Sydney Mining Club 7 November 2002 Presentation by Peter Coates CEO Xstrata Coal
The Agenda • The transformation of Xstrata Plc • Xstrata Coal’s origins • Xstrata Coal today • The outlook for thermal coal market 2
Xstrata Plc • International, diversified natural resources company • Diversified portfolio of high-quality, cash generative metals and mining businesses • Xstrata Coal • Xstrata Zinc • Xstrata Alloys • Based in Switzerland listed on the London Stock Exchange • New international shareholder base • Admitted to the FTSE 100 Index in June 2002 3
Transformation of Xstrata To create a platform from which value could be created, growth credibility pursued and existing potential unlocked The key challenges were: • US$ 1 billion capitalisation, – lack of critical mass • 2 quality assets (ferroalloys and zinc) not diversified by earnings profile or pricing cycle • Growth constrained by: high gearing (85% debt to equity ratio); an illiquid stock and a domestic shareholder base 4
Xstrata’s origins 5
Coal Acquisition • Coal assets: Ideal vehicle for transportation • Complemented quality of the portfolio • New commodity, pricing, earnings and geographical exposure • Scale to unlock new listing and international shareholder base • Transaction had to stand on financial merits: • Conservative assumptions: Acquisition makes returns in excess of cost of capital at long-run coal price of US$26/ton and US: Australian dollar exchange rate of 63 c 6
Roadshow Summary • In total, Xstrata’s IPO roadshow covered some 190 institutions worldwide, with an 89% success rate • 11 day programme • Meetings with investors in 13 cities in 7 countries • 66 one-on-ones • 15 groups meetings • 5 video or tele-conferences 7
The new Xstrata • Successful IPO placed Xstrata in strong position • Company effectively transformed New Xstrata Former Xstrata AG Proforma net cash from operations US$340 m US$33 m Net debt to equity ratio 19. 6% 84. 7% Debt to EBITDA <1. 5 x 3. 6 x 8
Top Shareholders: Public Data No of shares Glencore International AG Capital Group of Companies Fidelity % 101, 040, 000 35, 409, 006 7, 639, 144 40. 0 14. 7 3. 0 Undisclosed UK - 32. 5% of total register Undisclosed CH - 9. 8% of total register (Total shares in issue: 252. 6 million) 9
Xstrata Plc Revenue by Commodity - 2001 Proforma Revenue – US$1, 875 million 10
Xstrata Plc Revenue by Commodity - 2002 Six months to 30 June 2002 – US$957. 9 million 11
Xstrata has global leading positions in its selected markets Thermal coal exports (2001) mt 12
Xstrata has global leading positions in its selected markets Refined zinc production (2001) kt 13
Xstrata has global leading positions in its selected markets South African ferrochrome (2001) kt 14
Xstrata Coal One of world’s largest exporters of thermal coal • Australia • 14 mines – approximately 32 Mt managed production/ 27. 5 mt consolidated production • 20% of Australian thermal exports • South Africa • 12 mines – approximately 14 Mt managed production/ 16 mt consolidated production • 20% of South African exports 15
Xstrata Coal’s origins 16
Cerrejon, Columbia 17
The Genesis of Glencore Coal • 1995 – Glencore purchase of Prodeco assets • • Carbones del Cerrejon Calenturitas Lenquazacue Puerto Zuniga • Development of Mine and Port • Carbones del Cerrejon to 4 mtpa • Puerto Zuniga to 6 mtpa • 1998 – Sell down and consolidation • Sale of 50% of Cdel. C to Anglo • Merger of Cdel. C with Rio’s Oregenal • Later – Further consolidation • • Exit of Rio Buy in of BHP Purchase of Carbocol share of CZN Purchase of Exxon share of CZN 18
On the Acquisition Trail 1998 Cumnock Coal Ltd (Underwritten Rights Issue) Mt Owen OC (BHP) 1999 Teralba UG, West Wallsend UG, Westside OC (HIH) Liddell OC (Savage Resources) United UG (White Industries) 2000 Bulga OC, Sth Bulga UG and Baal Bone UG (Cyprus) 2001 Ulan UG and OC Mines (Exxon) Duiker Mining Ltd (On-market takeover) 2002 Ravensworth East OC, Narama OC (Rio) 19
Xstrata Coal Australia 20
Xstrata Coal South Africa 21
Leading NSW coal producer 22
Strong outlook for thermal coal demand 23
Australia’s thermal coal supply Major potential for expansion 24
In Summary • Xstrata Plc is a leading international, diversified natural resources company • Xstrata Coal is one of the world’s largest exporters of thermal coal • Well-positioned to capture future growth in coal market 25
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