Eurasian Resources Group Dmitry Pastour November 2015 1
Eurasian Resources Group Market Overview 2
Charge/HC FeCr Demand Source: Heinz H. Pariser Production, in '000 t 12,000 10,000 8,000 6,000 4,000 2,000 0 10,928 42.8 1955 34.6 34.0 5,851 11.6 1954 1953 Heinz H. Pariser 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 50.0 45.0 40.0 35.0 30.0 25.0 20.0 15.0 10.0 5.0 0.0 China / South Africa Share of Production, in % 3/
Supply/Demand in China and Rest of the World CHINA SUPPLY/DEMAND 2010 2011 2012 2013 2014 2015 e G.R. in % Stainless Steel Production 12,350 14,460 16,372 19,211 21,810 21,979 13.0 Real Cr Demand 3,799 4,443 5,027 5,893 6,686 6,737 12.9 Production - Cr Production 2,212 2,798 3,332 3,731 4,112 3,786 12.0 - Capacity 2,960 3,590 4,260 5,395 6,260 6,850 19.0 - Utilisation (in %) 74.7 77.9 78.2 69.1 65.7 55.3 Supply 4,188 4,782 5,141 5,852 6,576 6,685 10.3 - Domestic Supply 2,070 2,798 3,332 3,731 4,112 3,786 13.0 - Net Imports 1,947 1,798 1,521 1,828 2,057 2,590 5.9 - Cr in NPI 171 187 288 294 406 308 16.3 Supply & Demand Balance 389 339 114-41 -110-53 HC Tender Prices in $ / lb 0.97 1.01 0.92 0.88 0.82 0.77 REST OF THE WORLD SUPPLY/DEMAND 2010 2011 2012 2013 2014 2015 e G.R. in % Stainless Steel Production 20,017 19,621 19,437 19,454 20,026 20,086 0.2 Real Cr Demand 4,879 4,720 4,626 4,569 4,583 4,561-1.2 Production - Cr Production 6,681 6,351 6,154 6,609 7,039 7,141 2.1 - Capacity 8,330 8,548 8,639 9,152 9,403 9,716 3.2 - Utilisation (in %) 80.2 74.3 71.2 72.2 74.9 73.5 Supply to RoW 4,492 4,730 4,404 4,500 5,031 4,630 1.0 Supply & Demand Balance -387 9-223 -69 448 69 Charge Cr Prices in $ / lb 1.24 1.25 1.21 1.16 1.19 1.07 Source: Heinz H. Pariser 4/
16.0 Charge/HC FeCr Demand Source: Heinz H. Pariser 14.0 America G.R.: 2.4% EU G.R.: -1.4% China G.R.: 13.8% 13.5 Charge / HC FeCr Demand, in Mill t 12.0 10.0 8.0 6.0 4.0 6.1 India G.R.: 3.5% Total G.R.: 5.3% Other Asia G.R.: -0.8% Others G.R.: 2.9% 11.2 2.0 0.0 Heinz H. Pariser 2005 2008 2011 2014 2017 2020 5/
Charge/HC FeCr Demand Source: Heinz H. Pariser America EU China India Japan Other Asia Others Total 2015 659 1,532 6,377 526 648 748 701 11,191 2016 648 1,460 6,620 548 616 780 716 11,389 Change -2% -5% 4% 4% -5% 4% 2% 2% 2017 672 1,509 7,011 572 634 816 732 11,946 2018 696 1,539 7,375 601 653 797 746 12,407 2019 718 1,574 7,703 647 673 777 760 12,852 2020 739 1,610 8,028 696 693 757 774 13,296 6/
16.0 HC Ferrochrome production forecast Source: Heinz H. Pariser Charge / HC FeCr Production, in Mill t 14.0 12.0 10.0 8.0 6.0 4.0 China G.R.: 14.0% South Africa G.R.: 3.1% 5.9 Total G.R.: 5.9% India G.R.: 2.8% Others G.R.: 4.3% Kazakhstan G.R.: 4.4% 10.9 13.6 2.0 0.0 Source: CRU Heinz H. Pariser 2005 2008 2011 2014 2017 2020 7/
Import of chromium ore in China China chromium ore imports Source: ICDA 12,092,398 8,657,555 9,440,899 9,293,003 9,384,087 9,886,082 6,837,693 6,755,698 6,088,451 2007 2008 2009 2010 2011 2012 2013 2014 2015 F 8/
3.0 USA ferrochrome industry Source: Heinz H. Pariser 500 Crude Stainless Output, in Mill t 2.5 2.0 1.5 1.0 0.5 Crude Stainless Output Domestic FeCr Supply 1974: 306 kt 1981: Macalloy temporarily suspends production 1987-1993: producing for DLA stockpile (~ 50kty) 1998: Exit Domestic FeCr Production 2015: 2.5 Mill t 0.0 1950 1960 1970 1980 1990 2000 2010 450 400 350 300 250 200 150 100 50 0 Ferrochrome Output, in kt 9/
Japanese ferrochrome industry 5.0 4.5 Source: Heinz H. Pariser 1000 900 Crude Stainless Output, in Mill t 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 1972: Start-up SDK Plant 1974: 540 kt Crude Stainless Output Domestic FeCr Supply Strategic Investments and Partnerships in SA 2004: 4.2 Mill t 2002: Exit Domestic HC FeCr Production (LC continues) 0.0 1950 1960 1970 1980 1990 2000 2010 800 700 600 500 400 300 200 100 0 Ferrochrome Output, in kt 10/
