Norsk Hydro ASA · OSL:NHY
Norsk Hydro ASA — Investor Day (December 2011)
43 slides from Norsk Hydro ASA's investor day presentation, Dec 1, 2011
Slide 1: Capturing full potential in Bauxite & Alumina
Capturing full potential in Bauxite & Alumina Johnny Undeli, Executive Vice President and Head of Bauxite & Alumina Fernando Simões Henriques, Head of Operations December 1, 2011 (1)
Slide 2: Agenda
Agenda • World class operations and organization • Production process and operational improvements • Summary (2)
Slide 3: World class operations and organization
World class operations and organization (3)
Slide 4: Further improved bauxite and alumina production
Further improved bauxite and alumina production Annualized production, million mt 10 • Alunorte production up 16% from Q1 to Q3 2011 9 8 • Paragominas production up 27% from Q1 to Q3 7 2011 6 5 • Continued focus on implementing Hydro 4 production system 3 2 1 0 Q1* Q2 Q3 Q1* Q2 Q3 Alunorte Paragomin
Slide 5: Stabilize and improve further
Stabilize and improve further • Solid progress in production volumes • Supported by continuous improvement culture • Positive alumina market development • Index market has been accepted – and Hydro is participating • Expansion projects maturing • Stakeholder relations well established • Authorities
Slide 6: econ de avd A. Newas
econ de avd A. Newas — (6)
Slide 7: Operational momentum will give results
Operational momentum will give results Production growth - Capital discipline - Continuous improvement Paragominas Pipeline 7.5 Æ 9.9 million mt PS1 Æ PS2 Overall ambition 15 & 8 million mt Alunorte CAP & Paragominas expansion 5.8 Æ 6.3 million mt 1.9 & 5 million mt (7)
Slide 8: Paragominas
Paragominas One of the world’s largest bauxite mines • Record production in 2011 • Q3 production 8.7 million mt on annual basis • Target to stabilize and continue to deliver production increases • Possible expansion: up to 15 million mt • Current reserve life: 30 years • ~300 million mt • Long-life
Slide 9: Bauxite mining costs in Paragominas
Bauxite mining costs in Paragominas • Energy cost – power and fuel Paragominas bauxite mining costs Jan-Sep 2011 • Labor cost Sustaining capital; • Influenced by Brazilian wage level 16% • Productivity improvements Other costs; 16% • Maintenance and consumables Labor; 19% • Influenced by Brazilian i
Slide 10: Alunorte
Alunorte World’s largest alumina refinery • Improving production in 2011 • Q3 production 6.2 million mt on annual basis • Targeting stable production above 6 million tonnes • World-class conversion cost position • Modern technology • Bauxite supplied from Paragominas and MRN (10)
Slide 11: Excellent Alunorte alumina quality
Excellent Alunorte alumina quality • High-quality bauxite as basis • Low content of fines • Low content of non-organic materials • Gallium, phosphor and titanium • High degree of consistency • Low variability on high-quality alumina • Customers have preference for Alunorte alumina compared with othe
Slide 12: Favorable integrated alumina cash cost position
Favorable integrated alumina cash cost position • Integrated alumina cash cost position Jan-Sep 2011 Integrated alumina cash cost position Jan-Sep 2011 • USD 273 per tonne • Alunorte, Paragominas and sourced alumina Sourced alumina; • Bauxite 5% • Cash cost to be improved as Paragominas increase pro
Slide 13: Main market and commercial take-aways
Main market and commercial take-aways No.1: China – major importer of upstream aluminium long-term No.2: Industry-wide cost-increase and fight for resources No.3: Index pricing becoming widely accepted (13)
Slide 14: China short in upstream aluminium
China short in upstream aluminium 15 10 Illustrative Import development to China 5 Expect increased imports of 0 upstream aluminium to China Export from China -5 Source: CRU/Antaike/Hydro Alumina Bauxite Scrap Primary aluminium Fabricated Semis • China mainly importing bauxite and alumina • Global a
Slide 15: 66% of available bauxite in 3 countries
66% of available bauxite in 3 countries Billion mt Guinea 14.9 China 2.1 Mali 0.9 1.2 0.0 Jamaica 4.0 India Vietnam Venezuela 1.1 1.8 1.6 2.3 0.5 0.3 0.4 0.0 Indonesia Cameroon 1.0 0.1 1.2 0.0 Brazil 8.2 Australia 9.5 2.0 5.9 Big-league (Top- 3) Total bauxite, billion tonnes: reserves, mine site res
Slide 16: Raw material cost pressure
Raw material cost pressure Fuel oil A1 – Consumer average price Steam Coal (USD/mt) Caustic Soda (USD/mt) North Region (USD/mt) 700 140 600 600 120 500 500 100 400 400 80 300 300 60 200 200 40 100 100 20 0 0 0 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
Slide 17: Alumina pricing shifting from LME-link to market fundamentals
Alumina pricing shifting from LME-link to market fundamentals • Future pricing should reflect fundamentals of bauxite and alumina value chain • Spot market activity is important • New norm for the industry • Index pricing and shorter-term contracts (3-4 years) • Getting wider acceptance in the marke
Slide 18: Hydro's commercial strategy
Hydro’s commercial strategy • Actively promoting index pricing • Providing spot market liquidity • Reporting trades • Focus on selling to end-users based on a global portfolio • Establish a premium for Alunorte quality • Relatively minor volumes available for sale before 2016 • Selling 1.5-3 million
Slide 19: External alumina sourcing
External alumina sourcing • 1.6-1.7 million mt of external alumina sourcing in 2011 • Long term off-take agreement with Rio Tinto • Increasing with 400 000 mt annually when Yarwun expansion is in operation • Short- and medium term contracts • To balance and optimize position geographically • Various
Slide 20: Attractive alumina position
Attractive alumina position In thousand mt 9 000 Open position not committed to sales contracts 8 000 Sourcing contracts 7 000 CAP equity 6 000 Alunorte equity 5 000 4 000 3 000 Smelter demand* 2 000 1 000 0 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 *Sunndal 3 line assumed back in operation,
Slide 21: Production process and operational improvements
Production process and operational improvements (21)
Slide 22: What is bauxite?
