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8/12/2019 201111030800 Glencore Presentation
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London, 3rd November 2011
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Glencore investment ro osition
Uni ue market osition in inte rated tradin
High growth and return, diversification
Significant barriers to entry
Best in class equity value creation track record From $1.2 bn in 1996 to $45 bn equity currently
Best in class alignment between management and shareholder interests
Owners not renters of assets
Best in class volume growth in industrial assets
Portfolio on time / to budget
row r ves mar e ng opera ons
Robust balance sheet / cash generation
Glencore is the best in class way to gain exposure to structural growth in global commodity demand
GLENCOE I 2
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Glencore at a lance
Integrated commodity producer and marketer
Integrated commodity producer and marketer, active inevery step of the supply chain
One of the worlds largest physical marketers for thema or y o s core commo es
Diversified industrial asset portfolio - complementssourcing, distribution and marketing operations
Robust financial and operational track record through
Zinc / copper /lead
Alumina /
Metals and Minerals
Oil
Coal / coke
Energy Products
Grains
Oils / oilseeds
Agricultural Products
e cyc e
Experienced management team - proven track record ofprofitability, value creation and risk management
aluminium
Ferroalloys /nickel / cobalt /iron ore
152
184
Key financials Key statistics
($ bn) More than 57,500 employees (including over 2,700 in
marketing operations) spread across over 40 countries
ey nves men s n non-
listed companies:
50.7% Kazzinc
73.1% Mopani
6.8 6.23.9 3.3
6.2 5.3
7.76.6
106106ey nves men s n
listed companies:
34.4% Xstrata
74.8% Katan a
40.0% Mutanda
100% Prodeco
100% Murrin Murrin (4)
Reven ue Ad justed EBITDA Ad justed EBIT
2008 2009 2010 H1 2011 (annualised)
.
29% Optimum Coal
8.8% UC Rusal
54.2% Century Aluminum (3)
(1) (2) (1) (2)
GLENCOE I 3
E&P portfolio (various shareholdings)o es: xc u ng excep ona ems(2) Adjusted EBITDA and adjusted EBIT includes associates and dividend income(3) Including 9.8% two cash-settled total return swaps(4) As of recent successful Minara takeover
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Glencore overview
Unique Global Infrastructure
Xstrata
Xstrata Xstrata
Rusal
Century
CompaniesRecylex Biopetrol
Century
XstrataVarious RussneftCompanies
Kazzinc /Altyntau
Portovesme
Xstrata
Sherwin
Chemoil
Xstrata Pasar
Perkoa
Xstrata
Los Quenuales
Xstrata
Xstrata
Rusal
Rusal
Mutanda
E&P Initiatives
Rio Vermelho
Shanduka /
Cobar
Sinchi Wayra
Punitaqui
Zinc/Copper
Xstrata
Alumina/AluminiumCoalNickel Grain Oil
Main OfficesOfficesIndependent Offices
GLENCOE I 4
nc opper s ra a c e s ra a oa s ra a oys en ury
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Full inte ration throu h the value chain Position throughout the value chain allows Glencore to capture value at each stage
Producers typically more focused on sale of own products than third-party marketing while other marketing peers do
Glencores core competencies span the value chain
Marketing, Marketing,Processing /Upstream
era
ls
orage an re g orage an re g
Zinc /copper /lead
etalsan
dMin
Ferroalloys /
Alumina /aluminium
uc
tsOil
nickel /cobalt / iron ore
Energy
Pro
d
Coal / coke
n/a n/a
Agri.
