activities can have an impact on our
society and the environment. We care profoundly about our
performance in relation to environmental protection, human
rights and health and safety
Openness
We value open relationships and communication based on integrity, co-operation, transparency and mutual benefit, with our people, our customers, our suppliers, governments and society in general
21
Our business model
Explore, acquire &
develop
Our exploration activities
are near to our existing
assets, supporting the
development of brownfield
sites. This approach lowers
our risk profile and lets us
use existing infrastructure,
realise synergies and
control costs. Each
industrial investment
opportunity is evaluated
individually and on its
potential to strengthen our
marketing activities or
industrial assets. Our
approach allows us to build
on our economies of scale,
our familiarity with a
political and cultural
landscape and our
understanding of
commodity dynamics.
Extract & produce
We mine and beneficiate
minerals across a broad
range of commodities,
mining techniques and
countries, for processing
and/or refining at our own
facilities or for sale to third
parties. Extraction and
production of
commodities involves a
long-term commitment
and exposure to risks
relating to commodity
prices, project
development, changes in
sovereign legislation and
community acceptance.
An integral part of our
business is earning our
social licence to operate
from local communities
and host governments.
Process & refine
Our expertise and
technology advantages
in processing and
refining activities
optimise our end
products for a wider
customer base. These
facilities provide
volumes that are utilised
by our marketing teams,
increase our flexibility
and optionality, provide
security of supply and
enable us to gain
valuable market
knowledge. We
purchase and process
additional products as
required from smaller
operators that do not
enjoy the same
economies of scale.
Blending & optimising
Our presence at every
stage of the commodity
chain enables us to
blend and optimise
products, through using
both our own and third
party volumes, and
means we are better
placed to meet the exact
requirements of our
customers. Working with
third party suppliers
provides a fuller
oversight of supply.
This allows us to gain
valuable market and
local knowledge and to
better understand
the balance between
supply and demand.
Logistics & delivery
Our logistics assets allow
us to handle large
volumes of commodities,
to fulfil our marketing
obligations and to take
advantage of demand
and supply imbalances.
We have global storage
and logistics assets in
key strategic locations,
including metal
warehouses accredited
by the LME and
numerous oil and grain
storage facilities. Our
value-added services
fulfils the needs of
customers and
make us a preferred
long-term counterparty.
as well as strengthening
our long-term
relationships.
22
Our board
23
Ivan Glasenberg, CEO
Executive Director H
• CEO of Glencore since 2002
• 30 years with Glencore
• NED of Rusal (HKG)
Non-Executive Director H(C)
• 40 years of experience in the
resource industry
• Non-executive Chairman of
Santos and NED of Amalgamated
Holdings (both ASX)
Non-Executive Director A, R
• Chairman and CEO of First Reserve
• Chairman of Dresser-Rand (NYSE)
• NED of Weatherford International (NYSE)
Senior Independent
Non-Executive Director N(C), A
• Chairman of Bloomberg
• NED of Davita Healthcare (NYSE)
• Member of International Business
Council of WEF
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
Peter Coates
Leonhard Fischer
William Macaulay
Peter Grauer
John Mack
Chairman H
• Former CEO of BP
• Non-executive chairman of
Genel Energy (LON)
Non-Executive Director A(C), N, R
• CEO of BHF Kleinwort Benson
Group S.A. (formerly RHJ
International S.A) (EBR)
• Chairman of Kleinwort Benson
Bank Ltd and BHF-Bank AG
Anthony Hayward
Patrice Merrin
Non-Executive Director H
• Former COO of Sherritt and of former CEO of
Luscar (Canada’s largest coal company)
• Former Chair of CML Healthcare (then TSX)
• NED of Stillwater Mining (NYSE); NED of
Novadaq Technologies (NASDAQ, TSX)
Committees: A Audit; H HSEC; N Nomination; R Remuneration; C Chair
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