Chinese ferrochrome industry Source: Heinz H. Pariser Stianless Steel Production, in Mill t 50 45 40 35 30 25 20 15 10 5 0 If China domestic ferrochrome production will follow the path of economies like Japan and USA, it will create an additional demand for millions of imported ferrochrome. Where will that supply come from? A possible new direction? 1990 2000 2010 2020 10 9 8 7 6 5 4 3 2 1 0 Charge / HC FeCr Production, in Mill t Stainless Steel Production Charge/HC FeCr Production 11/
Chrome ore resources Source: Heinz H. Pariser, August, 2015 12/
FeCr Production Costs Ex Works 2015 Est. 140.0 Heinz H. Pariser Cost in US$ ct per lb Cr Content 120.0 100.0 80.0 60.0 40.0 20.0 Charge Cr Benchmark (2015): US$ ct 107 per lb China Tender (2015 Y-t-D, excl VAT): US$ ct 78 per lb (50% Cr) 2014 0.0 0.0 20.0 40.0 60.0 80.0 100.0 Share of Production, in % Source: Heinz H. Pariser 13/
Export of chromium ore and HCFeCr from India 2,000,000 700,000 1,800,000 600,000 1,600,000 1,400,000 500,000 Chromium ore export 1,200,000 1,000,000 800,000 400,000 300,000 HCFeCr export 600,000 200,000 400,000 200,000 100,000 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 F Axis Title 0 Source: ICDA India ore export India HCFeCr export 14/
Since there are continuous issues in South Africa with the electricity and the potential for increase in India is limited, there is a strong possibility of market undersupply in the mid and longterm future. The market price should adjust substantially to a higher level mid-term, in order to justify and allow further investments in ferrochrome productions in other regions. Taking into account long lead time for new projects, there is not that much time left for the market to adjust to insure the mid and long-term supply sustainability. Source: ICDA 15/
Price development: EU Benchmark, EU Spot and China Spot 6-8% C 140% 130% 120% 110% 100% 90% 80% 70% 60% Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011 Q2 2011 Q3 2011 Q4 2011 Q1 2012 Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 EU Benchmark indexed FeCr China spot 6-8% C indexed EU HC Spot indexed Linear (EU Benchmark indexed) Linear (FeCr China spot 6-8% C indexed) Linear (EU HC Spot indexed) Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Source: Metal Bulletin 16/
Value Added Structure of Chromium Alloys 0.03 < 0.02 Cr Metal 3.49 5.67 < 0.05 0.05 0.5 ULC 0.03 LC 0.42 2.04 2.13 2.01 2.09 0.5 4.0 MC 0.38 1.57 1.74 7.5 8.5 HC 3.63 0.98 1.02 4.0 7.5 Charge 7.39 1.04 1.08 Ore Concentrate 3.77 33.5 0.27 0.29 Basis 2015e Volumes in Mill. t Material Weight Price Ranges 2015 Y-t-D Heinz H. Pariser, Xanten 2015 17/
Charge & HC FeCr Classifications Source: Heinz H. Pariser High Grade High Carbon Cr: 65 72% C: max 10% Si: max 2.5% Albania Kazakhstan Russia Sweden Turkey AlbCHROME KazChrome Tikhvin, Serov, CHEMK Vargön (since 2008 only HC) Etikrom, Eti Metallurgij Low Grade High Carbon Cr: 57 65% C: max 10% Si: up to 4.0% China India Iran Zimbabwe Vietnam various IMFA, Facor, FAL, Balasore, Rohit, Tata. etc Faryab Mining Zimasco, Zimbabwe Alloys, Maranatha Nam Viet Ferrochrome Charge Cr: 45 57% C: 4.0 8.0% Si: 2.5 7.0% Brazil Finland Sweden Romania South Africa Ferbasa Outokumpu Cr Oy Vargön (until 08 Charge + HC) SC Feral Xstrata/Merafe, Samancor, Hernic, ASA, IFML, Assmang, Ruukki, Tata 18/
Different FeCr products for different Stainless/Special steel producers Source: Bryanston 19/
