Mining Industry Overview. Boyi Xie March 5, 2012

Transcription

1 Mining Industry Overview Boyi Xie March 5, 2012

2 Michael Porter s Five Forces

3 Outline Products Suppliers/Customers Industry Compe?tors Cost Revenue & profit Overall trends Other factors

4 Products Aluminum Copper Lead Zinc Gold Silver Uranium oxide Diamonds Stainless Steel Materials Iron Ore Coal Aluminum Zinc Diamond Copper Gold Iron ore

5 Marketing & Customers Marke?ng centers of mining companies Sell products at the most advantageous price to make the most of their intrinsic value Act as a source of specialist exper?se Iden?fy value opportuni?es Customer service: Technical assistance Transporta?on, e.g. BHP Shipping, Rio Tinto Marine Customers Jewelry makers. E.g. gold, silver and diamonds Manufacturing/construc?on companies. E.g Hyundai Steel Government Other retailers

6 BHP Billiton BHP Billiton is a global mining, oil and gas company headquartered in Melbourne, Australia and with a major management office in London, UK. It is the world s largest mining company measured by revenue. BHP Billiton was created in 2001 through the merger of the Australian Broken Hill Proprietary Company Limited (BHP) and the Anglo Dutch Billiton plc. (Billiton origins stretch back to 1860) It is now a dual listed company in Australian Securi?es Exchange and London Stock Exchange. It operates a wide variety of mining and processing opera?ons in 25 countries, employing approximately 41,000 people. It has opera?ons on: aluminum, diamonds, iron ore, petroleum, stainless steel, uranium, etc. Mines in: Algeria, Australia, Brazil, Canada, South Africa, USA

7 Rio Tinto Rio Tinto, now headquartered in London, UK (and Brisbane, Australia), was founded in 1873, when a mul?na?onal consor?um of investors purchased a mine complex on the Rio Tinto river, in Huelva, Spain. It is now a dual listed company in Australian Securi?es Exchange and London Stock Exchange. It is one the world leaders in the produc?on of aluminum, iron ore, copper, uranium, coal and diamonds. It also has significant opera?ons in refining, par?cularly for refining bauxite and iron ore. It has opera?ons on six con?nents but is mainly concentrated in Australia and Canada.

8 Vale Vale is a Brazilian mul?na?onal diversified metals and mining corpora?on and one of the largest logis?cs operators in Brazil. It s the largest producers of iron ore, pellets, and second largest nickel; other products include manganese, ferroalloys, copper, bauxite, aluminum. It s listed on stock exchanges of Sao Paulo, New York, Paris, Hong Kong and Madrid. It s also the corpora?on with the most contempt for the environment and human rights and was named world s most evil company.

9 Global 1.$/'44%('/;$06%')%*1+)2($/%)$*01/)%,$9$+,'+0%1+%,$('+,%3/1(%,$.$419$,%$*1+1(8$)%)0/2&&4$,%01% /$*1.$/:%A#84$%0#$%8+,2)0/5%?')%#80%#'/,%75%0#$%&417'4% *"."3!.,)3'!%!%8)7!"!"2)3174."!+%)0.9+),+#)&0+)'+&$'") '+,%&1+$%7$51+,:% Global indices (February 1989=1) Mining companies have con?nued to outperform the overall market While the industry was hit hard by the global financial crisis, mining companies have led the return and gone beyond Dow Jones FTSE HSBC Global Mining Index Source: Bloomberg. BCDC%)'?%/$'4%0$+)81+%8+%0#$%('/;$0%')%&/1?0#% /$712+,$,6%133)$0%75%'%+2(7$/%13%8+*8,$+0)%0#'0%;$90%

