BRAZILIAN PHOSPHATE FERTILISER MARKET TREND Fertiliser Latino Americano 2013 - Sao Paulo 20-22 January 2013 Ruben Fernandes – CEO, Niobium and Phosphates
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, or 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. 2
OUR AMBITION IS TO BE THE LEADING GLOBAL MINING COMPANY, BECOMING THE INVESTMENT, PARTNER AND EMPLOYER OF CHOICE Anglo American Portfolio Nickel Metallurgical Coal Other Mining and Industrial Platinum Thermal Coal Iron Ore and Diamonds Copper Manganese 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 3 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
KEY MARKET DRIVERS FOR FOOD DEMAND AND BIOFUELS INDICATE A SHARP EXPANSION OF GLOBAL NEEDS % Urbanisation rate World population bn 9 8 6 Population 4 3 growth & urbanization 1950 1975 2000 2025 2050 <35 37 47 58 <60 GDP growth rates % 5 5 5 5 10 4 4 4 Economic 7 7 7 6 7 6 6 5 growth 3 3 3 3 2 2 2 0 2010 2011 2012 2013 2014 2015 2016 Advanced economies Emerging & devel. econ. World Renewable Fuel Standard Bn gallons Biofuels +10% production 24 22 21 17 18 15 2012 2013 2014 2015 2016 2017 5 SOURCE: MB Agro; FAO STAT ; IMF World Economic Outlook Sept 2011; AA Phosphates analysis Click View > Header and Footer to add footer text
UNDER THIS CONTEXT, BRAZIL IS SEEN AS A POWERHOUSE AND A KEY STRATEGIC PARTNER... Brazil enjoys high national rainfall rates... ... and extensive water resources One of world's Little or no highest rainfall water scarcity indices Brazil has strong biomass production potential... ... with one of the highest arable land potential Arable land potential Arable land Arable land Arable land w/o Million hectares % Reserves Amazonia 453 444 372 341 329 281 269 394 263 169 220 138 Highest biomass 174 59 160 122 143 109 potential Brazil USA EU Russia India China 87 61 71 64 51 49 6 SOURCE: FAO STAT; FAO SDRN; MB Agro; USDA; AA Phosphates analysis Click View > Header and Footer to add footer text
…WITH MAJOR CROPS IN BRAZIL GROWING CLEARLY FASTER THAN WORLD PRODUCTION Soy production in Brazil expected to Corn production in Brazil expected Sugar production in Brazil grow almost twice as fast as in the to grow twice as fast as in the expected to grow four times world (5% vs 3% p.a.) world (4% vs 2% p.a.) faster than world (4% vs 1% p.a.) Soy (grain) production forecast (Mt) Corn production forecast (Mt) Sugar cane production forecast (Mt) CAGR CAGR CAGR 5% 3% 4% 2% 4% 1% (2011-17) (2011-17) (2011-17) 81 72 43 93 70 38 39 34 87 81 69 65 873 133 200 130 857 131 132 189 851 198 177 800 2011 2013 2014 2017 2011 2013 2014 2017 2011 2013 2015 2017 Brazil Rest of World Brazil Rest of World Brazil Rest of World SOURCE: MB Agro 7
… AND SHOULD DRIVE FERTILISER DEMAND UP ...and expected to increase to 5% p.a. from 2011 Brazilian agricultural sector by far fastest growing in the world and … to 2017, accounting for 12% of global demand Global and Brazilian fertiliser demand (2010 -2017) Index 2004-06 = 100 Mt P 2 O 5 160 Brazil CAGR (2000-2019): 4.1% 42 140 41 41 41 CAGR 120 (2010 – 2017) 100 Brazil 2% World E27 Canada Brazil 80 5.2% Australia (12%) China India 60 USA 5 5 4 4 Russia Ukraine 40 2011 2013 2015 2017 1992 2001 2010 2019 SOURCE: ANDA, CONAB 8
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
THE POSITIVE SCENARIO IS FOSTERING NEW PHOSPHATES PROJECTS AIMING TO REDUCE THE CURRENT NATIONAL GAP WITH IMPORTS Brazil represents 9% of world’s ...and will due to national undersupply remain a demand, but only 5% of supply... fertiliser importer Brazilian’s share of global Brazilian demand/supply balance phosphate demand/supply (2009) CAGR (2010-17): 5,2% 8,8% Avg. Mt of P 2 O 5 Mt P 2 O 5 Gap 39 5.0 40 4.9 (Mt/y) 4.8 37 4.5 4.3 1.5 4.0 3.8 1.4 1.3 1.4 3.5 30 1.5 1.7 1.6 1.8 1.5 20 3.6 3.6 3.4 3.0 2.6 2.4 2.0 2.0 World 10 Brazil 9 % 5 % 2010 2011 2012 2013 2014 2015 2016 2017 0 Demand Supply Demand Supply Gap (Imports) SOURCE: IFA, ANDA 10
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
HOWEVER, THE CHALLENGES FOR EXPANSION PROJECTS ARE INCREASING AND GETTING MORE COMPLEX ON OUR CURRENT ENVIRONMENT EPCM – Eng., Procurement and Construction Management Capital Restrictions • Strategic divestments and reallocation of capital • Cost Inflation - averaging roughly 5 – 7% in the last 10 years • Largest mining companies announcing cuts on budget for capital expenditures in 2013 • Workforce shortage - Identifying, attracting and retaining critical operational and construction skills • Use of resources from BNDES from mining remains a top priority for the mining and metal sector sector decreases 45% in 2012 (from Jan to Aug) Projects to be delivered: • On Safety • On Time Price Volatility Licensing (Environment) • On Budget MAP prices - USD / t Average months to obtain an environmental permit: 800 +60% -22% 24 Brazil 600 12 USA MAP Average 6 Argentina 400 0 5 Denmark 2010 2011 2012 Exame 12 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
THERE IS AN UPWARD TREND COST IMPACTED BY UNCONTROLLABLE MACROINDICATORS... .. the unemployment rate declining and the average wage rising sustain the upward trend on workforce cost... Annual Average Real Wage Growth (%) Brazilian Unemployment Rate (%) Brazil World 4,0% 3,8% 4 9,8% 3,4% 3,2% 3,2% 9,1% 10 3,0% 2,7% 7,9% 7,7% 2,6% 3 6,6% 5,8% 2,1% 5,6% 2 5 1,3% 1,2% 1,0% 1 0 0 2006 2007 2008 2009 2010 2011 2012 2006 2007 2008 2009 2010 2011 ... inflation has been directly impacted by the lowest .. and logistics costs are largely representative interest rates that Brazil already praticed ... Inflation (%) Logistics Costs Related to GDP (%) 10,2% 8 6,5% 5,9% 5,9% 5,8% Transportation 7,4% 6 4,5% 4,3% 6,3% Inventory 3,1% 4 4,7% Warehousing 2 3,2% 1,9% 0,8% 0,7% 0 2006 2007 2008 2009 2010 2011 2012 Brazil USA Click View > Header and Footer to add footer text 13 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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