Glencore Sell Side Analyst Visit Copper

Sell-side analyst visit
Copper
30 September 2014
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2
Agenda
• Welcome – Senior Management Team
• Who we are and introducing our Senior Management Team
• Telis Mistakidis – Head of Copper
• Global and Australian copper update
• Mike Westerman – Chief Operating Officer Copper Assets North Queensland
• Ernest Henry Underground Mine
• Mount Isa Copper Operations
• Deon Van Der Mescht – Chief Executive Officer CSA Mine
• Cobar: future growth options
• Questions
3
Glencore global copper
Copper overview
Third largest global mined copper
producer
• 2013 mined pro-forma production of
1,497kt
2013 mined copper production (kt)
Freeport
Codelco
Largest trader of copper concentrate
and metal
• 2013 marketed volumes exceeded
2.8Mt copper units (in both
concentrates and metal)
Glencore
BHPB
Anglo American
Rio Tinto
Glencore 2015
0
Source: Glencore, company reports.
500
1000
1500
5
Glencore copper assets
Industrial assets comprise: 14 mines, 6 smelters, 5 refineries and 14 EW circuits, assets in 36 countries, marketing offices spread across five continents
6
Copper asset portfolio optimised
Illustrative C1 metals cash cost curve
c.$300M
Q1
industrial merger
synergies and other
cost savings by end
2014
first quartile cost
positions for industrial
assets on track for end
2015
Post-integration
cost efficiencies
and focus now
ingrained in
industrial asset
structures
Cu
2012
Cu
2015
$7.9bn
combined Glencore and
Xstrata expansionary
copper capex since
2009(1)
Unit mine costs leveraged lower
through expansion of lowercost volumes by 2015:
•
•
•
•
Q1
Note: (1) Excludes Las Bambas.
DRC Copper: $1.48/lb
Collahuasi: $1.75/lb
Antapaccay: $1.00/lb
Antamina: $0.47/lb
Q2
7
North Queensland copper assets
Copper Assets North Queensland (NQ) – overview
Copper Assets North Queensland
• 2,584 employees (including contractors)
• Significant contributor to the Queensland economy
Mount Isa Copper Operations
•
•
•
•
Two underground copper mines – Enterprise, X41
Commenced Copper Mining in 1966
1800m deep
Life of Mine to 2020; reserves of 40Mt @ 2.43%
Ernest Henry Mining Pty Ltd
• Original Open pit – closed 2011
• Underground mining commenced 2009
• Life of Mine 2026; reserves of 74Mt @ 1.04% Cu, 0.53g/t Au
Copper Smelter
• 900kdmtpa capacity
• Scheduled closure in 2016
Refinery
• 300ktpa capacity
9
2013 NQ transformation
• At time of acquisition (May 2013), the NQ
copper business was forecast to generate a
negative full year cash flow
Safety performance improved
120
7
6.5
110
positive cash flow outcome:
DISR
• Key decisions and actions taken to achieve a
80
• Removal of negative margin revenue
5.5
5
90
streams
70
» Magnetite operations
60
4.5
DISR
HPIFR
6
100
4
HPFR
3.5
3
Jan 13Mrz 13Mai 13Jul 13Sep 13Nov 13Jan 14Mrz 14Mai 14
» Mount Margaret open pits
• Review of sustaining and expansionary
Production maintained
• Simplification of management structure to
• In 2013, NQ copper assets delivered a
positive free cash flow, achieving a 7 month
turnaround
Cu in Con (kt)
align with value delivery
,25
250
,20
200
,15
150
,10
100
,5
50
-
0
Actual
Cu in Con (kt) Full Year
capital expenditure
Budget
10
NQ transformation – consolidation of assets along the value chain
Mount Isa Mine
Copper ore sourced from
Mount Isa
Copper
concentrator
Copper
smelter
Copper anode
Townsville
copper refinery
(cathode)
Glencore Port
Operations
Ernest Henry Mining
Copper ore sourced from
Ernest Henry
Copper
concentrator
11
NQ transformation – streamlining management structure
• Previous management structure very
siloed and unconducive to integrated
production
• Streamlined structure enables:
» Effective decision making across three
geographical locations
» Sharing of resources across the NQ copper
assets, reducing capital requirements
» Ability to leverage Glencore expertise in
