Hunter Business Chamber

May 2014
GLENCORE FAST FACTS
• Employ approximately 200,000 people around the world
• Over 150 operations including mining and metallurgical sites, offshore oil production assets,
farms and agricultural facilities
• Global network of more than 90 offices
• Located in over 50 countries

2
Glencore in Australia

Australia is an important part of our global business and we have been successfully
investing in Australia for over 15 years
3
Employing 18,000 people and contributing over $17 Billion to the
national economy

4
12 coal mining complexes producing over 81Mt

5
We are the biggest coal exporter in NSW (& in the Hunter Valley)

Glencore 29%

Rio Tinto 19%

BHPB 13%

Centennial 9%

Peabody

Yancoal

Whitehaven

Idemitsu

Anglo

Vale

Bloomfield

Gujarat

LD Operations

0 10 20 30 40 50 60
Mt

Source: Glencore 6
Why there’s no shortage of bad news…..

7
Price Deterioration
2012-2014

Thermal coal prices (FOB - USD/t)

140 Hard
260 Coking coal prices (FOB USD/t)

130 240

120 220

110
200

100
180
90
160
80
140
70
120
60
100
50

JFY GC Newc Quarterly Spot

Source: Glencore 8
Australian Dollar at historically high levels

1.2

1.0

0.8

0.6

0.4

0.2

0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
• Traditionally, when Australian coal prices fall, the A$ falls
• Low US and European interest rates (near zero), has made the A$ a safe haven for global investors and
remains stubbornly high against other currencies
• Australian producers are therefore getting less for their coal compared to international competitors

Source: RBA 9
1/3rd of Australian coal mines are loss making

USD/t
50 Australian Cash Margin Curve

40

30

20

10

-10

-20

-30
0 50 100 150 200 250 300 350
Million Tonnes

Source: Glencore Margin including $5/t sustaining capital 10

Key industry risks and challenges

License to operate

Coal price and FX

Government regulation

Operating performance

Industrial relations

Project delivery

11
 Delays and uncertainty around project approvals have become a
material risk for future investment in Australia

45
2013
40

35
2010
Time - Months

30 Additional Time for Appeals

25
Additional time for EPBC
20
Time Taken for
15 Determination (Months)
2004
10

At the rate of 120Mt of

ROM coal, Glencore
consumes one large
mine every year

Source: New South Wales Government Department of Planning and Infrastructure http://majorprojects.planning.nsw.gov.au/page/ 12
A little bit of history…..

Supply Cost versus Price Global

GFC

Australian Exports and Coal Price Marginal supply cost

425
400 Aust Total Exports - Mt
375
350
325
Price USD/t Price
300
275 Capacity response
250 exceeds demand
225
200
175
150
125
100
75
50
25
0
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
2014

Iran Oil
Crisis
1971

1974

1984

1994

2004

2007
1970

1972
1973

1975
1976
1977
1978
1979
1980
1981
1982
1983

1985
1986
1987
1988
1989
1990
1991
1992
1993

1995
1996
1997
1998
1999
2000
2001
2002
2003

2005
2006

2008
2009
2010
2011
2012
2013
2014
China becomes net coal
Diversification of Asian electricity generation fleet from oil to coal
importer ~300Mtpa

Source: Glencore 13
Robust export growth….

Australian Exports and Coal Price

425
Aust Total Exports - Mt
400
375 Price USD/t
350
325
300
275
250
225
200
175
150
125
100
75
50
25
0

Source: Glencore 14
Is there light at the end of the tunnel?

What’s different this time?

The global demand for energy will grow

The other coal producing domains have their own issues

Shorter term demand / supply imbalance is correcting?

Glencore is a believer in coal (Clermont completed today)

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World energy poverty is widespread

1.3 billion people in the world live without electricity

2.7 billion live without clean cooking facilities

Sub-Saharan Africa China

8 423
Rest of
Latin America 585 653 developing
India
Asia
31
85 289 379

836
661

Millions of people without electricity

Millions of people without clean cooking facilities
Source: IEA, WEO 2012 16
Emerging economies contribution to global energy demand
IEA – predicted growth in primary energy demand by country

Mtoe
4 500
China
4 000
India
3 500
Other developing Asia
3 000
Russia
2 500
Middle East
2 000
Rest of world
1 500
OECD
1 000
500
0
2010 2015 2020 2025 2030 2035

Global energy demand increases by one-third from 2010 to 2035,

with China & India accounting for 50% of growth
Source: IEA, WEO 2012 17
Global coal production and exports

Major Coal Producers Major Seaborne Coal Exporters

Production Share Exports Share

Country Country
Mt, 2013(e) % Mt, 2013 %

China 3,680 46
Indonesia 414 33
USA 893 11
India 610 8 Australia 356 29
Indonesia 485 6
Russia 116 9
Australia 474 6
Russia 355 4 USA 105 8
South Africa 260 3
Germany 197 2 Colombia 79 6

Poland 144 2 South Africa 73 6

Kazakhstan 116 1
Colombia 89 1 Canada 39 3
Ukraine 88 1
Vietnam 16 1
Turkey 88 1
Canada 67 1 China 7 1
Greece 60 1
Others 39 3
Others 363 5
World 7,970 Total 1,245

Source: Glencore, BP statistics 18

 All the other major coal domains have their issues as well…

USA Russia
Challenge: Higher cost, regulatory change, Asian supply constraints Challenge: Rail distance and capacity
Opportunity: High quality, long life resources Opportunity: Market proximity, high quality

China (deeper/thinner)
Challenge: Transportation to coastal markets, supply cost
Opportunity: Market proximity, strong demand

Indonesia
Challenge: Low quality, increased regulation
Opportunity: Low capex expansions, market proximity

Colombia South Africa Australia

Challenge: Regulatory and stakeholder environment Challenge: Capacity constraints, regulatory burden Challenge: High cost, regulatory burden, distant markets
Opportunity: High quality, low cost Opportunity: High quality, low cost Opportunity: High quality, political stability

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Positive outlook

Coal
Market remains
oversupplied in the near-
term despite strong demand
• Demand expected to remain
solid in key regions amid
high gas prices and a
recovering global economy
• Coal remains the prime
choice to fuel economic
growth in Asia
• Australian and Indonesian
supply growth expected to
be significantly lower in 2014
– capex slashed / projects
suspended
• Medium/long-term upside
intact – coal remains the
lowest cost fuel source for
industrialising economies

Source: Ivan Glasenberg 2014 Global Metals, Mining & Steel Conference, Miami May 2014 20
Clermont acquisition supports Glencore position on continued strong
global demand for coal

New open cut thermal coal mine

currently reaching nameplate capacity
of 12mtpa saleable

Ownership: Rio Tinto 50.1%, Mitsubishi

31.4%, J-Power 15%, JCD 3.5%

Glencore and Sumitomo will takeover

Rio Tinto 50.1% stake
Clermont
Glencore appointed manager for
operating and marketing entity
Financial close anticipated Q2 2014

Low risk, established open cut

operation with relatively benign geology
(172Mt reserve)

Fully established mine with minimal

capital to spend and low sustaining
capital <$2/t due to new fleet

Connected by rail to DBCT (280km)

and Abbot Point (380km)

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END

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