NICKEL PERSPECTIVES. Barry Jackson, Sept 2016

Transcription

1 NICKEL PERSPECTIVES Barry Jackson, Sept

2 CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American plc ( Anglo American ) and comprises the written materials/slides for a presentation concerning Anglo American. By attending this presentation and/or reviewing the slides you agree to be bound by the following conditions. This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Anglo American. Further, it does not constitute a recommendation by Anglo American or any other party to sell or buy shares in Anglo American or any other securities. All written or oral forward-looking statements attributable to Anglo American or persons acting on their behalf are qualified in their entirety by these cautionary statements. Forward-Looking Statements This presentation includes forward-looking statements. All statements other than statements of historical facts included in this presentation, including, without limitation, those regarding Anglo American s financial position, business and acquisition strategy, plans and objectives of management for future operations (including development plans and objectives relating to Anglo American s products, production forecasts and reserve and resource positions), are forward-looking statements. By their nature, such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Anglo American, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding Anglo American s present and future business strategies and the environment in which Anglo American will operate in the future. Important factors that could cause Anglo American s actual results, performance or achievements to differ materially from those in the forwardlooking statements include, among others, levels of actual production during any period, levels of global demand and commodity market prices, mineral resource exploration and development capabilities, recovery rates and other operational capabilities, the availability of mining and processing equipment, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, the availability of sufficient credit, the effects of inflation, political uncertainty and economic conditions in relevant areas of the world, the actions of competitors, activities by governmental authorities such as changes in taxation or safety, health, environmental or other types of regulation in the countries where Anglo American operates, conflicts over land and resource ownership rights and such other risk factors identified in Anglo American s most recent Annual Report. Forward-looking statements should, therefore, be construed in light of such risk factors and undue reliance should not be placed on forwardlooking statements. These forward-looking statements speak only as of the date of this presentation. Anglo American expressly disclaims any obligation or undertaking (except as required by applicable law, the City Code on Takeovers and Mergers (the Takeover Code ), the UK Listing Rules, the Disclosure and Transparency Rules of the Financial Conduct Authority, the Listings Requirements of the securities exchange of the JSE Limited in South Africa, the SWX Swiss Exchange, the Botswana Stock Exchange and the Namibian Stock Exchange and any other applicable regulations) to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in Anglo American s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Nothing in this presentation should be interpreted to mean that future earnings per share of Anglo American will necessarily match or exceed its historical published earnings per share. Certain statistical and other information about Anglo American included in this presentation is sourced from publicly available third party sources. As such it presents the views of those third parties, but may not necessarily correspond to the views held by Anglo American. No Investment Advice This presentation has been prepared without reference to your particular investment objectives, financial situation, taxation position and particular needs. It is important that you view this presentation in its entirety. If you are in any doubt in relation to these matters, you should consult your stockbroker, bank manager, solicitor, accountant, taxation adviser or other independent financial adviser (where applicable, as authorised under the Financial Services and Markets Act 2000 in the UK, or in South Africa, under the Financial Advisory and Intermediary Services Act 37 of 2002.). 2

3 About Anglo American Perspectives Conclusions 3

4 ANGLO AMERICAN TODAY We are producing: Diamonds Platinum Group Metals Copper Nickel Metallurgical and thermal coal Niobium and phosphates Iron ore and manganese More than 128,000 permanent employees and 45 mines Operations and exploration activities spanning southern Africa, South America, Australia, North America, Asia and Europe. Source: Anglo American 2015-preliminary-results-presentation 4

5 THE NEW ANGLO 5 Source: THE NEW ANGLO AMERICAN presentation, BMO 25th Global Metals & Mining Conference, 29 February 2016

6 ANGLO AMERICAN PRODUCED 52,200 MT OF NICKEL IN 2015 FROM 3 OPERATING ASSETS Rebuild of the two furnaces at Barro Alto was concluded ahead of schedule and budget Barro Alto Ferronickel plant 21,300 mt of nickel contained in ferronickel Production Asset Codemin Ferronickel plant Rustenburg Base Metals Refinery Marketing Office Sources: AA Full Press Release 2015; AAP Annual Results 2015 Investor Day 2015 presentation, , p47 9,000 mt of nickel contained in ferronickel 21,900 mt of nickel in form of cathodes (Brand: RPM Nickel) 6