10 Global Indices "#$%&'(#)*+)*,-.%)/0 -.$/%0#$%*12/)$%13%0#$%4')0%5$'/6%&417'4%$*1+1(8*%'+,% *'4%0/$+,)%#'.$%*#'+&$,%0#$%8+,2)0/5:%"#$%(8+8+&%!"#$%&'()*"#%)!&%+,-)!").)"+/)+'.)."#)&0+'+)!%)"1)&$'"!"2) Emerging countries con?nued to storm ahead, with demand for resources driven by strong GDP growth, including close to 10% growth in China. 7'*;:%<($/&8+&%('/;$0)%'/$%4$',8+&%72448)#%41+&=0$/(%,$('+,%9/1>$*081+)%?#84$%)29945%/$('8+)%*1+)0/'8+$,6%?80#%*#'44$+&$)%)2*#%')%,$*48+8+&%&/',$%'+,%(1/$% /$(10$%41*'081+):%"#$%*1)0%*2/.$%#')%)#830$,%296% * &%01%920%9/$))2/$%1+%0#$%8+,2)0/5%01%('8+0'8+% Mining market capitaliza?on con?nued to rebound in 2010, with many players *"."3!.,)#!%3!4,!"+5)6+/)4,.(+'%).'+)+7+'2!"2)."#)&0+) 8+,2)0/5%8)%/$*$8.8+&%(1/$%'00$+081+%3/1(%80)%('+5%'+,% recovering the remaining market capitaliza?on lost during the global financial.'/8$,%)0';$#14,$/):%!"#$%&'#$"&($)"&*%#+%8+%0#$%(8+8+&% 8+,2)0/5: crisis and surpassing the level seen at the end of $/'44%('/;$06%')%*1+)2($/%)$*01/)%,$9$+,'+0%1+%,$('+,%3/1(%,$.$419$,%$*1+1(8$)%)0/2&&4$,%01% The total year end market capitaliza?on of the top 40 companies increased by /$*1.$/:%A#84$%0#$%8+,2)0/5%?')%#80%#'/,%75%0#$%&417'4% *"."3!.,)3'!%!%8)7!"!"2)3174."!+%)0.9+),+#)&0+)'+&$'") 26%, with larger gains generally achieved by the smaller companies. '+,%&1+$%7$51+,:% Global indices (February 1989=1) Dow Jones FTSE HSBC Global Mining Index Source: Bloomberg. BCDC%)'?%/$'4%0$+)81+%8+%0#$%('/;$0%')%&/1?0#% /$712+,$,6%133)$0%75%'%+2(7$/%13%8+*8,$+0)%0#'0%;$90% *'2081+%'+,%/8);%1+%0#$%'&$+,':%<($/&8+&%*12+0/8$)%

11 Top 10 Mining Companies Across the top companies, there was a cumula?ve 32% increase in revenue, a 72% increase in adjusted EBITDA and a 156% increase in net profit. New entrant: Coal India. Following its IPO in October 2010, it s the largest new entrant. The big get bigger. They are also diversifying in other direc?ons. For instance, some have begun exploring the benefits of ver?cal integra?on in an anempt to control the en?re commodity value chain from coal mining to steel produc?on to power genera?on. 3A.!).'1&*0$(!'./$!3#&*!+.2D,0*%!3#$0/!'&/4$3! )&103&,0(&30.*!&*+!H2(3!-.2/!+$)/$&(0*%K!3#$!,&/%$(3!!*-#*,/*'1*$%&'DE='10'FGHBA'C%(*#*/($%&.0',..'42"#'24' 3#$!+$)/$&($(!A$/$!C*+0&*!./!L#0*$($!).'1&*0$(7 M,$*)./$!#&(!/$)$*3,5!).'1,$3$+!03(!,0(30*%!0*!N.*+.*! &*+!O.*%!P.*%B!)/$&30*%!'&*5!#$&+,0*$(!0*!3#$!1/.)$((7! "#$!'.6$!D5!3/&+$/(B!(3$$,!).'1&*0$(!&*+!.3#$/(!3.! &)Q20/$!'0*0*%!&(($3(!'&4$(!03!'./$!)#&,,$*%0*%!$&)#! 5$&/!3.!+$3$/'0*$!A#.!3#$!".1!G?!'0*0*%!).'1&*0$(!&/$7 Top 10 market capitalisation ($ billion) 31 December BHP Billiton Source: Capital IQ. Note: EBITDA: earnings before interests, taxes, deprecia?on, and amor?za?on Vale Rio Tinto China Shenhua Xstrata Anglo American Freeport- McMoRan Barrick Gold PotashCorp Coal India 9%.#1:.%&7%2;-201$<% :3/.*%!+$'&*+!#&(!'&+$!>?@?!&!(3&*+!.23!5$&/!-./!3#$! '0*0*%!0*+2(3/57!R)/.((!3#$!".1!G?!3#$/$!A&(!&! 5$&/!".3 (#.A(!' 3#$!($)3 C*!>?@? 1*%*+(* ).11$/! /)28$%& "#$!+0-- 1/.+2)$ 0*!>?@? './$!3# 3/& !3#$!A $'$/%0* 3/&+030. A./,+B!$ Top 40 TS 250% 200% 150% 100% 50% 0% Source: B

12 "#$%&'($)%*+,-)&%&.$(%-'. -./0+&%1232%4$%)'4%5#$%567%5#/$$%(0+$/)%89:;%90<<056+=% "#$%('/D$5%*'705'<0)'506+%6A%5#0/,%7<'*$%?06%"0+56%0)%,6.E<$%5#$%)0F$%6A%5#$%+$G5%<'/&$)5%7<'B$/=%H#0+'%!"#$"%&'()"*+"(,#+-*$#,(./0(*$(1&-%#(,%2*$3(.4546(78( 5#$%567=%9:;%90<<056+I)%('/D$5%*'705'<0)'506+%A./5#$/% )5/$+&5#$+$,=%7.550+&%05%*<$'/<B%'E6J$%5#$%/$)5C%;/0*$%'+,% 7/6,.*506+%0+*/$')$)%0+%0/6+%6/$%4$/$%('K6/%,/0J$/)%6A% 5#$%&/645#%EB%5#$%567%5#/$$C% The Super Majors Step Out During 2010 we saw the top three miners (BHP Billiton, Vale and Rio Tinto) step clear of the rest of the industry. At the top, BHP Billiton s market capitaliza?on further strengthened, pupng it clearly above the rest. The market capitaliza?on of third place Rio Tinto is double the size of the next largest player, China Shenhua, which declined 25% in value during Price and produc?on increases in iron ore were major drivers of the growth by the top three. Top 3 market capitalisation ($ billion) 31 December BHP Billiton Source: Capital IQ Vale Rio Tinto "#$%/)0 L5/$+&5# 7/$,6(0 E0&%)56/B 9*3$(:;(-# &/645#%0 B#&2(A-& )7$+,=%) /'0<4'B% P5%5#$%)' $G5/'*506 76<050*'< 6A%7/6K$*!%<<-=*$,$('+, "#$%46/ (0+0+&%* 7/$))./$ ":)(8:(, 6A%,$<0J$ 5#$0/%*6+.+,$/)56

13 Source: PwC analysis.!"#$%&'"(()*&#+,&-*"+&"*)&#''".+/&0"*&123&"0&4"(&56& -$.$+/$)%0+*-$')$,%12%34567% %0+%:#$%2$'-%'+,% *)(*)?)+/),&963&"0&/"/#$&*)7)+.)?%&.(&0*"C&DE3&-+&/>)& ;-09-%2$'-6%"#$%-0)$%0)%,/$%:9%#0&#$-%;-0*$)%'+,%0+*-$')$,% (*",.'/-"+&7"$.C)?%&F-/>&(*",.'/-"+&.(&D13&"+&/>)&G#'H& 9<%$=;'+)09+%;-9>$*:)%'+,%:#$%-$:/-+%:9%</88%*';'*0:2%12% Production and Revenue Source: PwC ):-$+&:#%9<%0-9+%9-$6!121(34,.'+0/,& 5,--,./0*% E($')/-$F 6,7(81( 74,.'+0/,&( E(08809+F 59:&;$(<4,-( 09$(74/,4(*$:4( DGHII J EHF K-9+%9-$%E:9++$)F JDL DL M98,%E:9++$)F 4H B N'/=0:$%E:9++$)F HC DC O9:')#%E:9++$)F D4 4C P0*Q$8%E:9++$)F D H O8':0+/(%E9/+*$)F H C R0+*%E:9++$)F 4 C S0'(9+,)%E*'-':)F DH EDF K+*-$')$)%0+%;-9,/*:09+%'*-9))%:#$%19'-,%'-$%$.0,$+*$,% '19.$G%T0:#%9+82%*9;;$-%'+,%,0'(9+,)%)#9T0+&%,$*80+$)6% A 5% increase in overall produc?on The increase in produc?on is led by iron ore. More than global economic growth but less than the economic growth in the developing countries!"#$!"#$%&'($%#')%*#'+&$,%%%%!" Iron ore Bauxite Other Copper 2010 "#$%&-';#%'19.$%)#9T)%'%*9(;'-0)9+%9<%:9:'8%;-9,/*:09+% #$%$&'$()*(+,--,./0* 9<%:#$%"9;%HC%2$'-U9+U2$'-G%/)0+&%9+$%:9++$%9<%*9;;$-% Share ')%'+%$[/0.'8$+:%/+0:G%1')$,%9+%BCDC%*89)0+&%;-0*$)6% of revenue by commodity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ource: PwC analysis. Developing countries are the primary drivers for higher demand Coal Copper Iron ore Gold Bauxite Fertilizer Nickel Platinum Zinc Diamonds Other metals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otal production (Using Copper eq

14 Cost Costs are going up across the board Bumper profits have fuelled labor unrest New and replacement equipment Haul truck?res alone had tripled New taxes and royal?es is pushing up regulatory compliance costs

15 Cost Educa?on, such as mining major Long term infrastructure investment, including railways, ports, community housing and schools High commodity prices are driving shortages in equipment, labor and other key inputs, pushing costs up. This means mining companies must walk a?ghtrope between ramping up volumes to meet demand and containing their costs.

16 Mergers and Acquisitions The global mining industry '()()*&+,-&./%"&0#"1'/2&%).&0%"1/2&3%""4& becomes increasingly more &56&78559&:#"%;("/&<%=(;%"&'%3>/;2&?(""& consolidated &./%"'%>/32&;#&=3#<//.&<%1;(#12"49 )*+,"-./01"2&#" "-)/)"*55.657)("(6/458"01)"& 1,379 deals worth $71 billion >B"*5("=CB"1481)/"01*5"01)"9/,0"1*+<".<"=>#>?"D5"*5" were announced during the first half of &7B&C(*C/3&;C%)&7858&%).&577B&%).&D7B&C(*C/3& >>'?"E."F60"014,"450."F)/,F)704A)$"7.5,4()/"01*0" "(2/.&0#"1'/2&'%>/&7855&;C/&$12(/2;&4/%3&#E&+,-&()&;C/& Deals volumes and aggregate ".<"01)";45458",)70./"H;./)"</)5I4)("01*5")A)5"=>>&JK?" values were 10% and 25% higher than the first half of &4/%3&G"%3*/"4&%2&%&3/21";&#E&1)</3;%();4&()&$3#%./3& "&'%3>/;2H9&-2&./=(<;/.&()&I(*13/&J&#)&;C/&E#""#?()*& &./%"&0%"1/2&%).&0#"1'/2&C%0/&%"3/%.4&./<3/%2/.&$4& &%).&$%#&'#);C&#0/3&'#);C&()&K1"4&%).&%&E13;C/3&& million, a 40% increase over &%).&./%"&0#"1'/2&C%0/&./<"()/.&$4&"&#&9 The average deal value during the first half of 2011 was $ )/*8)"()*+"A*+6)"(6/458"01)"9/,0"1*+<".<"=>##"-*," -..-/01&%&(*#&()<3/%2/&#0/3&78589&I#3&=1$"(<"4&& %3*/;2@&;C/&%0/3%*/&=3/'(1'&#0/3&;C/&.%4&=3(#3&;#& )</'/);&2C%3/&=3(</2&?%2&5AB9&M3/'(1'2&0%3(/.& )/*3+G"3G"0*/8)0",4I)L"M./"2C>>";4++4.5N"*7O64,404.5,$" Global mining M&A volume and aggregate value Figure 1: Global mining M&A volume and aggregate value US$ (millions) 3,000 2,500 2,000 1,500 1, FY2005 FY2006 FY2007 Source: Capital IQ, PwC Analysis FY2008 FY2009 Total number of transactions FY2010 1H H 2011 Total deal value ($mm) Figure 2: Global mining M&A (1H 2011) by transaction size 180, , , , ,000 80,000 60,000 40,000 20,000 0 Number of transactions

17 Announced Date Massey Energy Company, through its wholly owned subsidiary, A.T. Massey!$%%#&'(#%$#)*'+,*#-././0#12,* H Top 10 Global Mining Deals 01/28/2011 Massey Energy Announced 01/11/2011 Target Consolidated Thompson Target Consolidated Description Thompson Iron Mines Limited, a mining company, engages in Target Canada Transaction C$4,900 Target Steel Acquirer Cliffs Natural Date Iron Mines Limited the exploration and development of mineral properties in Canada. Headquarters Value Resource Resources (millions) Type Incorporated 05/02/2011 International Coal Group, International Coal Group, Inc. produces coal in northern and central 01/28/2011 Massey Incorporated Energy Massey Appalachian Energy regions Company, of the through United States. its wholly owned subsidiary, A.T. Massey Corporation Coal Company, Inc., produces, processes, and sells bituminous coal primarily 04/14/2011 KazzInc Kazzinc the United JSC States. primarily produces zinc with copper, precious metals, and lead credits in Kazakhstan. 04/24/2011 Equinox Minerals Limited Equinox Minerals Limited engages in the mining and exploration of mineral properties. 06/10/2011 PT Bumi Resources PT Bumi Resources Minerals Tbk, through its subsidiaries, engages in the 01/11/2011 Consolidated Minerals Tbk Thompson Consolidated exploration and Thompson development Iron Mines of mineral Limited, properties a mining Indonesia company, and engages in west in Iron Mines Limited the Africa. exploration and development of mineral properties in Canada. 02/03/2011 Fronteer Gold 05/02/2011 International IncorporatedCoal Group, Incorporated Fronteer Gold Inc. engages in the acquisition, exploration, and development of International mineral resource Coal properties Group, Inc. in produces Canada, the coal United in northern States, and and central Turkey. Appalachian regions of the United States. 04/14/ /02/2011 KazzInc Companhia Brasileira de Kazzinc Companhia JSC Brasileira primarily de produces Metalurgia zinc e with Mineração copper, engages precious in metals, the extraction, and lead Metalurgia e Mineracao credits processing, Kazakhstan. manufacture, and marketing of niobium-based products. 06/10/2011 PT Bumi Resources Minerals Tbk 02/03/2011 Fronteer Gold Incorporated Target Target Description Target Headquarters Corporation Coal Company, Inc., produces, processes, and sells bituminous coal primarily in the United States. 04/24/2011 Equinox Minerals Limited Equinox Minerals Limited engages in the mining and exploration of mineral properties. PT Bumi Resources Minerals Tbk, through its subsidiaries, engages in the exploration and development of mineral properties in Indonesia and in west Africa. Fronteer Gold Inc. engages in the acquisition, exploration, and development of mineral resource properties in Canada, the United States, and Turkey. Transaction Value (millions) Target Resource Type Acquirer United States US$8,500 Coal Alpha Natural Resources, Incorporated Australia C$7,300 Copper Barrick Gold Corporation United States US$3,400 Coal Arch Coal United States US$8,500 Coal Alpha Incorporated Natural Resources, Kazakhstan US$3,200 Zinc Incorporated Glencore Australia C$7,300 Copper International p Barrick Gold Corporation Indonesia US$2,100 Diversified Bumi plc Canada C$4,900 Steel Metals and Cliffs Natural Mining Resources Incorporated Canada C$2,300 Gold Newmont Min United States US$3,400 Coal Arch Corporation Coal Incorporated Kazakhstan Brazil US$3,200 US$1,950 Zinc Diversified Glencore POSCO, Sojit Metals and International Corporation, p Mining Steel Corpora Indonesia US$2,100 Diversified Bumi Holdings plc Inco Metals and The Japan Oi Mining and Metals N Corporation & Canada C$2,300 Gold Newmont Pension Serv Min Corporation 03/02/2011 Companhia Brasileira de Metalurgia e Mineracao Companhia Brasileira de Metalurgia e Mineração engages in the extraction, processing, manufacture, and marketing of niobium-based products. 06/22/2011 Vale Fertilizantes SA Vale Fertilizantes S.A. produces and supplies phosphate- and nitrogen- based inputs for the production of fertilisers and inputs for chemical companies in Brazil. 06/15/2011 Drummond Company, Inc., Colombian Mining Operations and Related Infrastructure Drummond Companys, Colombian Mining Operations and Related Infrastructure comprises coal exploration properties with probable reserves of about 2 billion net tons. Brazil US$1,950 Diversified Metals and Mining Brazil US$1,390 Fertilisers and Agricultural Chemicals POSCO, Sojit Corporation, N Steel Corpora Holdings Inco The Vale Japan S.A. Oil and Metals Na Corporation & Pension Servi Colombia US$1,524 Coal Itochu Corpor 06/22/2011 Vale Fertilizantes SA Vale Fertilizantes S.A. produces and supplies phosphate- and nitrogen- based inputs for the production of fertilisers and inputs for chemical companies in Brazil. Brazil US$1,390 Fertilisers and Agricultural Vale S.A.

18 2011 1H Top 10 Global Mining Deals et ource Acquirer Acquirer Description Acquirer Headquarters Transaction Status (as at August 8, 2011) l Alpha Natural Resources, Incorporated Alpha Natural Resources, together with its subsidiaries, engages in the production, processing, and sale of coal in the United States. United States Closed per Barrick Gold Corporation Barrick Gold Corporation engages in the production and sale of gold, as well as related activities, such as exploration and mine development. Canada Closed l Cliffs Natural Resources Incorporated Cliffs Natural Resources, a mining and natural resources company, produces iron ore pellets, lump and fines iron ore, and metallurgical coal products. United States Closed l Arch Coal Incorporated Arch Coal engages in the production and sale of steam and metallurgical coal from surface and underground mines located throughout the United States. United States Closed Glencore International plc Glencore International plc, together with its subsidiaries, engages in producing, sourcing, processing, refining, transporting, storing, financing, and supplying commodities to industries worldwide. Switzerland Announced rsified als and ng Bumi plc Bumi plc, through its subsidiaries, engages in the exploration, mining, and processing of coal and other minerals in Indonesia and West Africa. United Kingdom Announced Newmont Mining Corporation Newmont Mining, together with its subsidiaries, engages in the acquisition, exploration, and production of gold and copper properties. United States Closed rsified als and ng POSCO, Sojitz Corporation, Nippon Steel Corporation, JFE Holdings Incorporated, The Japan Oil, Gas and Metals National Corporation & National Pension Service JFE Holdings, Inc., through its subsidiaries, engages in steel and engineering operations in Japan. National Pension Service is a pension fund manager. Nippon Steel Corporation, through its subsidiaries, engages in the manufacture and sale of steel and related products in Japan and internationally. POSCO engages in the manufacture and sale of steel products in South Korea and internationally. JFE Holdings Inc.: Japan National Pension Service: South Korea Nippon Steel Corp.: Japan POSCO: South Korea Announced Sojitz Corporation operates as a general trading company worldwide. Sojitz Corporation: Japan ilisers Japan oil, Gas and Metals National Corporation provides financial assistance, technology development, technical support, stockpiling, gathering/providing information, mine pollution control, and overseas field survey services in Japan. The Japan Oil, Gas and Metals National Corporation: Japan Vale S.A. Vale S.A. engages in the exploration, production, and sale of basic metals in Brazil. Brazil Announced cultural micals l Itochu Corporation ITOCHU Corporation operates as a general trading company primarily in Japan and internationally. Japan Announced