shipping and logistics
» Standardisation of work practices to
maximise value
Streamlined management structure
Chief
Executive
Xstrata Copper
Corporate
Functions
Brisbane Office
Chief
Operation
Officer NQ
Chief
Operating
Officer NQ
MICO
Chief Mining
Officer
EHM
Cu Smelter
HR
Finance
20x Senior
Management
45x Corporate
Office
Chief
Processing
Officer
Chief Financial
Officer
Corporate
Affairs
EHM UG
Project
12
NQ transformation – reducing the 2013 cost base
Operating Expenditure initiatives
• Management restructure and streamline
• Negative margin operations removed
• Improved productivity
• Renegotiation of contracts
3 % reduction in
operating costs
30 % reduction in sustaining
capital expenditure
25% reduction in expansionary
capital expenditure
18% Headcount Reduction
• Staged approach to headcount reduction
• Production profiles sustained
• No impact on safety
• Focus on Contractor reduction
• Rationalisation of support services and
duplication
• Consolidation of Business on site
Capital Expenditure initiatives
• Low probability study work terminated
• Marginal investment cases abandoned
• Gold plated solutions removed
13
EHM – Ernest Henry Underground Mine
EHM – transition to a long life, low cost underground producer
• From 1995 to 2011 successful open pit
• Innovative Sub level caving utilised to achieve viable low cost, low grade ore operation
• $589M brownfield project approved in December 2009 to convert from underground trucking
•
•
•
•
operation
Develops to over 1,000m below the surface and 475m below the open pit
Extends life of mine to 2026
Hoisting commenced end of May 2014
Production rates ramp up to 6.0Mtpa in 2015, exceeding feasibility expectations
Sub level caving process
EHM underground mine plan
15
EHM – underground mining flowsheet
Sub Level Cave
 Caving initiated
 Transfer Automation
 Resources and
Reserves
 Ore Passes
Hoisting System
 Loading Station
 Winder System
 Surface System
 Feeders
 Conveyor
Crushing System
 Transfer Level Automation
 Crusher operation
Transfer System
 Feeders
 Trunk Conveyor
 Automation
Other
 Ventilation system
 In Pit Dewatering
 Underground Dewatering
16
EHM – major project infrastructure
600m overland conveyor
Underground primary crusher
Underground surge bin
Loading station
17
EHM – concentrator
Background
• Historically utilised as a single-line single-ore
concentrator
• Evolution of the plant enabled processing of
additional feed sources, including low-grade
ores, smelter slag, and 3rd party ores
Operational improvements yielding results
Cumulative Milling Variance 2014
6%
5%
4%
3%
2%
1%
0%
Jan 14
2014 YTD operational improvements
» Unit costs (AUD/t) down 6% YTD
Smelter Slag
Jul 14
Aug 14
3rd Party
Sep 14
Jul 14
Aug 14
Jun 14
Apr 14
Mai 14
Mrz 14
Jan 14
Feb 14
Dez 13
Okt 13
Nov 13
Sep 13
Jul 13
Aug 13
Jun 13
» Milled tonnes up 4% YTD
Apr 13
• Utilisation of additional plant capacity:
Mai 13
» Au recovery improved 2.9% post change
Jun 14
3%
2%
1%
0%
-1%
-2%
-3%
Mrz 13
» Cu recovery improved 0.3% post change
Mai 14
Cu Recovery Variance
Jan 13
operational strategy, improving grind size and
overall recoveries:
Apr 14
Glencore Owned
Feb 13
• Opportunity to introduce low-milling rate
Feb 14 Mrz 14
Au Recovery Variance
4%
0%
-2%
Sep 14
Aug 14
Jul 14
Mai 14
Jun 14
Apr 14
Mrz 14
Feb 14
Jan 14
Dez 13
Nov 13
Okt 13
Sep 13
Aug 13
Jul 13
Jun 13
Mai 13
Apr 13
Mrz 13
-4%
Feb 13
focus:
» Underlying plant runtime >92%
2%
Jan 13
• Asset management strategy remains a core
18
EHM – unit cost performance and project upside
Current performance in line with expectations
• Early ramp up to 6.0Mt planned for 2015, 12 months ahead of schedule
• Mining unit costs reduced by 50%
• 42% reduction in EHM C1 Unit costs by end of 2015, taking operation from 4th Quartile to 2nd
Quartile
Upside emerging
•
•
•
•
Cave productivity already above nameplate capacity of 6.0Mtpa