What is bauxite? • Rock composed mainly of aluminum oxide and aluminum hydroxide minerals • Other materials: iron hydroxides, clay, silt and free silica • 3 main qualities • Gibbsite Al(OH)3 • Boehmite AlO(OH) • Diaspore AlO(OH) (22)
Slide 23: Bauxite
Bauxite Where do we find the different mineralogy's? Diaspore AlO(OH) • China and Russia • High pressure and temperature Bayer process at higher cost • 250° Celsius Gibbsite Al(OH)3 • Paragominas and Trombetas • Low pressure and temperature Bayer process • 145° Celsius Boehmite AlO(OH) • Australia a
Slide 24: Paragominas – production process
Paragominas – production process Reclaimer Silo SAG mill Pumping station Classification to pipeline Tailings dam/recovered Classification water Ball mill Recrusher Vibrating screen (24)
Slide 25: Paragominas – production process
Paragominas – production process Strip mining Milling • Strip mining allows for quick environmental recovery • Bauxite found in 0.5-2.5 meter layers 4-18 meters below ground Beneficiation plant • 2 beneficiation plants, each with annual capacity of 5 million mt • Remove clay from the ore and grind t
Slide 26: Paragominas – production process
Paragominas – production process Pipeline • 244 km pipeline from Paragominas to Alunorte • Only bauxite slurry pipeline in the world • 15 million mt annual capacity • Low environmental impact • Transport slurry to Alunorte with 50% solids • Delivery to Alunorte's dewatering filters (26)
Slide 27: Operational improvements
Operational improvements • Preventive maintenance • Less unplanned production stops • Feeding rate up 10% since 2010 • More fines sent to Alunorte dewatering • Housekeeping • Continuous improvements 27% increase in production from Q1 to Q3 2011 (27)
Slide 28: Bauxite mining going forward
Bauxite mining going forward Traditional technology New Technologies • Smaller equipment • Bucket wheel excavator & cross pit spreader • More manpower intensive (overburden) • Actual mining fleet • Surface Miner (bauxite excavation) • ~170 trucks, excavators etc, • Load distance conveyor belt and bi
Slide 29: Higher productivity and lower cost
Higher productivity and lower cost (29)
Slide 30: Alunorte - production process
Alunorte - production process Bauxite dewatering Steam Alumina Al2O3 Powerhouse Bauxite Caustic soda Evaporation Test tank Calcination Digestion Classification Hydrate (Al(OH)3) Precipitation Decanters Mud residue (30)
Slide 31: Alunorte – production process
Alunorte – production process Bayer process • Bauxite shipped by boat (MRN) or pipeline Digestion (Paragominas) • Liquidity removed in dewatering filters • Caustic soda added in the digestion • Pressure and heat added, resulting in a sodium aluminate sollution Dewatering • Settling in the decanters
Slide 32: Alunorte – production process
Alunorte – production process Bayer process • Precipitation • Cooling of liquor • Alumina hydrate added to start precipitation of pure alumina particles • Settle at bottom of tanks, transferred to the calcination • Calcination • Heating process • Result is fine white powder - alumina (32)
Slide 33: Operational improvements: Housekeeping
Operational improvements Housekeeping Before After (33)
Slide 34: Stopping leakages in Alunorte
Stopping leakages in Alunorte (34)
Slide 35: Operational improvements: Stopping leakages
Operational improvements Stopping leakages Before After (35)
Slide 36: Operational improvements
Operational improvements • Availability of all lines Dewatering 8%* • Dewatering • Housekeeping • Safety Demurrage costs 69%* • Port availability Safety improvement 38%* 16% increase in production from Q1 to Q3 2011 * Jan-Sep 2011 vs 2010. Safety measured as TRI (36)
Slide 37: Alunorte going forward
Alunorte going forward • Continuous improvement • Preventive maintenance • Hydro production system (37)
Slide 38: Key operational priorities
Key operational priorities • Safety and housekeeping improvement focus • Maximize synergies between Alunorte and Paragominas • Implement integrated management system • Improve efficiency to achieve nameplate production capacity • Industry benchmark in HSE and CSR (38)
Slide 39: Summary
Summary (39)
Slide 40: Strong social and environmental commitment
Strong social and environmental commitment • Social dialogue process initiated • Health and safety top priority • Ambition to become world class in mining and refining of bauxite • Our HSE culture to be the foundation for excellent operation • Green municipality • Reforestation (40)
Slide 41: Solid progress - 9 months after completion
Solid progress - 9 months after completion • Integration on track • Good stakeholder dialogue • Well established relations with unions and • Strong production growth government • Solid development in health and safety (41)
Slide 42: Bauxite & Alumina priorities
Bauxite & Alumina priorities • Stabilize and improve further • Benchmark social and environmental performance • Increase capacity utilization • Develop growth opportunities • Operational excellence and • Capitalize on long position in bauxite and alumina strong cost focus (42)
Slide 43: www.hydro.com
www.hydro.com