Entrepreneurialism Fully Priced Target Price HKD 70.40 Starts At70.40 Closing Price HKD 67.40 May 30, 2011 Potential Upside +4.5%

0805.HK 805 HK Glencore BASIC MATERIALS EQUITY RESEARCH

May 31, 2011 Initiating at NEUTRAL with TP of HKD70.40 Rating Starts at Neutral Entrepreneurialism fully priced Target price HKD 70.40 Starts at70.40 Closing price HKD 67.40 May 30, 2011 Potential upside +4.5%

Action/Valuation: Expensive relative to mining peers; NEUTRAL Anchor themes Glencore is evolving from a trading house whose mining assets principally We expect the mining sector to served to feed its marketing business into one whose mining assets outperform in 2011, with become the key driver of group earnings. Although we find Glencore's thermal coal being our management to be the most entrepreneurial team in the sector, we think preferred commodity pick. valuations are expensive relative to mining peers. Our HKD70.40 TP represents a 10% holding company discount to our SOTP NPV valuation. Nomura vs consensus Coverage on the street is Mining assets: higher volume growth, but with higher risk and costs currently sparse. Excluding Xstrata, we estimate an attributable copper equivalent CAGR for Glencore of 7.5% over 2011-2015E (vs an average of 5.2% for the Research analysts diversified miners). Glencore’s high growth is partly offset by higher geographical risk and a higher cost profile, with average costs mostly in Singapore Basic Materials the third quartile of industry cost curves. Tanuj Shori - NSL [email protected] A high-quality and counter-cyclical marketing business +65 6433 6981 Glencore’s marketing business has dominant market shares, high barriers to entry and counter-cyclical cash generation, and we believe it should European Metals & Mining trade in line with or at a small discount to Noble (because of Noble’s Paul Cliff - NI plc [email protected] greater exposure to agriculture, which tends to be less cyclical, and its +44 20 7102 4349 faster earnings growth, offset to some extent by Glencore’s higher RoCE). Patrick Jones - NI plc [email protected] M&A strategy: Xstrata merger unlikely for now +44 20 7102 5486

We would be surprised to see Xstrata’s board recommend a nil-premium European Steel merger of equals while Glencore trades at a relative valuation premium. Jeff Largey - NI plc Also, we don’t think Glencore would pay a large takeover premium for [email protected] Xstrata, given Glencore’s opportunistic M&A history. +44 20 7102 0021

31 Dec FY10 FY11F FY12F FY13F Currency (USD) Actual Old New Old New Old New

Revenue (mn) 144,978 198,108 224,543 215,161 Reported net profit (mn) 3,751 7,340 9,547 9,132 Normalised net profit (mn) 3,751 7,340 9,547 9,132 Normalised EPS 0.5 1.1 1.4 1.3 Norm. EPS growth (%) 129.7 95.7 30.1 -4.3 Norm. P/E (x) 16.9 N/A 8.6 N/A 6.6 N/A 6.9 EV/EBITDA 14.3 N/A 6.8 N/A 5.6 N/A 5.4 See Appendix A-1 for analyst Price/book (x) 3.1 N/A 1.7 N/A 1.3 N/A 1.1 certification and important

Dividend yield (%) na N/A 1.7 N/A 1.7 N/A 1.8 disclosures. Analysts employed by non US affiliates are not ROE (%) 20.7 26.4 23.7 18.8 registered or qualified as Net debt/equity (%) 146.2 55.1 42.3 25.8 research analysts with FINRA in the US. Source: Nomura estimates Key company data: See page 2 for company data, and detailed price/index chart. Rating: See report end for details of Nomura’s rating system.

