Investor Day 2014: Strategic progress Mining exploiting our potential

Transcription

1 Investor Day 2014: Strategic progress Mining exploiting our potential Bill Scotting, EVP and CEO Mining 10 March 2014 Mary River iron ore project, Baffinland

2 Disclaimer Forward-Looking Statements This presentation 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, 2013 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. Non-GAAP Financial Measures This presentation may contain supplemental financial measures that are or may be non- GAAP financial measures. Definitions of such supplemental financial measures and a discussion of the most directly comparable IFRS financial measures can be found on ArcelorMittal's website at 1

3 Overview Recap Franchise business potential Continued safety improvement Delivering Further growth Solid performance Growth plan on track Cost reduction focus Stretch growth opportunities Low capex intensity Market Marketing strategy Commercialization 2

4 Recap Mining: a franchise business with growth potential Strategic pathway Growth Exploration & development Deliver on project pipeline Customer strategic alliances M&A License to Operate Current Assets Developing people Expansion of resource base Market driven products Improving health and safety performance Optimization Market development Customer relations and solutions Supply chain excellence Production to planned levels at planned cost Meaningful stakeholder engagement contributing to business goals Corporate responsibility supporting sustainability Quality improvement and operational efficiencies Knowledge networks Exploiting our potential 3

5 Recap Solid progress on health and safety and sustainability ArcelorMittal Mining injury frequency rate* On-going focus Trending towards world class performance Continued aim of achieving zero fatalities and serious injuries: Increasing safety awareness with focus on hazard identification and risk awareness for areas/equipment and tasks Further y-o-y improvement in LTIF* and greater focus on total injury frequency rate reduction Manage occupational exposures through control plans to address key exposures from our health risk assessments Demonstrate environmental stewardship by managing and minimizing our impact on the environment Safety remains the No1 priority for ArcelorMittal * World steel association -standard: LTIF = Lost Time Injuries per worked hours; based on own personnel and contractors 4

6 Recap Franchise business potential Continued safety improvement Delivering Further growth Solid performance Growth plan on track Cost reduction focus Stretch growth opportunities Low capex intensity Marketing Marketing strategy Commercialization 5

7 Producer 1 Producer 2 Producer 3 Producer 4 Producer 5 ArcelorMittal Delivering Solid performance with competitive margins Mining EBITDA ($billions) Iron ore EBITDA margins 2013FY* AMMC remains comparable. Liberia margins to improve once move from Phase 1 DSO to Phase 2 sinter feed Iron ore marketable shipments (Million Mt) % ~15% F Growing earnings whilst maintaining competitiveness Definitions: Market priced tonnes represent amounts of iron ore or other raw materials from ArcelorMittal mines that could be sold to third parties on the open market. Market priced tonnes that are not sold to third parties are transferred from the Mining segment to the Company s steel producing segments at the prevailing market price. Shipments of raw materials that do not constitute market price tonnes are transferred internally on a costplus basis. * 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. 6

8 CAPACITY CAPACITY CAPACITY Delivering Strategic continuity: growth on track Target 84MT capacity in 2015 Iron ore production/ capacity* (Million Mt) 49 Production Liberia Phase 1 - Complete 4Mtpa Direct Shipped Ore (DSO) capacity - Achieved 5.2Mt shipments in 2013 AMMC Expansion to 24Mt complete Spirals upgrade, new concentrator, mine and rail upgrade 24Mt production and shipment rate achieved in Dec 2013 Unit costs benefiting from higher volumes Liberia Phase 2 Approved and underway 15Mtpa concentrator capacity to replace existing 4Mtpa DSO operation by end 2015 Revised sinter feed product defined for early years to maximize commercial and cost benefits Stretch potential expansion to 20Mtpa through low capex additions to mine fleet, and rail and port upgrade F 2015F Baffinland Early revenue phase approved and underway 3.5Mt production in ~$730 million capex** Low cash cost and 66%+ premium product Focus on value and growth * Capacity for Baffinland, ArcelorMittal Mines Canada, Algeria and Liberia on 100% basis ** Includes consideration from JV partner (Nunavut Iron Ore) for additional equity stake increase from 30% to 50%. 7