Ability to enhance grade (by up to 5%) due to Cave draw flow predictability
Low rate milling strategy delivering higher than expected recoveries
Leveraging Mount Isa expertise and productivity agenda
19
EHM – possible mine extension 2025 to 2030
1200 RL
EHM SLC orebody
Drilling Target
EH631 - 190m @ 0.76%
• Orebody currently open at Depth
• Potential to increase current Resource to below 1200 sub level
• Explore DD intersections from 1992-94 surface campaign of 42m @ 1.37% Cu
• Mineralisation adjacent EJ and open at depth and along strike of existing ore domains
• Low grade halo conversion at higher recoveries and higher production rates
20
EHM – potential for mine extension 2025 to 2030
Footwall Overdraw
East Extension
• Additional drilling enables recovery of low
• Additional mining to the east of the main SLC
grade material along footwall of the main sub
level cave (SLC)
Without FW rings
With FW rings
21
Mount Isa Copper Operations (MICO)
MICO – overview
N
Mount Isa Copper Mine
• Underground Mining commenced in 1966
• 1,200 km of development drives
• Over 200Mt of ore recovered from mine
4 km
U62 Shaft
M62 Shaft
30Mt @ 1.8% Cu
R62 Shaft
X41 Shaft
X41 Mine
2 km
Enterprise
Mine
23Mt @ 3% Cu
Remaining Reserve
Depleted Reserve
• 6.4Mt production rate via underground Sub Level Open Stoping
methods
• Mining 4km along strike & between 500m and 1800m below
surface production from ~50 stopes/annum.
• Extraction from two mines spilt approximately 60:40 in tonnage
23
MICO – overview
• Aged Asset with high grades and very productive infrastructure
• Demonstrated ability to reliably deliver high volumes of copper at robust margins
• Requires focus on operational discipline and management of variability (complexity):
» Development ~12km primary / 9km rehabilitation per year
» Large number of active mining areas spread out towards extremities of ore bodies
» Labour and equipment intensive
» Mobile fleet comprising 10 Jumbos, 3 cable bolters, 6 production drills, 11 trucks, 15
loaders
4km
24
MICO – operational discipline achieving results:
mobile equipment
LHD utilisation trend
,70
90%
,60
80%
70%
,50
60%
,40
50%
,30
40%
30%
,20
20%
,10
10%
,0
0%
2010
2011
Operating Hours
2012
2013
UofA
Jumbo idle time (per unit per day)
3.00
Hours Idle time
2.50
2.00
1.50
1.00
0.50
0.00
Est 2014
Availability
Thousand Hours
Thousand Hours
Truck utilisation trend
,80
90%
,70
80%
,60
70%
60%
,50
50%
,40
40%
,30
30%
,20
20%
,10
10%
,0
0%
2010
2011
Operating Hours
2012
UofA
2013
Est 2014
Availability
• Disciplined tracking of idle, standby and
delay times enabling significant utilisation
improvement
• Increased utilisation of truck and loader fleet
allows for absorption of additional tkms as
transfer approaches 2.5 rehandle ratio
• Underground shift changes remain key idle
time driver, with mine firings, distance to
work area and mine complexity significant
contributors
25
MICO – operational discipline achieving results: concentrator
Concentrator unplanned downtime
Ore Milling Rate (tph)
500
480
460
440
Jun 14
Mrz 14
Dez 13
Sep 13
Jun 13
Mrz 13
Dez 12
Sep 12
Jun 12
Mrz 12
Dez 11
Sep 11
Jun 11
420
Incremental copper recovery improvement
2.0%
1.5%
1.0%
0.5%
Jun 14
Mrz 14
Dez 13
Sep 13
Jun 13
Mrz 13
Dez 12
Sep 12
0.0%
Jun 12
Incremental Copper Recovery
2.5%
Unplanned Maintenance (min/month)
Ore milling rate performance
4000
3000
2000
1000
0
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
YTD
Embedded approach to asset management
• Increased processing volumes
• Improved plant performance
• Reduction in reactive maintenance and
contractor demand
Systematic approach to controlling
variation
• Mitigate repeat events – sustain the
baseline
• Drives continuing incremental improvements
• Devolved accountability and ownership
26
MICO – future resource potential: underground
Target
Size
N3000 remake
~30Mt
3500 remake
~40Mt
W Block South
~3.5Mt
SSW 1100 OB
~10Mt
