BRAZILIAN PHOSPHATE FERTILISER MARKET TREND Fertiliser Latino - - PowerPoint PPT Presentation

BRAZILIAN PHOSPHATE FERTILISER MARKET TREND

Fertiliser Latino Americano 2013 - Sao Paulo 20-22 January 2013 Ruben Fernandes – CEO, Niobium and Phosphates

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DISCLAIMER: CERTAIN FORWARD-LOOKING STATEMENTS

Certain statements made in this presentation constitute forward-looking statements. Forward looking statements are typically identified by the use of forward-looking terminology such as 'believes', 'expects', 'may', 'will', 'could', 'should', 'intends', 'estimates', 'plans', 'assumes' or 'anticipates' or the negative thereof or other variations thereon or comparable terminology, or by discussions of, e.g. future plans, present or future events,

• r strategy that involve risks and uncertainties. Such forward-looking statements are subject to a number of

risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Company's current beliefs and expectations about future events. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statement. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company and its

• subsidiaries. The forward-looking statements contained in this presentation speak only as of the date of this

presentation and the Company undertakes no duty to, and will not necessarily, update any of them in light of new information or future events, except to the extent required by applicable law or regulation.

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OUR AMBITION IS TO BE THE LEADING GLOBAL MINING COMPANY, BECOMING THE INVESTMENT, PARTNER AND EMPLOYER OF CHOICE

Platinum Diamonds Copper Nickel Iron Ore and Manganese Thermal Coal Metallurgical Coal Other Mining and Industrial

Anglo American Portfolio

Copebras is now Anglo American’s Phosphates business

• We are now officially Anglo American and we continue committed to strengthen our relationship so that we can grow together, always having

safe work and respect for the environment as fundamental values for our development

Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports Challenges to Deliver the Projects Brazilian Market Trends Anglo American Phosphates Conclusions

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KEY MARKET DRIVERS FOR FOOD DEMAND AND BIOFUELS INDICATE A SHARP EXPANSION OF GLOBAL NEEDS

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9 8 6 4 3 2050 2025 2000 1975 1950 5 5 5 4 4 4 5 5 10 2010 2011 2012 2013 2014 2015 2016 7 3 7 3 7 3 6 2 6 2 6 2 7 3 World Emerging & devel. econ. Advanced economies

SOURCE: MB Agro; FAO STAT ; IMF World Economic Outlook Sept 2011; AA Phosphates analysis

24 22 21 18 17 15 +10% 2017 2016 2015 2014 2013 2012 Population growth & urbanization Economic growth Biofuels production GDP growth rates % Renewable Fuel Standard Bn gallons World population bn <35

% Urbanisation rate

37 47 58 <60

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UNDER THIS CONTEXT, BRAZIL IS SEEN AS A POWERHOUSE AND A KEY STRATEGIC PARTNER...

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Brazil enjoys high national rainfall rates... ... and extensive water resources Brazil has strong biomass production potential... ... with one of the highest arable land potential

One of world's highest rainfall indices Little or no water scarcity Highest biomass potential

160 143 122 109 174

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China 281 138 India 329 169 Russia 341 220 EU 372 263 USA 444 269 Brazil 453 394 Arable land potential Arable land Arable land Million hectares 49 51 64 71 61 87

Arable land w/o Amazonia

% Reserves

SOURCE: FAO STAT; FAO SDRN; MB Agro; USDA; AA Phosphates analysis

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177 189 198 200 69 81 87 93 2011 2013 2015 2017

Brazil Rest of World

800 851 857 873 65 70 72 81 2011 2013 2014 2017

Brazil Rest of World

…WITH MAJOR CROPS IN BRAZIL GROWING CLEARLY FASTER THAN WORLD PRODUCTION

Sugar production in Brazil expected to grow four times faster than world (4% vs 1% p.a.) Sugar cane production forecast (Mt) Soy (grain) production forecast (Mt) Soy production in Brazil expected to grow almost twice as fast as in the world (5% vs 3% p.a.) Corn production in Brazil expected to grow twice as fast as in the world (4% vs 2% p.a.) Corn production forecast (Mt)

CAGR

(2011-17)

CAGR

(2011-17)

CAGR

(2011-17)

3% 1% 2% 5% 4% 4% 131 130 132 133 34 38 39 43 2011 2013 2014 2017

Brazil Rest of World

SOURCE: MB Agro

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… AND SHOULD DRIVE FERTILISER DEMAND UP

40 60 80 100 120 140 160 1992 2001 2010 2019 Brazil E27 Canada Australia China India USA Russia Ukraine Index 2004-06 = 100 Brazil CAGR (2000-2019): 4.1%

Brazilian agricultural sector by far fastest growing in the world and …

SOURCE: ANDA, CONAB

41 41 41 42 4 4 5 5 2011 2013 2015 2017 World Brazil (12%)

