Glencore CEO – Ivan Glasenberg Miami, 15th May, 2012
Why invest in Glencore?
1. Unique market position in global commodities
2. Strong track record of value creation driven by capital discipline and a focus on returns
3. Management are owners not renters of assets
4. Strong pipeline of high quality production growth with low capital cost
5. Marketing operations are scale-able at low incremental capital cost
6. Robust balance sheet
7. Xstrata merger and Viterra acquisition create unique natural resources group
Glencore - a uniquely compelling way for investors to benefit from commodity demand growth
I 2 What does Glencore do?
. Position throughout the value chain allows Glencore to capture value at each stage . Producers typically solely focused on sale of own products while other marketing peers do not have Glencore’s scale and access to own supply
Upstream Marketing, Processing / Marketing, production Storage and freight refining Storage and freight
Zinc / copper / lead
Alumina / aluminium
Ferroalloys /
Metals and Minerals nickel / cobalt / iron ore
Oil
Coal / coke n/a n/a Energy Products Energy
Agricultural products Agri. Agri. Products
Key: I 3 Significant presence Lesser presence
How is Glencore’s business model unique?
Scale Strong competitive positions in core activities Unique breadth of local presence with critical mass: more than 50 offices in more than 40 countries Largest global user of letters of credit 98 active banking relationships
Diversification 54 geographies 18 major commodity groups
Vertical integration
Production to delivery to customer No single competitor in all markets
Human capital Culture and high retention rates
Long-term customer/supplier relationships 7 000 customer and supplier relationships Supplier relationships provide unique access to compelling asset deals
I 4 Strong track record of value creation…
1974 1987 / 1988 . Establishment . Transition into an 1990 1997 2004 2008 2011 2012 of Glencore integrated producer . Acquisition of . Acquisition of . First public . Merger of Katanga and . IPO of . Merger with focused on with acquisition of a stake in majority stake bond issue of Nikanor resulting in a 8.5% Glencore Xstrata physical US smelter and Xstrata (then in Kazzinc $950m holding in the combined marketing of Peruvian mine Sudelektra entity commodities AG) . Purchase of initial 40% stake in Vasilkovskoye Gold (via Kazzinc)
1970s 1980s 1990s 2000s 2010s
1981 1993 / 94 1995 2002 2007 2009 . Acquisition of a . Manage- . Glencore . Subs- . Selected . Government 2009 – 2010 2012 Dutch grain trading ment acquires tantial Glencore approves start of . Issuance of . Acquisition company, buyout first Glencore aluminium West African $2.3bn of Viterra foundation of (“MBO”) building coal & alumina hydrocarbon convertible Agricultural Products block of assets assets projects bond division Prodeco contrib- contributed development
uted to to create phase forming UC Rusal Equity value creation since 1996 Xstrata plc
After management buy-out….. …to current 2012 $1.2 bn $44 bn
Value creation +3550%
vs. +121% S&P Index +50% FTSE 100 I 5 … driven by best in class RoE
Last 10 years RoE range (1)
%
61% 58%
50% 51%
45%
38% 36% 34%
21% 21% 19%
18% 15% 15% 15% 15% 11% 13%
4% 5% 6%
Averages
Note: (1) Net Income / average equity excl. minority interests. Data based on last 10 full reported financial years for all companies, ending FY2010. Length of historical period for some peers is limited by availability of publicly disclosed financials. Glencore pre-expectionals. I 6
