Exxaro Resources Limited · JSE:EXX
Exxaro Resources — Africa Iron Ore Conference 2011
15 slides from Exxaro Resources's conference presentation, Jun 7, 2011
Slide 1: Moving into iron ore, targeting Africa
7 June 2011 Moving into iron ore, targeting Africa Africa Iron Ore Conference Presentation by Ernst Venter Executive General Manager, Business Growth Exxaro Resources Ltd
Slide 2: Disclaimer
Disclaimer Opinions expressed herein are by nature subjective to known and unknown risks and uncertainties. Changing information or circumstances may cause the actual results, plans and objectives of Exxaro Resources Limited (the “Company”) to differ materially from those expressed or implied in the
Slide 3: The iron ore landscape
The iron ore landscape Historical Current • Only a few large players • Dozens of players • Long life mines • Also small, short life mines • High quality products • Lower quality products • Long-term contracts with steel mills • Spot market and trader sales Future • More large players and dozens of s
Slide 4: Iron ore fundamentals
Iron ore fundamentals Price Cost REVENUE Quality Demand Supply
Slide 5: Iron ore fundamentals: demand methodology
Iron ore fundamentals Methodology - Demand driven - Various approaches on steel demand Intensity of use World steel demand World World iron ore demand Regression Scenario analyses Steel analyses Demand World seaborne iron ore demand Historic lead or lag to GDP
Slide 6: Iron ore fundamentals: mix of seaborne iron ore
Iron ore fundamentals Mix of seaborne iron ore Fines represents the majority of seaborne trade and is also the fastest growing product Growth in fines exports has primarily been due to the demand from China where blast furnaces are traditionally oriented towards sintered fines Source: AME
Slide 7: Iron ore fundamentals: price outlook
Iron ore fundamentals Sector themes – Price outlook UBS forecasts a deficit in global iron ore supply over the next 3 to 4 years, translating into strong iron ore prices. These prices are expected to reduce in 2014/15 as key infrastructure developments debottleneck new supply in Australia and global
Slide 8: Iron ore fundamentals
Iron ore fundamentals 8 However, an emerging view from analysts in the sector is that the risk is to the upside with a large percentage of the new forecast supply expected to experience delays and significant capex increases Source: UBS, May 2011
Slide 9: Projected iron ore curve
Projected iron ore curve AFRICA IRON ORE As the volumes of the high quality ore depletes, this curve will compact to the left Source: Macquarie (2010)
Slide 10: Africa, underlying potential
Africa, underlying potential Major issues for investors: • Security of tenure • Perception of country risk • Exploration requirements • Lack of infrastructure • Capital intensity • Quality of iron ore deposits … however … • Significant number of acquisitions in the past few years • Despite substanti
Slide 11: Essential selection criteria
• Non existent or shallow capital markets • Low or unrated African countries impose sovereign ceiling and adversely Access to capital impact access to debt markets • (power and transport) • Lack of infrastructure development and maintenance infrastructure • Highly capital intensity and impact on pro
Slide 12: Risk mitigation
Risk mitigation TOOLS USED TO MITIGATE POLITICAL RISK IN EMERGING MARKETS
Slide 13: Countries most likely to be developed
Countries most likely to be developed Major companies involved in African projects will assist in bringing stability to the region Potential Year Capacity ~2025 >200mtpa Mauritania Guinea Sierra Leone Liberia Cameroon Republic of Congo Countries like Senegal, Angola, Gabon, Ivory Coast and Madagasca
Slide 14: What is happening?
XxX What is happening? Afi beng tured upside cow fo sc ion or reOUes ne
Slide 15: … but, Africa is not for the faint hearted!
… but, Africa is not for the faint hearted!