Pro
duc
ts Agriculturalproducts
GLENCOE I 5Significant presence Lesser presence
Key:
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Si nificant barriers to entr
Insight into market flows and access to real-time information across the globe
Scale and globalreach
Large scale and global sourcing and distribution of commodities is working capital intensive
Ability to fund investments in production facilities and industrial activities
Access to financingand riskmana ement skills
Ability to secure sourcing arrangements through facilitation of producer and/or consumerfinancing
nsures a re a e supp y o commo es
Enhances credibility with producers and customers alike where reliability and performanceare sought after attributes
Long-termsupplier / customerrelationship
Significant intellectual capital, which is generally challenging and time-consuming to createin, or transfer to, a new organization is a key competitive advantage on the marketing side ofthe business
Human capital
Global eo ra hic and diversified commodit mix which is difficult and ex ensive toreproduce but important to long-term sustainable success
geographic and
commodity mix
Distinctive factor vis--vis majority of other commodity marketersVertical inte ration
Provides stable source of supply and unique insight into the critical industrial production partof the commodity value chain
GLENCOE I 6
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Best in class value creation track record
19902008
Establishment ofGlencore focusedon physicalmarketing ofcommodities
Transition into anintegrated producer withacquisition of US smelterand Peruvian mine
Acquisition of astake in Xstrata(then SudelektraAG)
IPO ofGlencore
First public bondissue of $950m
Merger of Katanga and Nikanorresulting in a 8.5% holding in thecombined entity
Purchase of initial 40% stake inVasilkovskoye Gold (via Kazzinc)
Acquisition ofmajority stake inKazzinc
2002
Substantial
1980s 1990s 2000s 2010s1970s
2007
Selected
1993 / 94
Management
1995
Glencore2009 20101981
Acquisition of a Dutch
2009
Government a rovesGlencorecoal assetscontributed toformingXstrata plc
Glencorealuminium &alumina assetscontributed tocreate UC
Rusal
buyout(MBO)
acquires firstbuilding blockof Prodeco
$2.3bnconvertiblebond
grain trading company,foundation of AgriculturalProducts division
start of West Africanhydrocarbon projectsdevelopment phase
After management buy-out..
$1.2 bn
to current 2011
$45 bn
Value creation+3650%
GLENCOE I 7
.+50% FTSE 100
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Track record of value creation achieved by world class management team
%
Last 10 years RoE range (1)
61%
58%
50% 51%
45%
36%34%
38%
21%19%
21%
15% 15%
18%15% 15%
11% 13%
4%6%5%
Averages
Note: (1) Net Income / average equity excl. minority interests. Data based on last 10 full reported financial years. Length of historical period for some peers is limited
GLENCOE I 8
by availability of publicly disclosed financials. Glencore pre-expectionals.
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Performance is less correlated to commodity prices than peers
Marketing has made a profit every year since completion of the management buyout
Resilient model throughout the cycle
Marketing income is less correlated to commodity prices than that of diversified miners, with key profitdrivers being
Margin per unit of commodity, rather than based on absolute value
Service-like fee income
Uniquely positioned for geographical, product and time arbitrages
Market volatility and forward curve / spread opportunities
Unparalleled geographic and product diversification
Scale and market share
Economies of scale in sourcing, transportation, storage, insurance, finance and risk management
Limited directional trading strategies, including the ability to profit in falling markets
GLENCOE I 9
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Best in class alignment management and shareholder interests
Glencore management has considerably more skin in the game compared to peers
16.82%18%
14%
16%
10%
12%
O/S
4%
6%
0.02% 0.02% 0.11% 0.01% 0.25%
0%
2%
on o n o s ra a ng o mer can reepor encore
Glencore total employee ownership currently 83%
GLENCOE I 10
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Control of hi h ualit industrial assets
Prodeco Kazzinc Katanga
Major fully integrated zinc, copper and goldproducer in Kazakhstan, 50.7% owned by Glencore
8 mines, 2 zinc smelters, 1 lead smelter, 1 coppersmelter commenced in 2011, precious metal plantand auxiliary units
Large-scale copper-cobalt project in theDemocratic Republic of Congo, 74.8% ownedby Glencore
Listed on the Toronto Stock Exchange
Open pit and underground mining, ore
Thermal coal project in Colombia, 100%Glencore ownership
Two open-pit mines (Calenturitas and LaJagua) and owned rolling stock and portfacilities (1)
100% of VasGold recovery of 450 - 500k ozp.a. expected
48% of Novoshirokinskoe - expanding from450k MT p.a. to 600k MT p.a. mine designcapacity within 2 - 3 years
, -winning plant
Production expected to increase to c. 308k MTof copper, 8k MT of cobalt and 22k MT ofcobalt contained in cobalt hydroxide by 2015
Reserves and Resources
p.a. in 2010 to 19.9m MT in 2013 and 20.7mMT by 2015
Saleable reserves of 337m MT, totalresources of 540m MT
rec ous me a s rom o er azz nc m nes
Reserves (proven and probable, contained metal):
3,122k MT Zn
471k MT Cu
855k MT Pb
eserves prove an pro a e97.0m MT ore (4.2 %TCu, 0.5 %TCo)
Resources (measured and indicated)287.4m MT ore (4.0 %TCu, 0.5 %TCo)
Resources (inferred)180.2m MT ore (2.3 %TCu, 0.3 %TCo)
11.8 m toz Au
77.3 m toz Ag
280,000,
350,000,
20
25
Production profile
Thermal Coal (m MT)
Production profile
Copper (k MT)
300
350
800
1'000
Production profile
Gold (k oz) Zinc (k MT)
Gold Zinc
70,000,
140,000,
210,000,
5
10
15
50
100
150
200
200
400
600
GLENCOE I 11
,0,
200820092010201120122013201420152008 2009 2010 2011 2012 2013 2014 201500
2008 2009 2010 2011 2012 2013 2014 2015
Notes: (1) Licence to operate the port renewed on an annual basis until Puerto Nuevo is completed.
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Control of hi h ualit industrial assets
Mutanda West African Oil Assets Mopani Two fields under development offshore Equatorial
Guinea
Aseng: first oil expected Q4 2011 at an estimatedrate of 50,000 barrels per day; Glencore stake23.8%
Alen: first oil expected Q4 2013 at an estimatedrate of 37,500 barrels per day; Glencore stake 25%
Both fields operated by US listed Noble Energy,
Houston Further discoveries in Block I and O as well as
substantial exploration potential
Glencore owns 73.1% of Mopani, with theremainder of the business owned by FirstQuantum Minerals Ltd. (16.9%) and ZambiaConsolidated Copper Mines InvestmentHoldin s Plc 10%
Glencore owns 50% of Samref Congo Sprlwhich in turn holds an 80% ownershipinterest in Mutanda Mining Sprl
Glencore is the operator
Integrated mining and processing operation inthe Copperbelt region of Zambia, producingcopper and cobalt metal. It can process oxideand sulphide copper-cobalt concentrates
produced by Katanga and Mutanda. Mo ani also roduces sul huric acid which is
cobalt producer; operations located in theprovince of Katanga in the DRC
Mutanda is being developed to produceapproximately 110,000 tonnes p.a. of
copper and approximately 23,000 tonnes ,
used in the leaching operations at Katangaand Mutanda.
Operations are located in the cities of Kitweand Mufulira.
. .as of 2012
Potential for further production increasethrough merger with Kansuki
100
120 280
Production profile
Copper (k MT)
Production profile
Copper (k MT)
20'000
25'000
Production profile
(bbls / d)
20
40
60
80
70
140
5'000
10'000
15'000
GLENCOE I 12
0
2008 2009 2010 2011 2012 2013 2014 2015
0
2008 2009 2010 2011 2012 2013 2014 2015
0
2008 2009 2010 2011 2012 2013 2014 2015
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Industrial roduction rowth
Cu equivalent
' '
1'800'000Additional potential growth
from Kansuki and
1'400'000
1'600'000
Approved
1'000'000
1'200'000expans onprojects
600'000
800'000
200'000
400'000
0
2008 2009 2010 2011E 2012E 2013E 2014E
GLENCOE I 13
Mopani E&P Prodeco Kazzinc Katanga Mutanda Kansuki Agricultural
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Ke Financial Hi hli hts
Revenue 92'120 70'007 32%
Adjusted EBITDA(1) 3'845 2'635 47%
Adjusted EBIT(2) 3'303 2'197 50%
Glencore income(3) 2'450 1'558 57%
Operating cash flow before working capital changes 2'472 1'809 37%
Funds from operations (FFO)(4) 2'145 1'372 56%
Net Debt 8'287 14,756(5) (44)%
FFO to Net Debt(6) 49.6% 22.6%(5) 119.0%
(1) Adjusted EBITDA is revenue less cost of goods sold, less selling and administrative expenses, plus share of income from associates and joint controlled entities, plus dividend income,plus depreciation and amortisation.
(2) Adjusted EBIT is Adjusted EBITDA less depreciation and amortisation.(3) Pre other significant items(4) FFO is Operating cash flow before working capital changes less net interest paid, less tax paid, plus dividends received from associates
GLENCOE I 14
(6) Last 12 months
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Robust Balance Sheet(1)
Investment rade credit ratin has stren thened further:
Moodys LT: Baa2 ST: P-2 Outlook: Stable
S&P LT: BBB ST: A-2 Outlook: Stable
Gross Debt $24.1bn $30.6bn
Strong credit metrics going into H2
$10.4bn of cash and committed undrawn unsecured
Net Funding $22.5bn $29.1bn
Net Debt $8.3bn $14.8bn
credit lines
Additional > $2bn available liquidity under committedGearing 22% 43%
nven ory an rece va es orrow ng ase ac es
$1.3bn working capital release in Q2 2011
FFO to Net Debt 50% 23%
Net Debt to Adjusted1.1x 2.4x
Average VaR (1 day 95%) in H1 2011 was $48m (H1
2010: $37m)
Adjusted EBITDA to
Net Interest8.3x 6.9x
Average variable cost of funds improved by ca. 50 bps
since IPO
GLENCOE I 15(1) All definitions as per Interim Report 2011
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Workin ca ital flows enhance resilience
In a scenario of declining commodity prices, the release in working capital compensates for drop inearnings
The cash inflows preserve liquidity and position Glencore to capitalise on investment opportunitiesarising for example through a market downturn
Q2 2008 Q1 2009:
20,000
. Rapid fall in commodity prices from the mid-2008 peaks Glencores operations released c.$8bn of CCE, more than
offsetting any impact of the fall in profitability.
