Mining teach in: Building a world class mining business

Transcription

1 Mining teach in: Building a world class mining business Peter Kukielski, GMB Member, Chief Executive Mining Simon Wandke, Vice President, Chief Commercial Officer Mining 22 February 2012 Mont Wright, Canada Mont Wright, Canada

2 Disclaimer Forward-Looking Statements This document may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words believe, expect, anticipate, target or similar expressions. Although ArcelorMittal s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the SEC ) made or to be made by ArcelorMittal, including ArcelorMittal s Annual Report on Form 20-F for the year ended December 31, 2011 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise. 1

3 Today s agenda Overview and strategy Mining growth plan Commercial development - growing our product and market portfolio 2

4 Mining business portfolio Key assets and projects Canada Baffinland 70% Bosnia Iron Ore 51% Ukraine Iron Ore 95% Russian Coal 98.3% USA Iron Ore Minorca 100% Hibbing 62%* Non ferrous mine Iron ore mine Mexico Iron Ore Las Truchas & Volcan 100%; Pena 50%* USA Coal 100% Canada AMMC 100% Mauritania Iron Ore exploration license Liberia Iron Ore 70% Algeria Iron Ore 70% Kazakhstan Coal 8 mines 100% Indian Iron Ore & Coal exploration license Kazakhstan Iron Ore 4 mines 100% Coal mine Existing mines New projects / exploration Brazil Iron Ore 100% South Africa Manganese 50% South Africa Iron Ore** Coal of Africa 15.98% Geographically diversified mining assets * Includes share of production ** Includes purchases made under July 2010 interim agreement with Kumba (South Africa) 3

5 Mining now reported separately Segmental EBITDA (US$mn) FCA FCE Long AACIS AMDS Mining Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Segmental EBITDA 2011 Mining 31% AACIS 13% Long South America 10% Flat North America 17% Long North America 1% Long Europe 5% Distribution 3% Flat South America 5% Significant contribution to group EBITDA; more stable than steel EBITDA Flat Europe 15% All raw materials consumed from ArcelorMittal mines that could practically be sold outside the Group are now transferred internally at market prices Production from captive mines (limited by logistics or quality) continues to be transferred at cost-plus to the steel facilities Mining segment reported 2011 EBITDA of $3.1bn based on 28Mt iron ore and 4.9Mt of coal shipped at market prices (internally and externally) Mining segment represents ~30% of Group EBITDA in 2011 Steel segments are now more comparable on a like-for-like basis driving performance improvement New Mining segmentation promotes improved operating decisions and optimal capital allocation 4

6 Comparable margin to peers Mining EBITDA (US$mn) 3500 Iron Ore EBITDA margin FY2011* 80% % % % 500 0% Producer 1 Producer 2 Producer 3 Producer 4 Producer 5 ArcelorMittal* Mining benefited from higher shipments and higher market prices * Notes: ArcelorMittal EBITDA margin based on market-priced tonnes (i.e. excludes cost-plus tonnes from Revenue and EBITDA); Producers include BHP, Fortescue, Kumba, Rio Tinto and Vale. Competitor data sourced from public information and has been prepared on a comparable periodic basis. 5

7 Reserves update Liberia railway

8 Extensive iron ore reserve base Iron ore reserves as at December 31, 2011 Liberia 0% Brazil 3% Mexico 8% Bosnia 1% Ukraine 8% Kazakshtan 5% As at December 31, 2011 Total Ore Reserves Millions of Tonnes % Fe Americas and Africa Canada (excluding Baffinland) 1, Baffinland Canada Minorca USA Hibbing USA Mexico (excluding Peña Colorada) Peña Colorada Mexico Brazil Liberia Sub-Total 3, USA 14% Canada 61% Eastern Europe and Central Asia (1) Millions of Tonnes % Fe Bosnia Ukraine Open Pit Ukraine Underground Kazakhstan Open Pit Kazakhstan Underground Sub-Total Total 3, These reserves constitute the foundation of our life of mine plans including our planned growth strategy A very significant resource base that will constitute the basis for additional potential growth and ensure the sustainability of our operations Total iron ore reserves of 3.8 billion metric tonnes (1) Iron ore reserve estimates for Eastern Europe (Bosnia) and CIS (Ukraine and Kazakhstan) are reported only as aggregated proven and probable reserves as the methodology used in these countries (CIS standards) to estimate the exact degree of assurance and delimitation between the two categories cannot be fully defined. 7

9 Growth plan Mont Wright, Canada, Upgraded railway line linking mine with port at Liberia

10 Mining represents a key growth engine ArcelorMittal iron ore growth plan (MT) ArcelorMittal iron ore production growth plan (KT) 100 Liberia Phase 1 & Cost plus tonnage Marketable tonnage 80 Canada / Brazil % Growth Marketable production Operational effeciency Brow nfield Greenfield 2015 plan Cost-plus production 41% Grow th F 2013F 2014F 2015F Target 10% production growth in 2012 for iron ore Strategic contracts forecast of 16Mt by 2015 Target iron ore ~100MT by 2015 (incl. strategic contracts) ArcelorMittal 2015 iron ore growth plans on track 9

11 With good project returns Estimated capital costs of key planned growth projects* in the iron ore industry (US$/t) Iron ore production and operating unit cost (Index base 100=2011) ArcelorMittal Planned growth Tier 1 Brazil Tier 1 West Africa Tier 1 Australia Tier 1 Australia Iron ore production Operating unit cost ArcelorMittal s iron ore growth projects are competitively placed in terms of capex intensity And well placed on the cost curve Together this means that project returns are attractive even under conservative long-term price assumptions Investments in AMMC and Liberia improves the cost position of iron ore (excluding Baffinland) 2015 iron ore cash costs expected to be ~20% lower than 2011 (constant $ basis) ArcelorMittal s cost of adding iron ore production capacity is comparable to other major producers Sources: Arcelormittal estimates and Citi Group estimates based on public information for competitors Excluding planned greenfield projects (such as Baffinland) and investment in expanding the pellet plant at AMMC which has not yet been committed to. Note: Operating unit costs shown are on a FOB basis 10

12 Iron ore - potential growth beyond current plan Planned and potential iron ore growth targets (million metric tonnes) (Excluding strategic contracts) iron ore target of 84MT (excluding potential projects and strategic contracts) Potential brownfield and greenfield projects under study Base Planned efficiciency gains Planned Brownfield Planned Greenfield Potential efficiency gains Potential Brownfield Potential Greenfield Potential internal growth supported by pipeline of brownfield and greenfield projects 11

13 Coal Business Key assets and projects for coal business Coal mine USA Coal 100% Russian Coal 100% Existing mines New projects Kazakhstan Coal 8 mines 100% Coal production expansion 2015 (Mt) ` 7.0 Coal of Africa 15.98% interest Indian Iron Ore & Steam Coal F 10% Coal production target increase for 2012 Geographically diversified 12

14 Commercial development - growing our product and market portfolio Upgraded railway line linking Liberia mine Crushing/Screening with port Liberia at Liberia railway Plant

15 Business environment IRON & STEEL RAW MATERIALS IRON ORE MET COAL Diverse portfolio of mining assets to meet market demand 14

16 Market-driven commercial strategy: Right Product for Right market BUILD Build a globally trusted brand Position to external global steel industry as preferred alternative in an otherwise concentrated iron ore and coal market supply side Building a balanced (risk, margin) portfolio of global/segment high quality customers Build 'customer driven culture in mining assets Driving commercial market approach in M&A and greenfield growth options Product quality improvement EXECUTE Apply market pricing adjusted for transportation and value in use Developing long term supply relationships with ArcelorMittal steel mills and selected global iron and portfolio of steel producers based on delivering value for customers and our shareholders Maximise sales from core seaborne assets with focus on building share in growth markets Develop external niche customer sales for nonseaborne trade Leveraging logistics, product and market positions beyond selling Strategic alliances which may include customer coinvestments Goal to be a globally preferred supplier 15

17 Commercial segments 2011: Transitioning to commercial independence Commercial approach to mature markets Commercial approach to growth markets Customer Relationship - Technical development Position product suite to grow Market share with selected customers Work with Customer on cost reduction in price sensitive steel demand market MATURE MARKETS Build Long term supply arrangements based on customers strength Develop wide customer base to underpin sales in periods of weaker demand GROWTH MARKETS Improve/ maintain product specification where the Quality of material supply chain is deteriorating Adding growth to strengthen portfolio Mature market: Europe, NAFTA Growth market: China, India, Middle East, Russia and South America 16

18 Canada commercial development ArcelorMittal Mines Canada (AMMC) Primary target market Potential new market Domestic supply Canada (AMMC) Strategic trial in high growth market of Middle East and South East Asian market Iron ore mine AMMC pellet and concentrate production (Million MT) Canada commercial approach Concentrate Pellet 2012 market transition ` 15 Strategic trials in growth markets of Middle East and Asia to meet 2013 production growth F Canada expansion progressing 17

19 AMMC Port-Cartier Pellet Plant Annual production : 9.5 million tonnes of iron ore pellets Port-Cartier, Canada Port-Cartier, Canada Port operates year round and handles 180,000+ tonne ships 18

20 Liberia commercial development Liberia development Liberia commercial development approach Primary target market Phase 1: 4 mtpa DSO Commercial ramp up H Trials at selected ArcelorMittal Steel European plants and a range of Chinese mills Build portfolio of long term contracts which can be transitioned into higher grade Phase 2 product supply from 2015 Once base customers established, develop offshore cape loading Liberia Strategic trials in high growth market of South East Asian market Potential new market Iron ore mine Phase 2: 15 mtpa concentrate from 2015 Develop long term supply contracts to sinter plants Studying opportunities to extend market reach Liberia greenfield planned expansion (Million MT) ` F 2015F Liberia development on track with additional market opportunities under study 19

21 Liberia Strategic Infrastructure Phase 1: DSO 240km rail rehabilitation completed Upgrade of Buchanan port and material handling facilities completed First Direct Shipping Ore ( DSO ) product shipped Sept

22 Ukraine iron ore concentrate commercial development ArcelorMittal Ukraine commercial approach Strategic trials underway in Chinese mills. Use as Pellet Feed or Sinter Feed Building external shipments to 3-4 mtpa; targeting China Product quality enhancement: plan to reduce silica to <5.5% Develop stable and cost competitive logistic options Central and East Europe Ukraine China Ukraine planned expansion (Million MT) Primary target market 16 Ukraine marketable Ukraine non marketable Potential new market Iron ore mine Steel facility 4 0 ` F 2013F Excellent logistics to Central/East Europe and seaborne markets 21

23 Beyond 2015 Baffinland project: feasibility study progressing Background Baffin Island overview In partnership with Nunavut, ArcelorMittal has acquired a controlling interest in Baffinland; ArcelorMittal holding is 70% Baffinland owns the Mary River project, a tier-1 iron ore resource in northern Canada Product: High Grade: Fe 66%, Phos 0.03, SiO2 2.4%, Al2O3 1.2% Significant and scalable resource High quality direct shipping iron ore Aggressive expansion plan Outstanding chemical, metallurgical and handling characteristics No washing, concentrating, jigging; crushing and screening only 75% of output to be DSP: Direct Shipping Pellet and 25% Premium Sinter Fines ore Proposed railway alignment Steensby inlet camp and proposed port Foxe Basin Mary River mine site Baffin Island Baffin Bay Progress Feasibility study underway Ongoing environment discussions Commercial Strategy: Build customer base in Atlantic and Pacific growth markets Optimise customer and market mix based on logistics and value in use for stable long term demand Price products to reflect full value in use premia Steensby Rotterdam = 3100 nautical miles Brazil Rotterdam = 5000 nautical miles Acquisition of Baffinland demonstrates ArcelorMittal s commitment to building a world-class mining business 22

24 ArcelorMittal Coal: CIS coal CIS Coal Strategy Develop long term quality plan to maximise marketable products Building on excellent coking coal characteristics of our Kazakh coals Strong logistics management Sales to customers in Russia, China and CIS Extend sales to North & southern Europe Exploring better utilisation of reserves by entering PCI/Thermal markets Kuzbass/Kazakhstan Sales to high growth market Primary target market New markets Coal mines Kazakhstan production 2011: 4.6mmt clean coal Kuzbass production 2011: 1.2mmt clean coal Build Build external customers CIS: Kuzbass & Kazakhstan 23

25 ArcelorMittal Coal: Princeton, USA ArcelorMittal Princeton was acquired in August 2009 Currently operates three surface mines and four deep mines Coal preparation facilities with 4.5Mt capacity and 3 load out points to local infrastructure 27MT surface and 83MT deep mine proven and probable reserves Production of 2.4MT in 2011, planned expansion to 3.6M tonnes in future Produces high quality coking coal for steel making purposes Low Vol 16%, 8-9% ash, 0.66% S Mid Vol 21%, 8-9% ash, 0.69% S Sales to USA and global seaborne markets Load Out Facilities Sales Ratio 30% 70% Domestic Export Excellent USA and seaborne market access 24

26 Recap We are Customer Focused: We have a range of competitive iron making raw material assets in varied geographies and a wide range of products We are Independent: in an otherwise concentrated Iron making raw materials supply side We are Strong: Funding a strong maintenance and growth capex program to continue to deliver sustainable production growth We are in China: Wide customer base and a Mining team in Shanghai We are building a World-class mining business: We have abundant, high quality iron ore resources, good project returns and a strong global team to execute our market-driven commercial strategy ArcelorMittal is building a world class mining business and is growing rapidly 25

27 Appendix Mont Wright, Canada

28 Reserve definitions Notes on ore reserve estimates The ore reserve estimates have been prepared in compliance with both the SEC and NI requirements. Ore reserve estimates were prepared by competent professional engineers and geologists based on feasibility studies for greenfield projects and on pre-feasibility study level of engineering for existing operations to demonstrate that they can be economically extracted and sold at commercial rate. A commodity price not higher than the last historical threeyear average realized price has been used in any reserve or cash flow analysis used to designate reserves. There is no evidence that the company could not obtain all the required governmental permits and environmental authorizations to conduct the mining operations as currently planned. 27

29 Contacts Daniel Fairclough Global Head Investor Relations Hetal Patel UK/European Investor Relations Thomas A McCue US Investor Relations thomas.mccue@arcelormittal.com Lisa Fortuna US Investor Relations lisa.fortuna@arcelormittal.com Valérie Mella European & Retail Investor Relations valerie.mella@arcelormittal.com Maureen Baker Fixed Income/Debt Investor Relations maureen.baker@arcelormittal.com