9 Delivering Liberia Phase 1 complete Liberia iron ore production (Million Mt) F Liberia trans-shipment Phase 1: DSO Construction Mine site simple crushing, screening and rail loading facility 240km rail rehabilitation completed Buchanan port and material handling facilities initial upgrade completed Shipment details Costs First DSO product shipped Sept % to Europe and 50% to Asia Shipments of 5.2Mt in 2013 Competitive cash cost Improving with ramp up and offshore transshipment capability Offshore loader Commenced cape size off shore loading Dec 2012 to further increase margins Focus on long haul customers Liberia Phase 1 DSO production exceeding expectations 8

10 Delivering ArcelorMittal Mines Canada (AMMC) Expansion from 16Mt to 24Mt completed Commission of new spirals line at concentrator New trucks and maintenance shop operational Additional rail sidings completed New concentrator completed New stacker-reclaimer and shiploader in commissioning Concentrate production exceeded 2Mt in December 2013 Shipments of Mt in December 2013 Costs benefiting from scale AMMC concentrator 2013 concentrator production by month (Million Mt) Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec 24Mt expansion delivering 9 9

11 Delivering Baffinland Early Revenue Phase Targeting 3.5Mt production rate by 2H 2015 Proposed Early Revenue Phase rationale ERP commenced in 1Q 13 (budget ~$730m) Enables an early mining phase that requires less capital investment than full project, creating training, employment, business opportunities for local region ERP to demonstrate product quality/ ability to operate High grade: 66%+ Fe iron direct shipping pellet and fine ore (no processing or pelletization required); products expected to achieve full premium value ERP components Trucking of ore to Milne Inlet, loading of ore in Milne Inlet, and shipping of ore from Milne Inlet to markets Upgrades of road connecting Milne Inlet and mine site Mining and trucking of 3.5Mtpa from Deposit 1 to Milne Inlet throughout the year Open water season shipping of ore from Milne Inlet First ore to be shipped in 2H 15 product tonnage targeted for Europe ERP on track for first shipments in 2H 15 during open water season * Financing at JV level 10

12 Delivering Relentless focus on cost reduction delivering real savings Cost per ton analysis F (Base 100=2012) AMMC Concentrate -20% Liberia DSO -17% Kazakhstan Coal -16% F F F Relentless focus on costs and capex monitoring 11

13 Delivering Savings from multiple cost reduction levers Volume improvement Organizational levers Gaining economies of scale from debottlenecking Share and apply best practice leveraging internal and external benchmarks Zero based analysis of organization and overhead Delayering the organization Efficiency improvement Optimize mine plans with focus on grade control and recoveries Improving maintenance planning and reliability Operational excellence, rigour and discipline underway across assets Procurement benefit Procurement focus on key category management, shared services and centres of excellence Targeted y-o-y reductions in spares and materials inventories through improved warehouse practices Relentless focus on costs and capex monitoring 12

14 Recap Franchise business potential Continued safety improvement Delivering Further growth Solid performance Growth plan on track Cost reduction focus Stretch growth opportunities Low capex intensity Market Marketing strategy Commercialization 13

15 Further growth Liberia Phase 2 revised with potential to stretch to 20Mt capacity Old phase 2 project: Expansion to 15Mtpa concentrate capacity by 2015 Fully utilizing our wholly owned infrastructure Revised phase 2 project: Product analysis and additional mine planning have identified potential to supply 15Mtpa high quality sinter feed at significantly lower cost than concentrate for first 8-10yrs Investment capex estimate of circa $1.7 billion Stretch opportunity: Better definition of ore body and mine plan confirmed potential to continue DSO phase for additional 6 years Expansion to 20Mtpa capacity* Incremental investments enable benefits of scale on rail, port and SGA Liberia iron ore capacity forecast (Million Mt) Phase 2 revised: 15mt high quality sinter feed capacity by end of 2015 full production ramp up to 15MT in next few years 15 Phase 2 old - 15Mt concentrate 15 Phase 2 revised - Sinter feed Phase 2 old - Concentrate DSO Phase 2 stretch: High quality sinter feed plus 5MT DSO continuation Stretch Phase 2 revised - Revised Sinter feed Maximizing value potential of Liberia investments * subject to final approvals 14