Perched HWL
~17Mt
Buck Quartz Fault
~40Mt
SSW 1100
N650 OB
~17Mt
Potential target size – 10Mt
SW 1100 OB
~4Mt
N
650 OB
Potential target size – 7Mt
R62 SHAFT
U62 SHAFT
North 3000 Remake
X41 MINE
HWL Basement
BQF Perched
(Current)
Potential target size – 17Mt
Potential target size – 40Mt
Potential target size – 32Mt
S3500/W-block
Potential target size – 3.5Mt
BCZ Blind
Blind East 3500
Potential target size – 40Mt
Potential target size – 1.5Mt
ENTERPRISE
North 3500 Remake
Potential target size – 43Mt
27
MICO – future resource potential: surface resources
Background
Black Rock Open Cut
• Progression of several open pit studies
completed since the 1970’s, hampered by
infrastructure and metallurgy challenges
• The BROC cutback addresses these
challenges:
» Pit has been optimised on Copper ore
types only
» Designed not to interfere with high
replacement cost infrastructure
» Metallurgical test work programs
producing promising results on treatability
of BROC ores
Leach Circuit Concept
Potential
• Extension of current pit depth to 225m and
600m from N – S
• 50m nominal standoff from infrastructure
restricts pit boundary
• Total Strip ratio of 5.4 (or 4.0 inclusive of
Pb/Zn Ore)
28
Copper smelter and refinery
Mount Isa Copper Smelter - overview
2014 Copper smelter
•
•
•
•
•
200 employees
22 FTE contractors
900 kdmtpa Concentrate capacity
97.5% recovery
Acid plant owned and operated by
Incitec Pivot
Copper Smelter Equipment
• 35kwmt concentrate storage
•
•
•
•
•
capacity
Isasmelt Vessel
2 x Rotary Holding Furnace
4 x Piece smith Converters
2 x Anode Furnaces
1 x Anode Wheel (80t/hr)
Auxiliary equipment
• ESP Leach Plant (4 tph capacity)
• Converter Slag/Reverts Crushing
Plant (60tph capacity)
• CRL electrolyte recovery process
30
Mount Isa Copper Smelter
Asset Management
Isasmelt campaign life
• Smelter outage June 2014
» Significant overhaul of primary smelter
off-gas treatment system
• Converter hood replacement program in
progress to sustain SO2 capture through to
closure
Refractory Life (Weeks)
» Refractory replacement across 4 vessels
250
• Strong, integrated IPL/MIM planning process
200
150
100
50
0
1
achieved 24% improvement in off-gas
treatment in 2014
2
3
4
5
6
7
Campaign #
8
9
10
11
Converter campaign life
400
• Isasmelt refractory capable of 4+years
• Scheduled for closure - December 2016
• Personnel retention process in place through
to smelter closure
• Treatment of third party concentrate
# of Charges Completed
Outlook
350
300
250
200
150
100
2001
2004
C1 Charges
2006
C2 Charges
2009
Year
2012
C3 Charges
2014
2017
C4 Charges
31
Townsville Copper Refinery
CRL Operations
• Cathode annual production target 288,500t
• Slimes annual production target approx. 900t
• Cathode registered on LME and SHFE
Tankhouse Parameters
• ISA Process Technology
• 37 sections,
3 operating
circuits, 1162 operating cells
Standing
on pallet
rack rail
• 2 crop cathode cycle, 8 day crop 1, 10 day crop 2
Anode Weight
350kg
Cathode Weight
75kg
Anodes per cell
45/44
Anode Scrap Rate
17.8%
Current Efficiency
95.5%
Time Efficiency
Fell to this spot
96.0%
Current Density
326 amps/sqm
Cell Current
26,500 amps
Kunz Cranes
2
32
Townsville Port Operations
Facility
• All weather berth
• 3 storage sheds, total capacity of 160kt
• Dedicated rail loop and tippler
Berth 8 – Townsville Port
Environmental Authority Approvals
• Concentrates (Zn, Cu, magnetite, revert
and dross) – 3.86MTPa
• Lead concentrate – 140kTPa
• Fertiliser – 1.2MTPa
Relocation Project to Berth 8
• $86 million investment (jointly funded) to
relocate to a new berth
• Offers:
» 2.5 times more shiploading capacity
» Greater berth efficiency
» Significant improvements in
environmental performance
33
Third-party processing
• Currently progressing options on tolling
both copper ore and concentrates through
the EHM and Mount Isa concentrators and
smelter to supplement own sources.