19 -)12"'(#3".)4#+#$#)#+$)H&.('#<*#)(1)5"617")(!")7*+*+8) 9.)71.()#6%&*.*(*2")+#(*1+)/5:)$"#<)2#<&"0=)K1.()$"2"<1D"$) )5&:"'.)#'")"OD"6("$)(1)'"7#*+)61+."'2#(*2")(!'1&8!)(1) +$= Mergers and Acquisitions The US overtakes Canada and Australia to become the mining sector s most acquisi?ve na?on ()*"+,-(.(-%"/+'")*,()*)0%")(11*2*3-"(3"45667"83-(-(*'" &#'("'"$)*+)(!"),+*("$)-(#(".)/,-0)12"'(113)4#+#$*#+).)(1)5"617")(!")7*+*+8)."6(1'9.)71.()#6%&*.*(*2")5&:"'.) by value. )7#'3"().!#'";)5:)2#<&"0=)>&:"'.)?'17)(!"),-)#++1&+6"$) %"&'())(*+)*+)#6%&*.*(*1+.;)","#)!*8!"')(!#+)$1<<#') )#++1&+6"$)$&'*+8)(!")"+(*'")@ABA)6#<"+$#'):"#'=)C1&') )(1D)("+)$"#<.)1?)(!")!#<?E:"#')F"'")<"$)5:),-)5&:"'.;) 1?)F!*6!)F"'")5*8)5"(.)1+)'*.*+8)$"7#+$)?1')(!")3":) #3*+8)*+8'"$*"+(.)7"(#<<&'8*6#<)61#<)#+$)*'1+)1'"G 101% higher than the en?re Buyers from the US announced over $21 billion in acquisi?ons, #)I#(&'#<)J".1&'6".)#6%&*'"$)K#..":)L+"'8:)?1') "<(00(=3">+"46?"@2*A($A"-="-B*"'B+2*"@2(,*"-B*")+%"@2(=2"-=" ++1&+6"7"+(0=)M+)#)%&".()(1)5&*<$).6#<";)H<D!#)'"D1'("$<:) )1&()?"<<1F)H7"'*6#+)H'6!)41#<)(1)."6&'")(!")$"#<=) Four of the top ten deals of were led by US buyers. "#$%#&'()'*+&,-./0-,&,-#&1.2345',4.5&3#,)##5&./6&&.&1.27'54#+&)'+&+,6',#0418&,6'5+9.62',4.5'(&'5:&.27#((4508;&C0@B+"DB(*1"8E*,$-(.*"F1G,*2"H*.(3" 2$-,BG*0)"'-+-*)7&!"#&)#5,&45,.&,-#&76.1#++&)4,-&'5&#*#& )'6:&) &'5:8&',&,-#&#5:&.9&,-#&:'*&)#&:4:&#2#60#& 41,.64./+&'5:&)#$6#&'3+.(/,#(*&:#(40-,#:&,-',&)#&:4:<; Big bets on rising demand for the key steelmaking ingredients, metallurgical coal and iron ore..)i#(&'#<)j".1&'6".)#6%&*'"$)41+.1<*$#("$)n!17d.1+) "J(3*'"1=2"D9K7L"<(00(=3">+"M5?"@2*A($A"-="-B*"'B+2*" )(!")$#:)D'*1')(1)(!")#++1&+6"7"+(;)"O6<&$*+8)6&''"+6:) Global M&A Activity Figure Market 10: Global Share M&A of Deal Activity Values Market by Geography Share of Deal Values by Geography (1H 2011) (1H 2011) Other 35% India China 7% Brazil 3% United Kingdom 1% Source: Capital IQ, PwC Analysis Australia 4% United States 31% Canada 19% Figure 11: Change in Share of Global Mining M&A Market: 1H Change 2011 vs in Share FY 2010 of Global (measured Mining by M&A aggregate Market: 1H deal 2011 values) vs FY 2010 (measured by aggregate deal values) India