...and expected to increase to 5% p.a. from 2011 to 2017, accounting for 12% of global demand

2% 5.2% CAGR

(2010–2017)

Global and Brazilian fertiliser demand (2010 -2017) Mt P2O5

Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports Challenges to Deliver the Projects Brazilian Market Trends Anglo American Phosphates Conclusions

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4.3 2013 4.5 3.4 2014 1.8 1.4 3.0 1.4 1.6 1.3 1.7 2.6 1.5 1.5 2017 5.0 3.6 2016 4.9 3.6 2015 4.8 2012 4.0 2.4 2011 3.8 2.0 2010 3.5 2.0

THE POSITIVE SCENARIO IS FOSTERING NEW PHOSPHATES PROJECTS AIMING TO REDUCE THE CURRENT NATIONAL GAP WITH IMPORTS

39 37 9% 5% 10 20 30 40 Demand Supply World Brazil Mt of P2O5 Brazilian’s share of global phosphate demand/supply (2009)

Brazil represents 9% of world’s demand, but only 5% of supply... ...and will due to national undersupply remain a fertiliser importer

Mt P2O5 CAGR (2010-17): 5,2% 8,8% Brazilian demand/supply balance

Avg. Gap (Mt/y)

Gap (Imports)

SOURCE: IFA, ANDA

Supply Demand 1.5

Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports Challenges to Deliver the Projects Brazilian Market Trends Anglo American Phosphates Conclusions

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HOWEVER, THE CHALLENGES FOR EXPANSION PROJECTS ARE INCREASING AND GETTING MORE COMPLEX ON OUR CURRENT ENVIRONMENT

1 Federal Government Broadcast Alerts, 3 October; Canadian Mining Industry Employment and Hiring Forecasts, 2011 2 Deutche Bank, Commodity Online, 16 April 2012

SOURCE: BNDES release 2012; AA Phosphates historic prices; Exame Edição 1031

EPCM – Eng., Procurement and Construction Management Price Volatility Licensing (Environment) Capital Restrictions

5 6 12 24 Argentina USA Brazil Denmark Average months to obtain an environmental permit: 600

• 22%

400 +60% 800 Average MAP

Exame

MAP prices - USD / t

2010 2011 2012

• Strategic divestments and reallocation of capital
• Largest mining companies announcing cuts on

budget for capital expenditures in 2013

• Use of resources from BNDES from mining

sector decreases 45% in 2012 (from Jan to Aug)

• Cost Inflation - averaging roughly 5–7% in the last 10

years

• Workforce shortage - Identifying, attracting and

retaining critical operational and construction skills remains a top priority for the mining and metal sector

• On Safety
• On Time
• On Budget

Projects to be delivered:

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THERE IS AN UPWARD TREND COST IMPACTED BY UNCONTROLLABLE MACROINDICATORS...

.. and logistics costs are largely representative ... inflation has been directly impacted by the lowest interest rates that Brazil already praticed ... .. the unemployment rate declining and the average wage rising sustain the upward trend on workforce cost...

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1 2 3 4 2011 1,2% 2,7% 2010 2,1% 3,8% 2009 1,3% 3,2% 2008 1,0% 3,4% 2007 3,0% 3,2% 2006 2,6% 4,0% World Brazil 5 10 2012 5,6% 2011 5,8% 2010 6,6% 2009 7,9% 2008 7,7% 2007 9,1% 2006 9,8% 2 4 6 8 2006 2007 2008 2009 2010 2011 2012 5,8% 6,5% 5,9% 4,3% 5,9% 4,5% 3,1%

USA

7,4% 0,8% 1,9% 4,7%

Brazil

10,2% 0,7% 3,2% 6,3%

Warehousing Inventory Transportation

Annual Average Real Wage Growth (%) Inflation (%) Brazilian Unemployment Rate (%) Logistics Costs Related to GDP (%)

SOURCE: IBGE - Pesquisa Mensal do Emprego; IPEA - Mercado de Trabalho; BC - Relatório de Inflação; Instituto ILOS

Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports Challenges to Deliver the Projects Brazilian Market Trends Anglo American Phosphates Conclusions

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BRAZIL FERTILISER CONSUMPTION IS GROWING FASTER IN THE NORTH AND A NEW AGRICULTURAL FRONTIER IS COMING OUT

1,89 1,85 1,74 1,18 2012 29,42 Sul Centro- Oeste Sudeste Norte / Nordeste 2003 22,80

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Domestic Fertiliser Consumption (last 10 years)1

Fertiliser Consumption is spreading amongst Brazil from South for new areas to the North CAGR (03-12) Share 2003 2012 11% 15% 28% 28% 33% 32% 27% 25% 5,9% 2,8% 2,1% 1,6%

Fertiliser Consumption - Mt

% on Sector Growth 29% 28% 26% 18%

• North Region

presents the highest growth

• Its participation on

fertiliser demand have been raising due to:

• Land and water

availability

• Good weather

conditions

• The challenge is the

infrastructure to leak grain production (ports, roads, rails, etc)

• Centre West is the

biggest region in terms of fertiliser consumption

1 ANDA – Associação Nacional para Difusão de Adubos 2 Representing a share of at least 1% of the national market

Fertiliser Consumption is spreading towards new areas in the North

PA MA TO PI BA

States with 10-year Growth (2003-2012) greater than 50%2

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TECHNOLOGIES DEVELOPMENT HAS ENABLED BRAZIL TO HAVE 2 CROPS/YEAR

Mini crop concentrated in Midwest New technologies and better expertise have been raising the productivity of the mini crops with the “plantio direto” system For the first time mini corn crop surpassed normal crop in terms of volume produced Click View > Header and Footer to add footer text

4.917 5.133 4.163 3.540 3.643 3.592 966 540 +811% 12/13* 11/12* 10/11 3.641 09/10 08/09 07/08 02/03 94/95 2.069 89/90 79/80

"A safrinha do milho se tornou safrão. Foi surpreendente e sem dúvida contribuiu de forma decisiva para que tivéssemos a maior safra de grãos da história do país em 2011/2012”

“The mini corn crop has become a huge crop one. It’s surprising, we have no doubts that it contributed for the largest grain harvest of our history in 2011/2012”

Mendes Ribeiro (Agriculture Minister)

2012/13* 37,5 2011/12* 39,1 2010/11 22,5 2008/09 17,3 2006/07 14,8 2004/05 7,7 +92% Productivity mini corn crops – kg/ha Mini corn crop production - Mt % of total corn crop 22% 29% 34% 52% 39%

4% 5% 26% 65%

Mini Corn Crop 2012 Production by Region

Changing Brazilian scenario, therefore fertiliser dynamics

SOURCE – CONAB * Estimation

North/Northeast Southeast South Midwest 54%

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NPK DISTRIBUTOR SECTOR IS ALSO FACING IMPORTANT CHANGES

Phosphate Industry Chain Click View > Header and Footer to add footer text Blenders Sector Trend

• Market share of regional blenders falling

year by year

• Decrease number of blenders: 100 today

against more than 300 in the beginning

• f twenties
• Increasing number of acquisitions and

new entrants

• Producers not going downstream

Mining Operation Acid Plants Fertilisers Plants Integrated Producers

• Roles on Phosphate Chain are clearer on the past few years
• Blenders performing a crucial role for fertiliser distribution
• Producers are not interested to go downstream
• Blenders being pressured since farmers are more capitalized

and have more bargaining power

SOURCE: AMA; Sales Team Analysis

Blenders Farmers Non Integrated Regional National Traders Producers are Price Takers (Highly dependant on international market) Farmers are more capitalized

• Blenders continue to be important and

strategic for the Brazilian fertiliser industry

• Blenders market concentration might

increase in the coming years

Blenders

Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports Challenges to Deliver the Projects Brazilian Market Trends Anglo American Phosphates Conclusions

19 Ouvidor – GO

• Mine – 1,3 Mt
• @P2O5 – 12% in mine
• @P2O5 – 36% after

beneficiation Catalão Site

• 7 km from the mine
• Current Capacity:
• SSP – 600 kt
• MAP/GTSP – 200 kt
• DCP – 100 kt

Cubatão Site

• Favourable logistic for

being close to Santos Port and to meet SP and MT market

• Current Capacity (final

product):

• SSP – 400 kt
• Phosp Acid – 150 kt
• DCP – 60 kt

Cubatão Catalão

ANGLO AMERICAN PHOSPHATES IS INVESTING TO MEET FERTILISER DEMAND GROWTH IN BRAZIL

Anglo American Phosphate is very well located to meet Brazilian Fertiliser demand at a competitive cost... ..and Anglo has also a relevant project to duplicate the phosphate rock capacity at Catalão site

Main characteristics:

• Additional capacities:
• Phosphate Rock – 1,4 Mt
• Phosphoric Acid – 0,5 Mt
• Sulphuric Acid – 1,1Mt
• Fertiliser – 0,7 Mt
• Stage: FEL 2
• Brownfield Project with low Capex /

additional capacity

• In-house knowledge
• Long Life of Mine (more than 40

years)

• Highest P2O5 content in Brazil

Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports Challenges to Deliver the Projects Brazilian Market Trends Anglo American Phosphates Conclusions

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CONCLUSIONS

Agriculture positive environment Brazil plays a crucial market role There are still challenges on expanding Interdependent Fertilizer Value chain

Producers Blenders Farmers

• Value chain integrants need to work together to:
• Overcome the Brazilian challenges
• Support the country to achieve its targets
• Anglo American Phosphates is committed to

efficiency and growth, contributing to the market expansion

• Expand

production

• Distribute

efficiently

• Increase

productivity

THANK YOU