Eurasian Natural Resources Corporation PLC

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1 Eurasian Natural Resources Corporation PC Ferrochrome Market Review and Outlook by Mark. Midgley Marketing & Operations Director ENRC Marketing AG Disclaimer This presentation includes statements that are, or may be deemed to be, forward-looking statements. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms believes, estimates, plans, projects, anticipates, expects, intends, may, will, or should or, in each case, their negative or other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or intentions. These forward-looking statements include matters that are not historical facts or are statements regarding the Group s intentions, beliefs or current expectations concerning, among other things, the Group s results of operations, financial condition, liquidity, prospects, growth, strategies, and the industries in which the Group operates. Forward-looking statements are based on current plans, estimates and projections, and therefore too much reliance should not be placed upon them. Such statements are subject to risks and uncertainties, most of which are difficult to predict and generally beyond the Group s control. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances. The Group cautions you that forward-looking statements are not guarantees of future performance and that if risks and uncertainties materialise, or if the assumptions underlying any of these statements prove incorrect, the Group s actual results of operations, financial condition and liquidity and the development of the industry in which the Group operates may materially differ from those made in, or suggested by, the forward-looking statements contained in this announcement. In addition, even if the Group s results of operations, financial condition and liquidity and the development of the industry in which the Group operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. A number of factors could cause results and developments to differ materially from those expressed or implied by the forward-looking statements including, without limitation, general economic and business conditions, industry trends, competition, commodity prices, changes in regulation, currency fluctuations, changes in business strategy, political and economic uncertainty. Subject to the requirements of the Prospectus Rules, the Disclosure and Transparency Rules and the isting Rules or any applicable law or regulation, the Group expressly disclaims any obligation or undertaking publicly to review or confirm analysts expectations or estimates or to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any changes in the Group s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Where applicable in the document all references to t are to metric tonnes, to kt are to thousand metric tonnes and Mt are to million tonnes, unless otherwise stated. Any information in the document not attributed to an external source is Company information and has been provided by Eurasian Natural Resources Corporation PC. 2 1

2 ENRC PC Ferroalloys Division Overview Strategic ocation & Assets Ferroalloys Kazakhstan (2010 ) Donskoy Cr Ore Mines Zhairem Mines Zhairem GOK Aktobe Ferroalloy Plant Aksu Ferroalloy Plant Serov (Russia) Saranovskaya Mine Rudnaya Serov Russia Aksu Population: 15.6m GDP: US$138.4bn GDP growth: 7.0% Mongolia Saranoyskaya Cr ore Mine Tuoli (China) Aktobe Donskoy GOK Shubarkol open pit mine Kazmarganets Tur mine Vostochnij open pit mine Tuoli Azerbaijan Caspian Sea Zhairem Kazmarganets Kamys mine China Uzbekistan Kyrgyzstan Iran Turkmenistan egend: Plant Underground mine Open pit Electric power station Coal mine Kazakhstan data source: IMF,

3 Fully Integrated Operations in Kazakhstan Ferroalloys Energy Mining (Raw Materials) Chrome and manganese ore Coal Internal supply of key materials Processing Ferroalloys Electricity Easy access to low cost processing facilities Sales and Marketing 3 rd Party Sales Centralised marketing effort Source: ENRC ogistics Division Comprehensive logistics network ensuring uninterrupted and cost efficient material and product flow 5 eading Market Positions Highlights World s largest chrome producer by chrome content since 2008 Successfully recovered to operating at effectively full capacity in the aftermath of the 2008 crisis High chrome ore quality allowing production of highest grade of specialty FeCr Diverse product range of ferroalloys, including special ferrochrome grades (ow Si, P, Ti, S in low and high carbon grades) ENRC Group Ferroalloys Capacity by Grade FeSi FeSiMn FeSiCr Refined FeCr HCFeCr *By Chrome content Source Heinz Pariser HCFeCr [Bottom Axis] Other FA [Top Axis] Source: ENRC Source: ENRC 3

