SUPPLY OUTLOOK & COMPETITION TO ESTABLISHED BRANDS. Alina Wills Senior Commodities Research Analyst MVS

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1 SUPPLY OUTLOOK & COMPETITION TO ESTABLISHED BRANDS Alina Wills Senior Commodities Research Analyst MVS

2 DISCLAIMER Whilst every effort has been made to ensure the accuracy of the information in this document, the content of this document is provided without any guarantees, conditions or warranties as to its accuracy, completeness or reliability. It is not to be construed as a solicitation or an offer to buy or sell iron ore, related products, commodities, securities or related financial instruments. To the extent permitted by law, we, other members of our group of companies and third parties connected to us hereby expressly exclude: All conditions, warranties and other terms which might otherwise be implied by statute, common law or the law of equity. Any liability for any direct, indirect or consequential loss or damage incurred by any person or organisation reading or relying on this document including (without limitation) loss of income or revenue, loss of business, loss of profits or contracts, loss of anticipated savings, loss of goodwill and whether caused by tort (including negligence), breach of contract or otherwise, even if foreseeable.

3 GLOBAL ORE SUPPLY OUTLOOK

4 GLOBAL IRON ORE SUPPLY AUSTRALIA & BRAZIL ALONE WILL PRODUCE 1.35 BILLION TONNES IRON ORE BY 2017 MTPA Australia Roy Hill 55mtpa by 2017 Rio and BHP extra capacity Brazil Vale - S11D 90mtpa by e 2017e Australia Brazil Source: MVS Analytics

5 REST OF WORLD IRON ORE SUPPLY INCREASING BUT WORLD STEEL DEMAND FORECAST TO DROP MTPA RoW China Worldsteel demand India Brazil Australia USA S. Africa e 2017e Source: MVS Analytics & Worldsteel Association

6 GLOBAL IRON ORE SUPPLY MAP ACTUAL 2015 Source: MVS Analytics

7 GLOBAL IRON ORE SUPPLY MAP FORECAST 2017 Source: MVS Analytics

8 CHINA DOMESTIC SUPPLY DECREASES WITH LOW PRICES - NEW SEABORNE SUPPLY WILL MAKE A POSITIVE QUALITY CONTRIBUTION TO CHINA S BLEND 70 Current domestic Newman Fines 65 Fe % 60 S11D FMG/Vale Blend Roy Hill Fines SiO2 % Roy Hill Fines PB Fines Jimblebar Fines FMG/Vale Blend SiO % P % Lower SiO2 & P supply could support long term shift in China to higher quality steel production that is more environmentally compliant Source: MVS Analytics

9 LOW CASH COST OF MAJOR PRODUCERS & LOW FREIGHT COSTS MEANS MINERS STILL COMPETITIVE IN SQUEEZED MARKET Mining Cash Costs $ per tonne Vale S11D Rio BHP FMG Source: MVS Analytics

10 INNOVATION & OVERSUPPLY?

11 FMG AND VALE AT GRADE EXTREMETIES BLEND WILL SEE THEM JOIN CLUSTER OF PRODUCTS AROUND IODEX 62% FE FMG & Vale blend allows both companies to compete in IODEX 62% grade range Super Special Fines Fe SiO2 IODEX 62% Newman Fines Pilbara Blend Fines Roy Hill Fines Carajas North Fines Al2O3 Source: MVS Products Analytics

12 FMG/VALE BLEND HAS POTENTIAL TO TRUMP PB FINES WITH LOWER CONTAMINANTS ACROSS THE BOARD Blend % Contribution Fe SiO2 Al2O3 P S LOI Super Special Carajas North MVS Estimated Blended Specs PB Fines IODEX FMG & Vale blend could achieve lower impurities across the board than PB Fines offering a competitive advantage Source: MVS Analytics

13 VALUE IN USE 31% PB FINES VS 31% FMG/VALE BLEND FMG/VALE COULD COMMAND A PREMIUM AT THIS LARGE MILL IN HEBEI $52.00 $51.50 Value In Use Breakdown Delta +$1.31 $51.00 $50.50 $50.00 $49.50 $49.00 Reference Price Sinter Costs Burden Mix Costs Iron Ore Productivity Sizings of FMG and Vale ores thought to complement one another sinter pot tests being undertaken currently in China Coke Rate PCI Other Injectants Overheads Slag Revenues PB Fines Burden Mix 70%Sinter 31% PB Fines 10% Lump 20% Pellets Desulph Dephos Inland Transport Costs Breakeven Price FMG/Vale Burden Mix 70%Sinter 31% FMG Vale 10% Lump 20% Pellets Source: MVS Blend Analytics