Capital discipline is a key focus at Glencore
Capital efficient model allows shareholders to benefit from robust FCF generation
2012E-2014E Capex as percentage of aggregate value(1)
40% 36% 32% 31% 28%
24%
8%
+
2012E-2014E EBITDA CAGR (Based on broker consensus)(1)
8% 4% 1% 11%
Note: (1) Based on broker consensus estimates provided by Capital IQ and Enterprise Value as of 10 May 2012. I 7 Glencore management are owners not caretakers of assets
CEO and CFO holdings in peers
16.82%
Acquisition of Shares by Directors in 2011-2012YTD (1)
0.12%
0.09%
0.08%
0.04%
0.01% 0.00% 0.00% 0.01% 0.00% Xstrata Anglo American Rio Tinto BHP Billiton Glencore
0.25%
0.11% 0.01% 0.02% 0.02%
Freeport
Note: (1) Based on FY2011 annual reports for the comparable companies. For the period 30 June 2010 – 30 September 2011 for BHP Billiton
I 8
Unique pipeline of production growth from low-risk, low-cost and high grade brownfield operations
Asset grades 2011A to 2015E copper equivalent volume growth CAGR Cu % content per tonne of P&P reserves % 4.2% (1) 12.9%
3.4%
10.3%
7.4% 7.3%
6.4% 1.9%
5.5%
0.8% 0.7%
Katanga Mutanda Mopani Kazzinc Global Average
Source: Company filings, IPO prospectus., broker consensus estimates
Note: (1) Relates to the expectd Cu equivalent 2011-15E production CAGR expected across the entire Industrial Asset’s portfolio I 9
Efficient capex programme underpins high returns
USD (‘000) / tonne Cu eq.
(2) Glencore projects 25 Peer copper projects Low-cost incremental tonnes 20 from flagship growth projects 15
10
5 (1) Pebble Puthep Mopani Haquira Sentinel Kazzinc El Morro El Nokomis Prodeco Aktogay Mutanda Relincho Reko Diq Reko Tia Maria Tia Antucoya La Granja Pachon El Tampakan Agua RicaAgua Resolution Bozshakol Mina JustaMina Oyu Tolgoi Michiquillay Queilaveco Inca de Oro Freida River Morenci exp Las Bambas Olympic Dam Olympic Galore Creek Galore Grasberg UG Grasberg Konkola North Asarco Rehab Toquepala exp Coroccohuayco Cerro Verde exp Verde Cerro Chuquicumata UG Katanga PhaseIV Boseto expansion Los Pelambres exp Pelambres Los Lumwana Expansion Escondida exp OGP1 Collahuasi expansion Kansanshi expansion Quebrada Blanca exp Tenke Fungurume exp Sierra Gorda (Quadra) Lomas Bayas Sulphide Bayas Lomas Collahuasi expansion (b)
Cu eq
prod’n 40 50 80 16 70 82 40 46 232 240 741 104 100 240 531 323 241 450 419 231 227 597 201 134 421 248 319 441 365 317 171 308 374 387 113 243 117 120 427 146 414 205 985 300 145 310 130 193 159 199 (‘000)
Total
Capex900 900 240 900 900 350 350 770 550 734 576 635 5,200 5,300 1,350 1,750 1,600 3,800 8,200 4,800 3,500 6,500 6,000 3,300 3,200 8,200 2,750 1,800 5,500 3,200 4,000 5,500 4,500 3,800 2,000 3,500 4,200 4,000 1,100 2,300 1,100 1,000 3,200 1,020 2,800 1,323 6,000 1,750 1,477 ($m) 16,000
Source: Glencore expansion projects data from IPO prospectus technical reports. Peer projects from Deutsche Bank research note (Higher capital intensity – a higher long-term price, 11 January 2012). Cu conversion prices updated to spot prices on 2 March 2012: (Copper - $8,625.0/MT, Brent Crude Oil - $124.0/bbl, Coal - $103.9/MT, Zinc - $2,088.5/MT, Cobalt - $31,150/MT). Prodeco capex calculated as 2010 – 2014 expansionary capex less capex allocated to the port as per IPO prospectus. Kazzinc capex and production as per IPO prospectus. Kazzinc and Mopani represents expected capex for LOM over production ramp-up until 2015E. I 10 10 Notes: (1) Includes own mines’ production only.