» Allowing local mines to leverage our
existing asset base for processing
copper ores and concentrates
» Smelter value-add to copper product
stream through removal of logistic
constraints and delays
» Established logistics chain to market
34
Cobar
CSA Mine – historical overview
• Discovered in 1871
• Current operation began in 1967
• Initially produced Cu/Ag/Zn/Pb – now Cu/Ag
Sinking No.1 Shaft (Feb. 1962)
only
• Acquired by Glencore in 1999 ending a year
long shut down
• 25Mt of ore extracted to date
• Highest grade copper mine in Australia
CSA Mine (Jan. 1964)
36
CSA Mine – today
• High grade asset with aged infrastructure
• Amongst the three deepest mines in
CSA Mine No.2 Shaft
Australia – currently 1,640m below surface
• Producing 1.1Mtpa of copper/silver ore (4.6%
Cu, 15.2g/t Ag)
• Producing 162ktpa of copper/silver
concentrate (28.5% Cu, 80g/t Ag)
• Concentrate transported by rail from mine to
Newcastle – sold to smelters overseas.
• Reserves: 5.8Mt @ 4.4% Cu, 17.3g/t Ag
• Resources: 11.5Mt @ 5.7% Cu (2.7Mt
Measured, 3.1Mt Indicated, 5.7Mt Inferred –
Dec 2013)
• Current Life of Mine – 10 years
37
CSA Mine – additional potential cost reduction
Upgrade of current infrastructure
CSA Mine Processing Plant
• Ventilation and hoisting capacity to facilitate execution
of new infrastructure, replacing trucking at depth
• Majority of current infrastructure upgrades to be
completed by end 2015 and allow/facilitate:
» initiation of new infrastructure establishment
» increased development of resource, particularly in the
new QTS Central ore body
Increase current ore resource to enhance project capital
returns
• Potential exists to double current resource within the
new QTS Central ore body and the down plunge extent
of the QTS North ore body
• Magnitude and success of the ore resource increase will
dictate the size of the new infrastructure investment
38
CSA mine – significant resource growth potential
Shaft
s No.1
No.2
Historic Western & Eastern System Workings
QTS South Mineral Resource
0.3Mt @ 7.4% Cu (22 Kt Cu)
Remaining Western & Eastern
Resources
2.2Mt @ 4.4% Cu (97 Kt Cu)
Sh aft b ase 1.1km b elow su rface
QTS North Mineral
Resource
Potentia l
8.9Mt @ 5.9% Cu (525 Kt Cu)
• @ +5% Cu
Depleted
Known anomaly
Measured Resource
• @ +5% Cu
Potentia l
• @ +5% Cu
QTS Central
• Discovered 2014
• Inferred: 1.0Mt @ 6.1% Cu
• Open at depth
Declin e b ase 1.6km b elow su rface
Indicated Resource
Inferred Resource
Ore body open at depth
(2-3 km b elow su rface)
Conclusion
Summary
The future of our Australian Copper operations is via expanded mining and concentrate
production
• We are continuing to invest in our business
• Major projects are progressing in line with targeted expectations
• We have mature assets – efficient mining and processing techniques, improving productivity
and lowering costs is critical for our future
• Significant resources and reserves remain for potential future development
• We remain committed to high standards in the areas of health, safety, environment and
community
41
Q&A

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