4 Ferrochrome: Applications & Outlook Chromium - Alloying Element in Steels Passive ayer Formation Stainlessness Stainless Steels (min 10.5% Cr) Increasing Hardness, Carbide Forming Tool & HSS, Creep Resistant Steels, Wear Resistant Steels Cr Case Hardening, Quenched and Tempered Steels Increase Hardness Penetrability Heat Resisting Steels Scale Resistance Source: Heinz H. Pariser, August % Increase Hardnability 4 30% Increase Corrosion Resistance 8 4

5 Characteristics of HC FeCr / Charge Chrome Application HC FeCr Wide range of usage in Alloy Steels, the Foundry Industry as well as for other materials but also in Stainless Steels Charge Cr Almost exclusively for Stainless Steel melting Analysis Difference Benefits High Cr Content (typically 58% 70%). Cr:C ratio 9:1 Cr:Si ratio >100:1 Advantages when limited Fe input is required, where specific constraints exist for certain special steels in particular with regard to trace elements such as Ti, V, P, Si, etc. HCFeCr has a more diverse range of application than charge chrome and is less prone to volume risk in any stainless steel downturn ow Cr Content (48% 58%), High (free) Iron Content. Typically high Si Content (2% 6%) Cr:C ratio 6.5:1 Cr:Si ratio 12:1 Competitive bulk product for mass production 9 Stainless Steel Melting Production by Region and Grade First Use of Chromium Units in Mill t Source: Heinz H. Pariser, August 2011 Source: Heinz H. Pariser, August

6 Indian Market Indian Stainless Steel Demand Forecast Over the last 10 years Indian Chrome ore quality has been falling. The Cr 2 O 3 content has fallen by 5% during this period, whilst Si content has increased. More so, the amount of lumpy ore mined has fallen. This reduces the amount of high-grade FeCr produced domestically, increasing India s dependence on imports of FeCr for specialty steel producers Source: Fairfax IS, The Indian Stainless Development Association (ISSDA), Bloomberg Source: Heinz H. Pariser, Chinese Chrome Ore Imports and HCFeCr Production CAGR Cr Ore Imports: 21.4% CAGR FeCr Production: 54.6% 000 mt 000 mt [HS] Source: Underlying Cr Ore volume and price data by Chinese Customs. Analysis by ENRC [RHS] 12 6

7 Chinese FeCr Prices vs. FeCr ex Works Cost of Production Source: Underlying Cr Ore volume and price data by Chinese Customs. Analysis by ENRC 13 China s HCFeCr Net Imports Source: Underlying Cr Ore volume and price data by Chinese Customs. Analysis by ENRC 14 7

8 Chinese and RSA FeCr Production Cost FeCr Production Cost Breakdown and Outlook Source: Heinz H. Pariser, Scrap Ratio Stainless Steel Source: Heinz H. Pariser, 2011 Source: FT,

9 Nickel Pig Iron Production Cr contained in NPI Nickel Pig Iron on average contains 7.1% Nickel (kmt, in FeCr equivalent, basis 55% Cr content) 240,000 mt Nickel units 3,4 million mt NPI NPI contains on average 1% Chrome 3.4 million t NPI 34 kmt Cr Units (basis 1% Cr) 34 kmt Cr 62 kmt FeCr (basis 55% Cr) Source: ISSF, Macquarie Research estimates, June 2011Source: ENRC Estimates, August FeCr Demand: Historic Development Stainless Steel Consumption 2010 Stainless Steel Consumption Current Estimate per Capita of Number of Cars per Thousand People Current Estimate of Number of Cars per Thousand People Source: Heinz H. Pariser, 2011 Source: Fairfax IS, Bloomberg, Environment Agency 18 9

10 Stainless & Alloy Steel Production Growth Source: Heinz H. Pariser, Summary Without Chrome there is NO STAINESS STEE China, India and the emerging market economies will drive chrome consumption China and India will continue to grow their domestic FeCr production to seek to remain self-sufficient Stainless steel production technology and scrap availability will dictate chrome usage Due to nickel price volatility and research advances 400 and 200 series are expected to grow quicker than 300 series Engineering and Alloy Steels expected to continue to grow strongly ENRC is ideally placed to meet global requirements of high quality FeCr 20 10

11 Thank You ENRC Marketing AG Tel: