Opportunities and challenges for supply in our industry CRU s 7 th World Copper Conference, Santiago, Chile Owen Hegarty, Oxiana CEO 9 April 2008

Transcription

1 Opportunities and challenges for supply in our industry CRU s 7 th World Copper Conference, Santiago, Chile Owen Hegarty, Oxiana CEO 9 April 2008

2 Important notice 2 For the purposes of the Forward-Looking Statements Safe Harbor provisions of the US securities laws This presentation contains statements which constitute forwardlooking statements within the meaning of he US securities laws. Such statements include, but are not limited to, statements with regard to capacity, future production and grades, projections for sales growth, estimated revenues and reserves, targets for cost savings, the construction cost of new projects, projected capital expenditures, the timing of new projects, future cash flow and debt levels, the outlook for minerals and metals prices, the outlook for economic recovery and trends in the trading environment and may be (but are not necessarily) identified by the use of phrases such as will, expect, anticipate, believe and envisage. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside Oxiana s control. Actual results and developments may differ materially from those expressed or implied in such statements because of a number of factors, including levels of demand and market prices, the ability to produce and transport products profitably, the impact of foreign currency exchange rates on market prices and operating costs, operational problems, 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 regulation. Included in this presentation is information which is intended to provide general information about the proposed transaction between Oxiana Limited ( Oxiana ) and Zinifex Limited ( Zinifex ). This material is not and does not constitute an offer, invitation or recommendation to subscribe for, or purchase any shares. Neither this material nor anything contained in it shall form the basis of any contract or commitment. Reliance should not be placed on the information or opinions contained in this material. This material does not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Any decision to purchase or subscribe for shares should only be made after undertaking an independent assessment and determination as to the information to be contained in the Scheme Booklet to be subsequently issued and after seeking appropriate financial advice. No representation or warranty, express or implied, is made as to the fairness, accuracy, completeness or correctness of the information, opinions and conclusions contained in this material. To the maximum extent permitted by law, Oxiana, Zinifex and their affiliates and related bodies corporate, and their respective officers, directors, employees, agents and advisers disclaim any liability (including, without limitation any liability arising from fault or negligence) for any loss or damage arising from any use of this material or its contents, including any error or omission therefrom, or otherwise arising in connection with it. Any forecasts and other forward-looking statements set out in this material are based on a number of estimates, assumptions and pro forma adjustments that are subject to business, economic and competitive uncertainties and contingencies, with respect to future business decisions, which are subject to change and in many cases outside the control of Oxiana and Zinifex. Any forecasts contained in this material may vary from actual financial results, and these variations may be material and, accordingly, neither Company nor their Directors can give any assurance that the forecast performance in any forecasts or any forward-looking statement contained in this material will be achieved. Neither Company undertakes to revise the material to reflect any future events or circumstances. This material may not be lawfully published in some jurisdictions or may only be provided to certain persons and you must not view this material if to do so would be unlawful in your jurisdiction or may otherwise place either Company under obligations which it has not complied with. All figures are expressed in Australian dollars unless stated otherwise.

3 Contents 3 1. Oxiana Update 2. Merger with Zinifex 3. Copper demand growth, the opportunities 4. Challenges to copper supply 5. Prominent Hill world s next best 6. Industry opportunities

4 Oxiana: successful Australia/Asia-Pacific mining company 4 VISION To grow a major mining company. STRATEGY Commodities: Base and precious metals; progressive diversification. Domain: Asia, Pacific Australia; other domains. Assets: High margin, long-life, upside. Maintain strong pipeline of development projects. Exploration: Strong commitment to near mine and regional exploration. PERFORMANCE MISSION Quadruple bottom line excellence VALUES Respect and Openness Action and Performance MANAGEMENT Highly experienced Board and management team MARKET STATISTICS ASX-listed (OXR; S&P/ASX100) Market capitalisation; A$5.4 billion Laos Thailand China Cambodia Indonesia Martabe gold-silver project Golden Grove zinc, copper, precious metals operation 46% of Toro Energy Australia Sepon copper and gold operations Prominent Hill coppergold project Headquarters Operation Development Equity interest Exploration

5 2007 full year financial highlights 5 Gross Revenue By Operation Gross Revenue By Commodity Gross Revenue By Geography Sepon Gold Other Gold Golden Grove Sepon Copper Zinc Copper Australia, 45% Asia, 55% 2007 Full Year Financial Results Gross Revenue A$1,196m EBITDA A$595m NPAT A$306m Gearing 10% Nil Hedging