7 About Anglo American Perspectives Recent developments 7

8 CONDITIONS LME Price Concerns about Chinese and world economy in Q1 depressed LME prices 13 year low of LME nickel price in February of $7,710/t Strong increase in the nickel price since then: Strong demand H1 Chinese stainless steel production up ~9% YoY Nickel sector in deficit Shortage of nickel-iron units (FeNi, NPI, scrap) Increase in FeNi premiums Lower Chinese NPI production (impact of Indonesian ore ban & lower Philippines ore production/exports, new government) Announced supply cutbacks in response to depressed LME prices Reportedly low stainless scrap availability and higher prices 11,000 10,500 10,000 9,500 9,000 8,500 8,000 7,500 Source: LME, to , LME nickel price 2016 (US$/t) Nickel supply, demand, balance 2016 (kt) Balance Production / Usage Jan Feb Mar Apr May Jun Production Usage Balance Source: International Nickel Study Group

9 Record high nickel demand; declining supply Especially in China Long term nickel supply, demand and prices 30 Peak of $54,200/t Price Production Demand Balance Source: nickel production, demand, balance (monthly) source International Nickel Study Group, price (daily) LME 9

10 Chinese nickel demand is strong But nickel ore imports (needed for NPI production) are down due to supply challenges Stainless steel production Nickel imports % change yr-on-yr % change yr-on-yr SMR Custeel 46 Antaike* SSC CSSM Cathodes FeNi Ore H Source: SSC = Stainless Steel Council of China Special Steel Enterprises Association CSSM = China Stainless Steel Institute of CAMMT Antaike* = Jan-July SMR - Steel & Metals Market Research GmbH Custeel Jan-July Source: International Steel Statistics Bureau 10

11 Chinese NPI production is declining As nickel ore imports have fallen following supply restrictions* and declining output Chinese monthly NPI production Chinese nickel ore imports by origin kt 50,000 NPI production (kt, monthly, ni content) 45,000 40,000 35,000 30,000 25,000 20,000 15,000 10,000 5, Source: Antaike Jan-July % Vs % Vs Source: ISSB *Indonesian nickel ore export ban; Philippines government mandated nickel mine closures Other Philippines Indonesia 11

12 Chinese NPI production accounts for ~20% of global Ni supply China s NPI production is wholly dependent on Ni ore imports Philippines accounts for nearly all China s nickel ore imports World mined nickel production World refined nickel production Chinese nickel ore imports 2% 1% 1% 1% 1% 2% 22% 49% 53% 52% 58% 90% 80% 77% 76% 77% 81% 76% 97% 49% 46% 47% 42% 10% 20% 23% 24% 23% 19% Other 2012 Indonesia Philippines Other Philippines Other Chinese NPI Source: ISSB, Wood MacKenzie 12

13 Chinese nickel ore imports are declining Impact of Indonesian ore ban & lower Philippines ore production/exports Chinese nickel ore imports from the Philippines Mt China s nickel ore imports from the Philippines Jan-July (Mt) % Jan Mar Source: ISSB May Jul Sep Nov 2014 Source: ISSB

14 The Philippines has suspended mining operations Due to environmental concerns of the new president and head of DENR Philippines nickel production (t s) 393, ,366 Sinosteel Philippines H.Y. Mining Corp. CTP Construction & Mining Corp. AAM-PHIL Natural Resources Exploration & Dev t Corp Oriental Synergy Mining Corporation Westernshore Nickel Corporation/East Coast Mineral Resources Co. Inc. Libjo Mining Corporation Oriental Vision Mining Phils. Corporation/Norweah Metals and Minerals Co. Inc. Wellex Mining Corporation Adnama Mining Resources Incorporated Agata Mining Ventures, Inc. Marcventures Mining & Development Corp. Carrascal Nickel Corporation Rio Tuba Nickel Mng. CTP Construction & Mining Corp. SR Metals, Inc. Cagdianao Mining Corp. Suspended 27% 16% Platinum Group Metals Corporation Taganito Mining Corp. Benguet Corporation Nickel Mines Inc. Zambales Diversified Metals Corporation LNl Archipelago Minerals Inc. Eramen Minerals Inc. Berong Mining Corp. Citinickel Mines & Development Corporation Hinatuan Mng. Corp. Note: a number of other mines have been suspended who are not listed in the MGB data, so the impact to production of suspensions is expected to be larger than indicated Source: Philippines Mines and Geosciences Bureau (MGB), nickel content of ore. DENR = Department of Environment and National Resources 14