230
16,000
ase
d)
loye
d(US$m
)
180
8,000
12,000
CCIIndex
(re
en
tcap
ita
lemp
1304,000
Curr
80-
Q103
Q203
Q303
Q403
Q104
Q204
Q304
Q404
Q105
Q205
Q305
Q405
Q106
Q206
Q306
Q406
Q107
Q207
Q307
Q407
Q108
Q208
Q308
Q408
Q109
Q209
Q309
Q409
Q110
Q210
Q310
Q410
Q111
Q211
Current capital employed CCI Index (rebased)
GLENCOE I 16Note: Current capital employed defined as current assets less accounts payable, income tax payable and other financial liabilities.
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Ke statistics
Glencore operates significant industrial and marketing activities across the various businesssegments
Marketing activities Industrial activities
Operational
Glencore
Main activitySourcing, distribution
and marketing
Controlled and non-controlled investments in
producing anddevelopment assets
A leading integratedproducer and marketer
of commodities
Geographicalpresence
Over 40 countries Over 30 countries
Employees Over 2,700 Over 54,800(1)
Over 40 countries
Over 57,500
Financial
H1 11 Revenues Total assets: $81.4 bn$92.1bn
H1 11 EBITDA $3.8bn
H1 11 EBIT $3.0bn$2.3bn
Glencore shareholders funds: $29.0 bn
$3.3bn Standard & Poors: BBB (stable)
(3)H1 Net income $2.5bn(2) Moodys: Baa2 (stable)
GLENCOE I 18
Notes: (1) Marketing employees includes managers, support staff and employees in global offices.(2) Excludes exceptional items
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Marketin illustration arbitrage opportunities
Glencore has the ability to implement and execute any combination of the following arbitrage opportunities
Geographical1 Timing3Product2
Gasoline
Ethanol
Corn Vegoil
BiodieselEnergydistributor
Gasoil
Triangulation of freightmovements and regionalsupply/demand dynamics allow
Diverse commodity range, supplybase and extensive storage,handling and processing capabilities
Glencore is able to benefit frominefficiencies in the shape of theforward price curves
for capitalisation and executionof value add and profitenhancing transactions
enable exploitation of pricedifferentials across various products
Glencore enters into generic and Differences in grade, e.g. blending Carry trades booked in contango
contracts with various industry
participants Extensive and global commodity
books provide opportunities to
requirements at a lower overall cost
Locking in processing margins totake advantage of price differentialsbetween unprocessed and
,comparatively lower financing and
storage costs than that implied bythe forward curve
Glencore can benefit from avert cargos an enter nto
swap agreements to optimisephysical delivery schedule
Optimisation of existing
contracts results in reduced
processe pro uct
Substituting products where an end-product can be produced from avariety of commodities (e.g. animal
feed)
ac war at on mar et y pr c ngsales contracts as early as possibleand deferring the quotation periods(QPs) of supply contracts
xamp es
GLENCOE I 19
shipping costs and higher profitmargins compared to standardtrades
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Marketin illustration geographical arbitrage
Vanilla transaction executed by various
industry participants
Vanilla transaction executed by various
industry participants
premium profit margins achieved by Glencore due to its extensive and
global alumina book with insight into freight movements
premium profit margins achieved by Glencore due to its extensive and
global alumina book with insight into freight movements
Glencore enters into anexclusive 10 year purchaseagreement from an Aluminarefinery in theMediterranean basin.
Glencore enters into acontract to supply aluminato a Black Sea customer(B)
The logical origin to supply
Approached by a largeproducer with commitmentsto deliver alumina into theMediterranean, Glencoreswaps its Mediterranean
Glencore has an existingalumina supply commitmentto Iceland (D), typicallysourced from Jamaica (E).
Jamaican alumina (E) isthen finally shipped to theBlack Sea customer (B)resulting in a higher margin
existing contracts existing contracts
alumina is from A. Net of
freight costs, the salesagreement is priced atpremium to the purchasecontract thereby locking ina modest margin.
Alumina (A) for Northern
European Alumina (C) inexchange for the freightdifferential
n g o e swap
agreement, Glencorerecognises the benefit ofsupplying the new NorthernEuropean Alumina (insteadof the Jamaican) to Icelanddue to reduced shi in
encore s a y o
optimise freight andrationalisation of existingcontracts allow it to lock ina higher profit margin on astandard trade
costs.
B C D B
AA
C
E
A
Extensive and global alumina book provide flexibility to enhance profit margins
Glencores reputation as a secure and reliable counterparty present additional opportunities to optimise existing contracts
Triangulation of global freight movements allow Glencore to capitalise and execute value add and profit enhancing trades
GLENCOE I 20
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Marketin illustration product arbitrage
Glencores diverse commodity range and processing ability enables it to exploit price differentials
across various products, for example
s ng erences n gra e, e.g. en ng eren gra es oge er o mee con rac requ remen s aa lower overall cost
Locking in processing margins to take advantage of price differentials between unprocessed andprocessed product
Substituting products where an end-product can be produced from a variety of commodities (e.g.animal feed)
Illustrative example - Agriculture
After 3 months, relative Glencore improve their
Scenario Catalyst Outcome1 32
Gasoline mean Glencore calculatesthat the margin wouldimprove with a blend of 75%rapeoil and 25% soyoil
rapeoil and buyingsoyoil
Ethanol BiodieselEnergy
distributor
Corn VegoilGasoil
Different vegoil blends (rapeoil, soyoil, palmoil) produceBiodiesel with different quality specifications and hencemarket values
GLENCOE I 21
ase on mon orwar pr ces encore ca cu a e anoptimal Biodiesel producers margin with a feedstock of100% rapeoil
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Marketin illustration time arbitrage
Glencore is able to benefit from inefficiencies in the shape of the forward price curves
In a contango market, Glencore can book carry trades, benefiting from its comparatively lowernanc ng an s orage cos s an a mp e y e orwar curve
Glencore can also benefit from a backwardation market by pricing sales contracts as early aspossible and deferring the quotation periods (QPs) of supply contracts
Time arbitrage is dependent on the existence of liquid forward and futures markets and competitive
access to storage and financing
Illustrative example - Oil in a contango market
Glencore purchases 3 month forward Glencore sells At maturity Glencore
Scenario1 Outcome4Glencores strategy3Catalyst2
$75 each
barrel
at $80, resulting in aprofit beforefinancing, storageand other
of oil
Profit per barrel is $5less say $3 ofCurrent value Forward price
$85 transaction costs of
$5
,and other
transaction costs
$75
$80
$75 / bbl $80 / bbl
Spot 3mforward
$70
GLENCOE I 22
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Marketin illustration freight & logistics
Glencores freight and logistics operations are key to supporting marketing strategies, understandingtrade flows and adding additional value, for example
y e ng a e o p ys ca y ranspor an s ore pro uc s o a e a van age o preva ng mar econditions
The scale of operations ensures low cost transportation, often allowing Glencore to win contracts byoffering a lower unit price CIF (Cost, Insurance, Freight) than competitors
Illustrative example - General
Scenario1 Outcome3Glencores strategy2
Market price of a commodityin location X is $100
Glencore is able to operateat lower unit costs for freight
due to scale, experience and
Glencore can offer a CIFprice of say $106-$110 and
still win the contract as reva ng mar et transport
cost to ship the commodityto location Y is $10, total CIFprice is $110
vert ca ntegrat on owest cost prov er
Market = $10 / unit Glencore = $6 / unit
GLENCOE I 23
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World class mana ement and Board
Highly experienced Board of Directors and management team
Simon MurrayIndependent Non Executive Chairman
Aged 71
Executive Chairman of GEMS
Board member of Richemont and
Independent Non Executive DirectorsExecutive Directors
Essar Energy
Ivan Glasenberg Peter Coates
Aged 65
40 years of experience in theresource industry
Anthony Hayward
Aged 54
Former CEO of BP
Board member of TNK-BP and
Leonhard Fischer
Aged 48
CEO of RHJ International andformer CEO of Wintherthur
Aged 54
BoD Member since 2002
CEO of Glencore since 2002
Santos and AmalgamatedHoldings
par ner o nves ors,founder of Vallares
em er o e oar s o u usBaer Gruppe, AXA Konzern and
Arecon
years w encore
CFOSteven Kalmin
INEDWilliam Macaulay
INEDLi Ning
GLENCOE I 24
ge Chairman and CEO of First
Reserve
Chairman of Dresser-Rand
Executive Director of Henderson
Land Development Company
Director of Hong Kong (Ferry)Holdings
ge CFO of Glencore since 2005
12 years with Glencore