6 Oxiana Zinifex merger - creating a major diversified mining company 6 A strong platform to deliver superior growth Complementary: Operations Development pipeline Exploration High quality assets Strong cash flows and balance sheet Enhanced market position Platform for further growth Experienced and committed Board and management team

7 Oxiana and Zinifex - complementary portfolios 7 Complementary asset portfolios with leverage to continued global growth Operations Australia 1. Century (zinc/lead) 2. Golden Grove (zinc/copper/gold/silver) 3. Rosebery (zinc/lead/copper/gold/silver) Laos 4. Sepon Copper (copper) 5. Sepon Gold (gold) Projects under development Australia 6. Prominent Hill (copper/gold) Indonesia 7. Martabe (gold/silver) Laos 8. Sepon Copper expansion (copper) 3 Project pipeline Australia Oxiana assets Zinifex assets Oxiana exploration focus Zinifex exploration focus 9. Dugald River (zinc/lead/silver) Canada 10. High Lake (zinc/copper) 11. Izok Lake (zinc/copper) Laos 12. Sepon Gold expansion (gold)

8 Opportunities demand growth 8 GDP Growth Rate % 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% Italy Japan Global Expansion Driven by China USA Germany UK GDP growth rate 2007 New Zealand Australia Thailand Brazil USA China Source: UBS Investment Research US impact minimal Relative impact: China vs. US, incremental refined copper consumption (kt) Korea Chile Malaysia Indonesia Laos Philippines Vietnam India China China s Copper Intensity will Continue to Grow Copper: Intensity of Use for Selected Countries and Regions Kgs per Capita Japan ( ) China ( ) S.Korea ( ) GDP per Capita (US$ billions; real 1990 terms; at PPP) Source: Goldman Sachs JB Were

9 Opportunities demand growth 9 Asian production lagging Limited exploration in Asia 20,000 15,000 World Asia Australia 11% USA 8% Pacific/SE Asia 4% Latin America 23% KT 10,000 51% 41% 5,000 15% Rest of World 18% Canada 20% 0 Mine Smelting Consumption Africa 16% Worldwide Exploration Budgets by region, ,624 Companies Budget Totalling $7.13 Billion Source: MEG

10 Challenges to supply 10 Fewer discoveries. Entry into new mining domains required. Increasing new supply from non-traditional domains kt 90,000 New copper projects Country-wise average ore grades & contained copper (in reserves & resources) 3.0% 80,000 70, % 60, % 50,000 40, % 30, % 20,000 10, % 0 Chile Peru USA DR Congo Australia Mexico Mongolia Kazakhstan Zambia Pakistan Philippines Argentina Panama PN Guinea Brazil Canada Laos 0.0 % Source: Credit Suisse Contained copper in reserves and resources (kt) (LHS) Average ore grade (%) (RHS)

11 Challenges to supply 11 Declining head grades. Copper head grades declining Copper grades of 66 projects Copper Industry head grade trends* From 1% to 1.5%, 14% More than 1.5%, 13% 2.0 From 0.61% to 0.99%, 26% Less than 0.31%, 6% Head Grade Cu % Forecast 1.0 * Weighted by payable copper From 0.31% to 0.6%, 41% Source: Credit Suisse Source: Brook Hunt

12 Challenges to supply Increasing capital costs Above US$7,000, 37% Less than US$4,000, 15% From US$4,001 to US$5,000, 7% 12 Capital costs of new copper projects From US$6,001 to US$7,000, 18% From US$5,001 to US$6,000, 24% Source: Credit Suisse Original Announced Capital Expenditure Announced Revised Capital Expenditure 5,000 Total: US$10.0B 5,000 Total: US$17.5B 4,000 4,000 3,000 2,000 Average US$1,251M 75% 3,000 2,000 Average US$2,193M 1,000 1, Source: CRU Gabriela Mistral Tenke Fungurume Prominent Hill Los Bronces El Morro Cerro Casale / Petaquilla Galore Creek Gabriela Mistral Tenke Fungurume Prominent Hill Los Bronces El Morro Cerro Casale / Petaquilla Galore Creek