15 Philippines to fast-track hearings to ban ore exports Currently less than 1% of GDP from mining, less than 0.1% from nickel Philippines congressmen have moved two bills in August calling for a ban on minerals exports and greater focus on domestic processing. Philippines GDP House bill number 2165 by congressman Erlpe John Amante revives his previous bill seeking a complete ban on the export of unprocessed mineral ores. "Any mineral ores extracted under the provisions of the [revised Mining Act] shall be processed within the country. "No person granted with permit for purposes of mining operation shall be allowed to export the unprocessed mineral ores to other country for the purpose of trading of mineral products." House bill number 2715 moved by seven congressmen seeks to "reverse the current export-orientation of mining", drawing attention to the small contribution the sector makes to the country's GDP growth and employment. The bill was moved by congressmen Carlos Isagani Zarate, Antonio Tinio, Emmi A De Jesus, Arlene Brosas, France Castro, Ariel Casilao and Sara Jane Elago this month. It calls for an act re-orienting the Philippines mining industry towards national industralisation and ensuring the highest industry development standards and for other purposes. Agriculture and forestry Fishing Mining & Quarrying Manufacturing Construction Electricity, Gas and Water Supply Mining accounted for only 0.8% of GDP in 2015 SERVICE SECTOR In the explanatory note the bill points at the small contribution of 0.7% that the mining sector makes to the country's GDP growth also highlighting that the sector's contribution to employment is 0.6%. The bill also adds that the government's share from mining in taxes, royalties and fees amounted to only 1.33% of total tax revenue. Data sources: the Philippine Statistics Authority

16 Lower NPI production is good for the environment Estimated carbon footprint of nickel output in different regions (circles are scaled) Norway Finland Russian Federation Canada UK Ukraine France Greece Japan Cuba China Colombia Venezuela Brazil South Africa Australia Source: Nickel Institute 2013 study 16

17 About Anglo American Perspectives Stocks & Financing 17

18 LME stocks are declining Low levels of availability in Europe 500,000 t s LME nickel stocks total 500,000 t s LME nickel stocks available 400, , ,000 Midde East America Europe Asia 400, , ,000 Midde East America Europe Asia 100, , , t s LME nickel stocks total - Europe 200, t s LME nickel stocks available - Europe 150,000 Europe 150,000 Europe 100, ,000 50,000 50,000 Source: LME

19 Nickel stocks have shifted to China Financing has become a large nickel consumer 240, , , ,000 80,000 t s Chinese nickel stocks NPI SHFE non-nandalu stocks Shanghai Nandalu stocks Bonded stocks Financing Financing transactions typically involve a simultaneous purchase of metal for nearby delivery and a forward sale to take advantage of a market in contango, when later-dated contracts cost more than those with nearer dates. The contango s size influences profitability, along with borrowing and storage costs. Financing nickel may bring a 1.5% to 2% risk-free return, according to Macquarie. 40, In China, nickel can be obtained with a letter of credit and used as collateral against a yuan-denominated loan. Source: AA Beijing, Macquarie, Bloomberg, 19

20 About Anglo American Perspectives Outlook Conclusions 20

21 SMR stainless steel production forecasts Recovery in production growth forecast in 2016 Quarterly production 37,728 3,907 2,408 7,471 6,442 Annual production 2.6% 3.0% -1.0% +9% 46,622 44,551 45,437 44,114 4,033 4,489 5,153 40,898 4,237 4,130 3,473 3,283 3,327 3,411 2,745 7,288 7,202 7,241 7,130 7,138 6,634 6,392 5,978 5,892 6,385 17,500 20,500 23,123 23,000 24,402 25, ROW Americas Europe Other Asia China Source: SMR - Steel & Metals Market Research GmbH 21

22 Nickel sector shifting to deficit Source: Wood MacKenzie H1 2016: The International Nickel Study Group put the deficit at -37kt, the World Bureau of Metal Statistics estimated -81kt Source: Wood MacKenzie

23 About Anglo American Perspectives Conclusions 23

24 Conclusions Strong nickel demand Consumption growth underpinned by wide range of end use applications, growing population and increasing intensity of use Lower Chinese NPI production (impact of Indonesian ore ban & lower Philippines ore production/exports, new govt.) Announced supply cutbacks in response to depressed LME prices Sector in deficit Image source Aperam 24

25 NICKEL PERSPECTIVES Barry Jackson, Sept