16 Further growth ArcelorMittal Mines Canada... Expansion potential to 30Mt Daily records show potential in system First sustain 24Mt and chase the shifting bottleneck to maximize system potential Incremental investments for debottlenecking as required: Mt Wright mine optimization, Fire Lake expansion (richer ore) and crusher debottlenecking Rail winter reclaim capability, long train capability, additional sidings Additional conveyor capacity at port Significant cost benefits from scale Potential to expand beyond 30Mt at low capital intensity Iron ore production and capacity (Million Mt) 15 Production Completed expansion Potential further debottleneck Spirals 1 Concentrator 8 24 Incremental debottlenecking Potential expansion by 6MT, through low capex intensity F Stretch potential Expansion 30 Maximizing value from use of own rail and port facilities 15

17 Further growth With good project returns Estimated capital costs of key growth projects* in the iron ore industry (US$/t) ArcelorMittal s iron ore growth projects are competitively placed in terms of capex intensity Leverage existing infrastructure and essentially brownfield growth Well placed on the cost curve Project returns are attractive even under conservative long-term price assumptions 0 Attractive low capex intensity / stretch ArcelorMittal planned growth Tier 1 Brazil Tier 1 Brazil Tier 1 West Afica Tier 1 Australia Tier 1 Australia potential targets identified Competitive capex intensity compared to peers Sources: ArcelorMittal estimates and estimates based on public information for competitors * Includes key projects subject to final approvals 16

18 Recap Franchise business potential Continued safety improvement Delivering Further growth Solid performance Growth plan on track Cost reduction focus Stretch growth opportunities Low capex intensity Market Marketing strategy Commercialization 17

19 Marketing Marketing strategy targets future volumes and customer needs Developing the right products and mix by planning changes to ore and coal grades to ensure long run demand Developing the right customers through strategic trials, logistics requirements, and potential blend optimisation Achieving the right price (value in use) for our products: Leveraging steel group R&D knowledge to assist our customers usage New blends of product have opened new markets Targeted product specifications Optimizing logistics to market for margin expansion: Liberia (trans-shipment), AMMC (potential for larger cape size vessels) Global sales reach* Leverage strong sales, marketing and logistic capabilities Domestic AMMC Sales office Belo Horizonte, Brazil Current/proposed material flow Luxembourg ArcelorMittal Liberia Kazakhstan coal and iron ore Shanghai, China Sth Korea Japan Taiwan Targeted niche marketing strategy * Focus on AMMC and ArcelorMittal Liberia as our largest marketable tonnes assets 18

20 Marketing Commercialization focused on product development & new markets Strategy: Average grade in international market is changing: Fe down, and level of gangue up Higher grade sinter fines in demand Opportunity in Liberia to launch sinter feed sized product early and before concentrate benefit ArcelorMittal steel in Europe Bundling Liberia DSO + sinter fines for higher value/offtake bundling options with other AM iron ores Competitive supply of low gangue concentrate to China/Asia expected to fit well with expected trend of higher gangue ore supply from Australia and reduced domestic China supply Grow product streams with lower risk brownfield expansions in growth markets: E.g AM Kazakhstan high quality coking coal now developing new growth markets in West China via rail Sinter fines: More marketable than concentrate - higher ratio in sinter mix Liberia sinter fines specification positioned for customer value optimization with low gangue Sinter pot tests indicate good results for Atlantic blends Concentrate: AAMC fully sold, premium quality concentrate Liberia fineness limits usage to <15% in most sinter plants unless pre-agglomeration installed E.g HPS, Drum mixers Can use at high rates but typically with sizing value in use demerits Right products for right markets to grow shareholder value Right products for right markets: Capturing market share in West China by leveraging our steel group value-in-use know how to offer the right coking coal to targeted mills 19

21 Recap Mining is a strategic franchise business within ArcelorMittal We are exploiting our potential: Trending toward World Class Safety outcomes Assessing and optimizing our global asset base Developing a niche marketing strategy that guides our product and mine development Delivering year-on-year cost reductions in key assets Delivering competitive bottom line performance We are delivering on our growth plans and Growing For Value ArcelorMittal is building a world class mining business focussing on value and growth 20