13 Challenges to supply 13 Project delays Delays for capital, equipment and consumables Comparative delivery lead times (Months) Tyres Large haul trucks Wagons Locomotives Barges Shiploaders Reclaimers Rope shovels Draglines Power generators Normal delivery time Current delivery time Crushers Grinding mills Source: PricewaterhouseCoopers

14 Challenges to supply 14 Project delays Majority of new projects encountering delays Start Up Date Tenke Fungurume El Abra II Esperanza Miheevskoye Galeno Reko Diq Toromocho Agua Rica Cerro Casale / Aldebaran Petaquilla Quellaveco San Jorge Tampakan El Pachόn La Granja Marcona Oyu Tolgoi Alejandro Hales (Mansa Mina ) Las Bambas Olympic Dam Expansion Pebble Frieda River Namosi Resolution Bougainville Rio Blanco Source: CRU 2007 Estimate 2008 Estimate Based on 38 projects profiled by CRU Analysis over 2007 & 2008 (26 are likely to be delayed)

15 Challenges to supply Increasing operating costs Operating costs impacted by consumables and labour costs C1 Cash Costs All Mines Sepon Copper Cash Cost 2007 USc76/lb Source: Brook Hunt 15 USc/lb 13, ,005 1,858 2,169 2,464 3,249 3,988 5,030 6,417 7,366 7,592 7,697 7,867 8,493 8,870 9,910 10,168 10,585 10,653 10,791 10,940 11,111 11,445 11,610 11,680 11,803 11,882 12,011 12,121 12,162 12,220 12,268 12,367 12,699 12,829 12,884 13,005 13,073 13,176 Cum.kt Cu

16 Challenges to supply 16 Continuing disruptions Power shortages Water shortages Acid shortages Technical and professional staff availability Labour availability and disputes Country risk

17 Long-term price forecasts increasing long-term Source: Broker research Old broker forecast copper Old broker forecast zinc New broker forecast copper New broker forecast zinc

18 Prominent Hill - world s next significant copper-gold mine 18 Status: Mining type: Resource base: Plant: Production: 2009(f) Under construction Open pit 1.9Mt copper, 3.7Moz gold 8Mtpa crush, grind, flotation 117,000t copper 86,000oz gold Product: High grade copper concentrate 45% Cu, 19g/t Au, 57 g/t Ag LOM Cash cost: Capital cost: 85c/lb LOM A$1.08 billion First production: End 2008

19 Prominent Hill infrastructure 19 Transport: Short haul road to rail siding. Power: Water: Labour: Rail to Port of Darwin 48 hours from mine to port. Exports to major copper smelters in Asia 8-10 days sailing. Close to grid via Olympic Dam. New water source for SA, the Arckaringa Basin. Adelaide and regional.

20 Prominent Hill a major long life copper-gold mine 20 West 10 year pit outline East 1200mRL 800mRL 400mRL 0mRL 0.8% Cu 0.2% Cu Untested Copper Potential LEGEND Drilling results: 1.5% Cu Untested Gold Potential Significant gold intercepts Cover 2.4g/t Au Significant copper intercepts Stage 1 study Underground sub-level open stoping. Additional 1-2Mt/a. Concurrent with open cut. Stage 2 study High tonnage. Bulk cave mining. Post end of open cut. 7.8g/t Au ( Western Rise haematite breccia) 1.9g/t Au 1.8% Cu, 0.6g/t Au 9.6g/t Au 6.6g/t Au 2.2 % Cu, 0.6 g/t Au 1.6% Cu, 0.4 g/t Au 4000mE 4400mE 4800mE 5200mE 5600mE 6000mE 6400mE Untested 1.5% Cu, 1.0 g/t Au 1.4% Cu, 0.8 g/t Au 1.2g/t Au 1.2g/t Au 1.5% Cu, 0.6g/t Au 2.28% Cu, 0.49 g/t Au Base of current resource metres

21 Prominent Hill Australia s next new copper supply 21 Mining friendly jurisdiction Flat terrain Close to infrastructure Substantial resource Open pit Good grades Good metallurgy Long life Excellent exploration potential

22 In Summary 22 Supply is our opportunity and responsibility We must take a long term view There is a disconnect between the financial markets and the fundamentals We must continue to invest heavily and responsibly in: - expansions and new investments -exploration - training and development - social and environmental management Strategic consolidation will continue

23 THANK YOU P: E: admin@oxiana.com.au