Many variations in the pricing for various commodities, which can be applied to FeCr Increased liquidity & Pricing Transparency 1 2 3 4 5 6 7 Pricing variation Aspect Potential for Ferrochrome Financial settlement Terminal markets Financial markets participation Index pricing Journalistic pricing Settlement against physical delivery One designated liquid end-market Effective risk management tools Spot market traded reference price(s) Reference price based on public transactions Funds (ETF) supported by physical FeCr & issuance of warrants Including FeCr as an LME or CME deliverable metal Effective replacement for the stainless Alloy-Surcharge mechanism Development and acceptance of multiple indexes for multiple products Independence of publication source is essential Short-term pricing Tendering or ongoing negotiations Current Chinese standard Benchmark pricing Yearly or quarterly agreed prices to an agreed reference Current European standard 20/
ERG key facts Global diversified natural resources group with integrated and low cost mining, processing, energy, logistical and marketing operations Six principal divisions: Ferroalloys, Iron Ore, Alumina and Aluminium, Other Nonferrous, Energy and Logistics (internal services) Revenues of $5,7 Bn in FY 2014 Largest producer of ferrochrome in the world and one of the biggest iron ore and alumina producers in CIS Majority of production assets are located in Kazakhstan with an average of 79+ thousand employees globally. Accounts for approximately 4% of Kazakhstan s GDP Company listed on the LSE in December 2007 with a maximal historical market cap of US$30+ billion. Company taken private in 2013 and is now undergoing strategic transformation 21
ERG: a global diversified natural resources company Brief overview Commodity divisions of ERG Revenue, $ bn Output, Mt ERG has a balanced product portfolio in steelmaking materials, non-ferrous and energy Ferroalloys Iron ore 1.3 2.2 1.9 15.2 Assets: - Energy - Logistics - Non-ferrous metals, etc. - Ferroalloys Geographical footprint EUROPE 13% CIS 40% 25% 9% JAPAN Alumina and aluminum Other non-ferrous metals 0.7 0.9 1.4 0.12 - Iron ore CHINA - Aluminum Energy 0.4 19.9 Sales: - Share of revenue in the region 13% OTHER REGIONS 2014 Total Revenue: $ 5.7 bn 22
Kazakhstan assets: extensive producing assets network with diversified product portfolio Overview of ERG Kazakhstan assets SSGPO Pavlodar Alumina / Aluminium Assets: Aluminium of Kazakhstan Stage: production Product: bauxite, alumina, aluminum Aktobe Astana Karaganda Aksu - Alumina / Aluminium - Ferroalloys - Iron Ore - Coal KAZAKHSTAN Zhayrem* Almaty Logistics Assets: ENRC Marketing Iron Ore Assets: SSGPO Stage: production Product: iron ore concentrate, pellets Ferroalloys Assets: Aksu, Aktobe FeCr plants, Kazmarganets* Stage: production Product: FeCr, FeSiCr, FeMn Coal / Energy Assets: EEC, Shubarkol Stage: Production Product: coal, coke, electricity *disposed in December 2014 ERG s primary assets are located in Kazakhstan. They are supported by an integrated energy and transport infrastructure 23
ERG Ferroalloys Division: location of the Plants 24
Kazchrome: World s biggest producer of ferroalloys Kazchrome Operational overview Number of Employees: 18, 720 Facility description: Ferroalloy plants based in cities of Aktobe and Aksu. Underground mining and processing facilities in Donskoi GOK. Products: Ferroalloys HCFeCr, LCFeCr, MCFeCr, FeMn, FeSiCr, FeSi, manganese concentrate Capacity: - Donskoi GOK 3,7 mln tpa of chrome ore - Aktobe plant - 800 000 tpa of ferroalloys - Aksu plant 1,2 mln tpa of ferroalloys - Kazmarganetz 362 000 manganese concentrate Key Markets: Kazakhstan, Russia, China, Japan and Europe Location: Ferroalloy plants in Aktobe and Aksu Molodezhnaya and 10 years of Independence of Kazakhstan mines in Chromtau city (90km from Aktobe), Kazmarganetz (manganese ore) open pit in Karaganda region 25
Ferroalloys -- Flow sheet 26
Eurasian Resources Group Thank you for your attention Any questions? 27