20 J"&'(+%/.*)(E"&'"+%#&(E%&%&'(2"$1"$#.%"&K/(<EE2?( #6;-%/%.%"&("G(E"&'"+%#&(6"0%&'(6"#+(7%&*$(LMN(2"#+(G"$( DEFG"-+::+.$H"DIJKLG"-+::+.$"+$"75*&"<:6*"DMG"-+::+.$"+$" 6"&,*$.%4+*(4"&)/(<1+-/(#(G-.-$*(1$%6*(#)O-/.7*&.(4#/*)(( "&(G-.-$*($*/*$,*(6#+6-+#.%"&/?8!""N57C:6*%)'"4&+$'*'"O6PQ*+8'"9.:6-'*"?')'"$.%"/.)":57C"( "G(#()*/%$*(G"$()*#+I7#0%&'8(P&(G#6.A(BCDD(/#:(&-7*$"-/( 23%&*/*I+*)(.#0*",*$(#..*71./(.3#.(G#%+*)()-$%&'(,#+-#.%"&( &*'".%#.%"&/8(Q:"(&".#4+*(*=#71+*/(#$*R( Mergers and Acquisitions I((P&(*#$+5(F1$%+A(E%&7*.#+/(S*/"-$6*/(7#)*(#&(-&/"+%6%.*)( E%&*$#+/A(#(6"11*$(7%&*$(:%.3($%63($*/*$,*/(%&(T#74%#(( #&)(!#-)%(F$#4%#8(U+.%7#.*+5A(E%&7*.#+/K("GG*$(:#/(.$-71*)( OP"T5))+7C"U.:8R*"4DJLI"O+::+.$".//')3"5"7.6$%').//')"%&5%" 1$"71.*)(E%&7*.#+/(."($*.$*#.A($#.3*$(.3#&(*&'#'*(%&(#( 4%))%&'(:#$8( In the first six months of 2011, Chinese en??es announced 75 acquisi?ons in the global mining sector worth a total $4.7 billion.!"#$%&'()$%*++$'$,%-.%/0''()1%(2%0-*3$%*4'%5*26%*&6(5(26()% 022$225$76%*+%3084$9:%/#%)(F&)$*:(E%63*+7"$*A(23%*G( S,'76%+9'"V/(7')"./"W+$-'%5:*"X'*.6)7'*L"!;*5&$6(7<% =(6#%/0''()1%06%6#$2$%&'()$2%=*48,9%(7%*4'%3($=9%-$%3084$%,$26'4)6(3$>:( 4,000 2,000 0 FY 2000 FY 2001 FY 2002 FY 2003 Source: Capital IQ, PwC Analysis FY 2004 FY 2005 Value FY 2006 FY 2007 FY 2008 FY 2009 Volume Figure Chinese 7: Chinese Acqusitions acqusitions in the in Mining the mining Sector sector (by geography, (by geography, 1H 2011) 1H 2011) Latin America and Caribbean 4% United States and Canada 9% Africa/Middle East 4% Asia/Pacific (Developed) 15% Europe 0% FY H H 2011 Asia / Pacific (Emerging) 68% Despite repeated efforts to extend its geographical reach via M&A, Chinese en??es remained close to home. 68% of acquisi?ons were in Asia/Pacific emerging markets. (Hong Kong listed Mongolian Mining Corpora?on s acquisi?on of Mongolian coking coal miner for $465 million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igure 6: Chinese equity acquisitions in the global mining sector Chinese Source: Capital equity IQ, PwC acquisitions Analysis in the global mining sector (excluding cancelled/withdrawn deals) (excluding cancelled/withdrawn deals) US$ (million) 20, , , , , ,000 8, PwC! 6, , , FY 2000 FY 2001 FY 2002 FY 2003 FY 2004 FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 FY H H 2011 Value Volume Source: Capital IQ, PwC Analysis Number of transactions

21 Government Regulation Government touches all aspects of the opera?ons A lease or license of the right to access the land and extract the product The rights to transport Taxes Produc?on sharing Land rehabilita?on

22 Government Regulation Government around the world are reassessing their approach to the mining sector. It s not simply about taxes anymore. It s about governments striving to take a greater share in every area of the industry. As?me goes on, this may drive mining companies to invest in regions based not only on their poli?cal stability, but also on the stability of their fiscal regime.

23 Sustainability Keeping people safe and healthy Exposure to noise Hazardous materials Isola?on work Disease

24 Sustainability Reducing climate change impacts Engagement in policy development Reducing energy and GHG emissions Managing water use Enhancing biodiversity and land management Vale turned farm lands into mines. It was nominated as the most evil company of 2011.

25 Reference Mine 2011 The Game has Changed. Review of global trends in the mining industry. PWC. Mine 2010 Back to the Boom. Review of global trends in the mining industry. PWC. Riders on the Storm Global mining deals 2011 mid year update. PWC. Tracking the Trends 2012 the top 10 trends mining companies may face in the coming year. Deloine. Mining Market Review. Willis. Spring BHP Billiton Annual Report Rio Tinto Review. Year XX. Some other online public resources.

26 Thank You.