14 MVS AUTOPRICER ESTIMATE FOR FMG/VALE, BLENDED VS INDIVIDUAL PRODUCTS SELLING BLEND ON IODEX 62% BENEFIT OF $0.86 PER TONNE Super Special on PLATTS 58% Carajas North on PLATTS 65% Average price for past year $42.60 $58.77 FMG/Vale Blend 3 on PLATTS IODEX 62% Fines Super Special Fines on PLATTS 58% Fines 0 May 15 Jun 15 Jul 15 Aug 15 Sep 15 Oct 15 Nov 15 Dec 15 Jan 16 Feb 16 Mar 16 Apr 16 May 16 Source: MVS Analytics Autopricer

15 MVS AUTOPRICER ESTIMATE FOR FMG/VALE, BLENDED VS INDIVIDUAL PRODUCTS SELLING BLEND ON IODEX 62% BENEFIT OF $0.86 PER TONNE Super Special on PLATTS 58% Carajas North on PLATTS 65% Average price for past year $42.60 $58.77 Estimated contribution to blend 40% 60% $52.30 FMG/Vale Blend on IODEX 62% $53.16 DIFFERENCE TO BLEND ON IODEX $0.86 per tonne 80 MTPA * $0.86 PER TONNE $69 MILLION PA Source: MVS Analytics Autopricer

16 CURRENT BRAND PERFORMANCE

17 BRAND COMPARISON OF PB FINES, NEWMAN, MNP AND JIMBLEBAR TRADED ON SPOT - PB FINES SURPASSES ALL BRANDS IN VOLUME OF TRADES BRANDS ASSESSED VS IODEX PB FINES - $0.34 above NEWMAN - $0.09 below MNP - $1.20 below JIMBLEBAR reducing discount below IODEX Source: Platts & MVS

18 PILBARA BLEND FINES MOST LIQUID TRADE ON IODEX ACHIEVED CONSISTENT PREMIUM AVE $0.34T FOR LAST YEAR Well regarded sinter properties - up to 40% of blend Consistent product Trades are normalised for Fe, SiO2 & Al2O3 and delivery timing Specification Fe SiO2 Al2O3 P Pilbara Blend Fines (norm) IODEX Source: Platts & MVS

19 NEWMAN FINES ONLY 5 MT SEEN TRADED ON SPOT AT AVERAGE $-0.09 BELOW IODEX Spot trades seen trading very close to IODEX Trades are normalised for Fe, SiO2 & Al2O3 and delivery timing Specification Fe SiO2 Al2O3 P Newman Fines IODEX Source: Platts & MVS

20 MNP THOUGHT TO BE USED TO SELL MAC SIMILAR SPEC TO PB FINES BUT LESS FAVOURABLE SINTER QUALITIES Useable max. of MAC thought to be 15% in sinter blend Only normalised for delivery timing as grade unknown Specification Fe SiO2 Al2O3 P MAC IODEX Source: Platts & MVS

21 JIMBLEBAR MOVING CLOSER TO THE IODEX DESPITE HIGH P CONTENT REDUCED FROM -2.9% BELOW IODEX IN 2015 TO ONLY -0.6% IN 2016 FY 2015 production 16.8mt, 2.38mt traded on the spot Normalised for Fe, Si, Al, P and delivery timing based on paper structure Specification Fe SiO2 Al2O3 P Jimblebar fines IODEX Source: Platts & MVS

22 JIMBLEBAR GETTING MORE THAN THEY BARGAIN FOR UP TO 8% MORE THAN TYPICAL SPEC PRICE GAINING POPULARITY & ACCEPTANCE WITH STEEL MILLS [ ]In terms of quality, Jimblebar is on par with the leading 62pc mainstream fines grades Chinese trader Estimated US$ 6.8 million benefit from January 2015 Normalised price against calculated specs price Source: Platts & MVS Autopricer

23 QUESTIONS?