Nomura | ASIA Glencore May 31, 2011

Key data on Glencore Income statement (USDmn) Year-end 31 Dec FY09 FY10 FY11F FY12F FY13F Notes Revenue 106,364 144,978 198,108 224,543 215,161 Strong earnings growth to last Cost of goods sold -103,057 -139,688 -187,430 -211,480 -202,556 through FY11-12F, in our view Gross profit 3,307 5,290 10,677 13,063 12,605

SG&A

Employee share expense Operating profit 3,307 5,290 10,677 13,063 12,605

EBITDA 3,929 6,201 11,664 14,104 13,538 Depreciation -622 -911-987 -1,041 -934

Amortisation EBIT 3,307 5,290 10,677 13,063 12,605 Net interest expense -587 -936-1,602 -1,114 -1,059

Associates & JCEs

Other income Earnings before tax 2,720 4,354 9,076 11,949 11,545 Income tax -238 -234 -758 -1,193 -1,177 Net profit after tax 2,482 4,120 8,318 10,756 10,368 Minority interests -96 -355 -978 -1,209 -1,236 Other items -753 -14 0 0 0

Preferred dividends Normalised NPAT 1,633 3,751 7,340 9,547 9,132

Extraordinary items Reported NPAT 1,633 3,751 7,340 9,547 9,132 Dividends 0 0-1,000 -1,040 -1,082 Transfer to reserves 1,633 3,751 6,340 8,507 8,050

Valuation and ratio analysis FD normalised P/E (x) 38.8 16.98.6 6.6 6.9 FD normalised P/E at price target (x) 40.8 17.7 9.1 7.0 7.3 Reported P/E (x) 36.7 16.08.2 6.3 6.6 Dividend yield (%) na na1.7 1.7 1.8 Price/cashflow (x) na 571.037.4 19.1 8.6 Price/book (x) 3.6 3.11.7 1.3 1.1 EV/EBITDA (x) 21.0 14.36.8 5.6 5.4 EV/EBIT (x) 25.0 16.77.5 6.0 5.8 Price and price relative chart (one year) Gross margin (%) 3.1 3.65.4 5.8 5.9 Price EBITDA margin (%) 3.7 4.35.9 6.3 6.3 (HKD) Rel MSCI HK EBIT margin (%) 3.1 3.65.4 5.8 5.9 67.5 100.5 Net margin (%) 1.5 2.63.7 4.3 4.2 Effective tax rate (%) 8.8 5.48.4 10.0 10.2 67 100 Dividend payout (%) 0.0 0.013.6 10.9 11.8 66.5 99.5

Capex to sales (%) 1.0 1.31.0 0.7 0.6 66 99 Capex to depreciation (x) 1.8 2.12.1 1.4 1.3 65.5 98.5 ROE (%) na 20.726.4 23.7 18.8 ROA (pretax %) na 7.412.8 13.9 12.6 65 98

64.5 97.5

Growth (%)

Revenue na 36.336.6 13.3 -4.2 EBITDA na 57.888.1 20.9 -4.0 (%) 1M 3M 12M EBIT na 60.0101.8 22.3 -3.5 Absolute (HKD) Normalised EPS na 129.7 95.7 30.1 -4.3 Absolute (USD) Normalised FDEPS na 129.7 95.7 30.1 -4.3 Relative to index Market cap (USDmn) 59,656.3 Per share Estimated free float 20.0 Reported EPS (USD) 0.24 0.541.06 1.38 1.32 (%) Norm EPS (USD) 0.24 0.541.06 1.38 1.32 52-week range (HKD) 67.3/64.55 3-mth avg daily Fully diluted norm EPS (USD) 0.22 0.511.00 1.30 1.25 57.99 turnover (USDmn) Book value per share (USD) 2.41 2.835.20 6.43 7.59 Major shareholders DPS (USD) 0.00 0.000.14 0.15 0.16 (%) Source: Nomura estimates Ivan Glasenberg 15.7

Nomura | ASIA Glencore May 31, 2011

Cashflow (USDmn) Year-end 31 Dec FY09 FY10 FY11F FY12F FY13F Notes EBITDA 3,929 6,20111,664 14,104 13,538 Positive operating cashflow expected Change in working capital -5,279 -4,484-3,286 -3,140 1,114 from FY11-13F Other operating cashflow -1,660 -1,606 -6,681 -7,638 -7,323 Cashflow from operations -3,010 111 1,696 3,326 7,329 Capital expenditure -1,116 -1,890-2,039 -1,489 -1,197 Free cashflow -4,126 -1,779 -343 1,837 6,132 Reduction in investments -251 -1,112 -3,421 -4,214 -3,938