Xstrata & Viterra enhance Glencore’s position
. $[90]bn pending merger of equals with Xstrata – $500m of synergies in 2013 – full inclusion of Xstrata production within Glencore’s marketing operations – Scope for optimisation of combined development portfolio to allow faster/cheaper/lower risk growth – Improved diversification within the enlarged business – Completion expected Q3 2012 . $[6]bn pending acquisition of Viterra announced in March 2012
– Acquisition of a first class asset with leading positions in two key agricultural export markets – Tier 1 portfolio of assets in Canada and Australia – Currently at a key regulatory turning point in Canada given pending Canadian Wheat Board deregulation – Turns Glencore into a truly global trader in wheat, barley and canola, boosting Glencore’s global origination capabilities by filling a key geographic gap in origination markets – Expected to be earnings-enhancing to Glencore in the first full year after consolidation (1) – Completion expected Q3 2012
Note: (1) This statement should not be interpreted to mean that future earnings per share of Glencore will necessarily match or exceed the historical earnings per share of Glencore. I 11
Appendix Key financial highlights
US$ m 2011 2010 % Change
Revenue 186,152 144,978 28%
Adjusted EBITDA (1) 6,464 6,201 4%
Adjusted EBIT (2) 5,398 5,290 2%
Glencore net income (3) 4,060 3,799 7%
Funds from operations (FFO) (4) 3,522 3,333 6%
Net debt 12,938 14,756 (12%)
FFO to Net debt 27.2% 22.6% 20%
Notes: (1) Adjusted EBITDA is revenue less cost of goods sold, less selling and administrative expenses, plus share of income from associates and joint controlled entities, plus dividend income, plus depreciation and amortisation. (2) Adjusted EBIT is Adjusted EBITDA less depreciation and amortisation. (3) Pre other significant items. I 13 (4) FFO is Operating cash flow before working capital changes less net interest paid, less tax paid, plus dividends received from associates.
Robust balance sheet(1)
2011 2010 . Robust balance sheet with almost $7 billion of committed liquidity headroom as at 31 December Total assets $86.2bn $79.8bn 2011 Glencore $29.3bn $19.6bn . 12% fall in net debt over the year to $12.9bn shareholders' funds . Strong and improving cashflow coverage ratios with
Net debt $12.9bn $14.8bn FFO to Net debt increasing 20% from 22.6% to
27.2% and Net Debt to Adjusted EBITDA falling to
Adjusted current ratio 1.5x 1.3x 2.0x
. No material refinancing in next 12 months FFO to Net debt 27% 23% . S&P and Moody’s investment grade credit ratings Net debt to Adjusted 2.0x 2.4x strengthened in July 2011 to BBB (stable) and Baa2 EBITDA (stable) respectively
– Following announcement of Xstrata merger, both agencies have flagged possible
upgrade potential
. Average VaR (1 day 95%) was $39m (2010: $43m), representing a modest 0.1% of shareholders’ equity
Notes: (1) All definitions as per Preliminary Results Release 2011. I 14
Key statistics
Glencore operates significant industrial and marketing activities across the various business segments
Glencore Marketing activities Industrial activities
Operational
Controlled and non- A leading integrated Sourcing, distribution controlled investments in Main activity producer and marketer and marketing producing and of commodities development assets
Geographical Over 40 countries Over 40 countries Over 30 countries presence
(1) Employees Over 58,000 Close to 3,000 Over 58,000
Financial
FY 11 Revenues $186.2bn Total assets: $86.2bn
FY 11 EBITDA $6.5bn Glencore shareholders’ funds: $29.3bn
FY 11 EBIT $5.4bn $3.0b$2.3bn Standard & Poor’s: BBB (stable)
FY 11 Net (2) $4.1bn Moody’s: Baa2 (stable) income (3)
Notes: (1) Marketing employees includes managers, support staff and employees in global offices. (2) Excludes exceptional items I 15 Glencore overview
Unique Global Infrastructure
Century Polymet Xstrata Rusal Aluminum Portovesme Recylex Xstrata Nyrstar Biopetrol Various Rusal Xstrata Companies
Columbia Falls
Century Various Russneft Aluminum Companies
Sherwin Alumina Kazzinc
Xstrata Xstrata Pasar
Prodeco Perkoa Chemoil
Volcan Rusal Xstrata Rusal
Los Quenuales E&P Assets Xstrata
Sinchi Wayra
Cobar Ponta Pora Xstrata
Rio Vermelho Xstrata Punitaqui Kansuki
Umcebo/ AR Zinc Moreno Timbues Renova Mopani Katanga Mutanda Shanduka Optimum Murrin Murrin
Main Offices Offices Alumina/ Agents Zinc/Copper/Lead Nickel Aluminium Coal Oil Grain
Xstrata Zinc/Copper Xstrata Nickel Xstrata Alloys Xstrata Coal
I 16 Marketing illustration – arbitrage opportunities
Glencore has the ability to implement and execute any combination of the following arbitrage opportunities
1 Geographical 2 Product 3 Timing
Gasoline
Energy Ethanol Biodiesel distributor
Corn Gasoil Vegoil
. Triangulation of freight . Diverse commodity range, supply . Glencore is able to benefit from movements and regional base and extensive storage, ‘inefficiencies’ in the shape of the supply/demand dynamics allow handling and processing capabilities forward price curves Definition for capitalisation and execution enable exploitation of price of value add and profit differentials across various products enhancing transactions
. Glencore enters into generic and . Differences in grade, e.g. blending . “Carry trades” booked in contango flexible purchase and sales different grades to meet contract market, benefiting from its contracts with various industry requirements at a lower overall cost comparatively lower financing and participants . Locking in processing margins to storage costs than that implied by . Extensive and global commodity take advantage of price differentials the forward curve books provide opportunities to between unprocessed and . Glencore can benefit from a Examples divert cargos and enter into processed product backwardation market by pricing swap agreements to optimise . Substituting products where an end- sales contracts as early as possible physical delivery schedule product can be produced from a and deferring the quotation periods . Optimisation of existing contracts variety of commodities (e.g. animal (QPs) of supply contracts results in reduced shipping costs feed) and higher profit margins compared to standard trades I 17 Marketing illustration – geographical arbitrage
Vanilla transaction executed by various … premium profit margins achieved by Glencore due to its extensive and industry participants… global alumina book with insight into freight movements
1 Purchase contract 2 Sales contract 3 Swap agreement 4a Optimisation of 4b Optimisation of existing contracts existing contracts . Glencore enters into an . Glencore enters into a . Approached by a large . Glencore has an existing . Jamaican alumina (E) is exclusive 10 year purchase contract to supply alumina producer with commitments alumina supply commitment then finally shipped to the agreement from an Alumina to a Black Sea customer to deliver alumina into the to Iceland (D), typically Black Sea customer (B) refinery in the (B) Mediterranean, Glencore sourced from Jamaica (E). resulting in a higher margin Mediterranean basin. . The logical origin to supply swaps its Mediterranean alumina is from A. Net of Alumina (A) for Northern . In light of the swap . Glencore’s ability to freight costs, the sales European Alumina (C) in agreement, Glencore optimise freight and agreement is priced at exchange for the freight recognises the benefit of rationalisation of existing contracts allow it to lock in premium to the purchase differential supplying the new Northern contract thereby locking in European Alumina (instead a higher profit margin on a a modest margin. of the Jamaican) to Iceland standard trade due to reduced shipping costs.
C D B B
E A A C A
Extensive and global alumina book provide flexibility to enhance profit margins Glencore’s reputation as a secure and reliable counterparty present additional opportunities to optimise existing contracts
Triangulation of global freight movements allow Glencore to capitalise and execute value add and profit enhancing trades
I 18 Marketing illustration – product arbitrage
. Glencore’s diverse commodity range and processing ability enables it to exploit price differentials across various products, for example
– Using differences in grade, e.g. blending different grades together to meet contract requirements at a lower overall cost
– Locking in processing margins to take advantage of price differentials between unprocessed and processed product
– Substituting products where an end-product can be produced from a variety of commodities (e.g. animal feed)
Illustrative example - Agriculture
1 Scenario 2 Catalyst 3 Outcome
. After 3 months, relative . Glencore improve their Gasoline forward price movements margin by selling mean Glencore calculates rapeoil and buying that the margin would soyoil Energy improve with a blend of 75% Biodiesel Ethanol distributor rapeoil and 25% soyoil
Corn Gasoil Vegoil
. Different vegoil blends (rapeoil, soyoil, palmoil) produce Biodiesel with different quality specifications and hence market values
. Based on 12 month forward prices Glencore calculate an optimal Biodiesel producer’s margin with a feedstock of 100% rapeoil I 19 Marketing illustration – time arbitrage
. Glencore is able to benefit from inefficiencies in the shape of the forward price curves – In a contango market, Glencore can book “carry trades”, benefiting from its comparatively lower financing and storage costs than that implied by the forward curve – Glencore can also benefit from a backwardation market by pricing sales contracts as early as possible and deferring the quotation periods (QPs) of supply contracts
. Time arbitrage is dependent on the existence of liquid forward and futures markets and competitive access to storage and financing
Illustrative example - Oil in a contango market
1 Scenario 2 Catalyst 3 Glencore’s strategy 4 Outcome
. Glencore purchases . 3 month forward . Glencore sells . At maturity Glencore 100 barrels of oil at price is $80 per forward 100 barrels delivers 100 barrels $75 each barrel at $80, resulting in a of oil
profit before . Profit per barrel is $5 Current value Forward price financing, storage less say $3 of $85 and other financing, storage transaction costs of and other $80 $5 transaction costs
$75
$70 Spot 3m forward $75 / bbl $80 / bbl
I 20 Marketing illustration – freight & logistics
. Glencore’s freight and logistics operations are key to supporting marketing strategies, understanding trade flows and adding additional value, for example
– By being able to physically transport and store products to take advantage of prevailing market conditions – The scale of operations ensures low cost transportation, often allowing Glencore to win contracts by offering a lower unit price CIF (Cost, Insurance, Freight) than competitors
Illustrative example - General
1 Scenario 2 Glencore’s strategy 3 Outcome
. Market price of a commodity . Glencore is able to operate . Glencore can offer a CIF in location X is $100 at lower unit costs for freight price of say $106-$110 and due to scale, experience and still win the contract as
. Prevailing market transport vertical integration lowest cost provider cost to ship the commodity to location Y is $10, total CIF price is $110
Market = $10 / unit Glencore = $6 / unit
I 21 World class management and board
Highly experienced Board of Directors and management team
• Aged 72 Simon Murray • Executive Chairman of GEMS Independent Non Executive Chairman • Board member of Richemont and Essar Energy
Executive Directors Independent Non Executive Directors
CEO SID INED INED Ivan Glasenberg Anthony Hayward Peter Coates Leonhard Fischer Aged 55 Aged 54 Aged 66 Aged 49 . BoD Member since 2002 . Former CEO of BP . 40 years of experience in the . CEO of RHJ International and . CEO of Glencore since 2002 . Board member of TNK-BP and resource industry former CEO of Wintherthur . 27 years with Glencore partner of AEA Investors, . Member of the Boards of . Member of the Boards of Julius founder of Vallares Santos and Amalgamated Baer Gruppe, AXA Konzern and Holdings Arecon
CFO INED INED Steven Kalmin William Macaulay Li Ning
Aged 41 Aged 66 Aged 55 . CFO of Glencore since 2005 . Chairman and CEO of First . Executive Director of Henderson . 12 years with Glencore Reserve Land Development Company . Chairman of Dresser-Rand . Director of Hong Kong (Ferry) Holdings I 22