Net acquisitions

Reduction in other LT assets -507 0 0 0

Addition in other LT liabilities 843 11 11 11 Adjustments 203 -2,0892,748 3,578 3,289 Cashflow after investing acts -4,174 -4,644 -1,006 1,212 5,494 Cash dividends -2 -2 -1,000 -1,040 -1,082 Equity issue 0 0 10,033 0 0 Debt issue 3,087 5,952 0 0 0 Convertible debt issue 1,915 283 0 0 0 Others -792 -9860 0 0 Cashflow from financial acts 4,208 5,247 9,033 -1,040 -1,082 Net cashflow 34 603 8,028 172 4,412 Beginning cash 826 860 1,463 9,491 9,663 Ending cash 860 1,463 9,491 9,663 14,075 Ending net debt 23,131 28,669 19,816 18,819 13,582 Source: Nomura estimates

Balance sheet (USDmn) As at 31 Dec FY09 FY10 FY11F FY12F FY13F Notes Cash & equivalents 860 1,4639,491 9,663 14,075 Stable cash cycle; gearing to come Marketable securities 75 66 66 66 66 down Accounts receivable 15,189 18,994 23,021 26,093 25,002 Inventories 15,073 17,393 19,190 21,751 20,842 Other current assets 6,179 6,100 6,100 6,100 6,100 Total current assets 37,376 44,016 57,868 63,673 66,086 LT investments 18,083 19,204 22,625 26,840 30,777 Fixed assets 6,845 12,088 13,141 13,589 13,853

Goodwill

Other intangible assets Other LT assets 3,972 4,479 4,479 4,479 4,479 Total assets 66,276 79,787 98,113 108,580 115,195 Short-term debt 7,186 11,881 11,881 11,881 11,881 Accounts payable 11,482 16,145 18,683 21,176 20,291 Other current liabilities 11,913 8,8128,812 8,812 8,812 Total current liabilities 30,581 36,838 39,376 41,869 40,984 Long-term debt 16,403 18,251 17,426 16,601 15,776

Convertible debt Other LT liabilities 1,348 2,191 2,202 2,213 2,224 Total liabilities 48,332 57,280 59,004 60,683 58,984 Minority interest 1,258 2,894 3,123 3,405 3,668 Preferred stock 0 0000 Common stock 46 4661 61 61 Retained earnings 4,395 5,378 21,736 30,243 38,293

Proposed dividends Other equity and reserves 12,245 14,189 14,189 14,189 14,189 Total shareholders' equity 16,686 19,613 35,986 44,493 52,543 Total equity & liabilities 66,276 79,787 98,113 108,580 115,195

Liquidity (x) Current ratio 1.22 1.19 1.47 1.52 1.61 Interest cover 5.6 5.76.7 11.7 11.9

Leverage Net debt/EBITDA (x) 5.89 4.621.70 1.33 1.00 Net debt/equity (%) 138.6 146.255.1 42.3 25.8

Activity (days) Days receivable na 43.0 38.7 40.0 43.3 Days inventory na 42.435.6 35.4 38.4 Days payable na 36.133.9 34.5 37.4 Cash cycle na 49.440.4 41.0 44.4 Source: Nomura estimates

Nomura | ASIA Glencore May 31, 2011

Contents

5 Executive summary: NEUTRAL, HKD70.40 TP Research analysts

Singapore Basic Materials 7 Valuation (NEUTRAL, TP HKD70.40)

Tanuj Shori - NSL [email protected] 12 The marketing business +65 6433 6981

Tushar Mohata - NFASL 12 The industrial business – listed assets [email protected] +91 22 6723 4042

13 The industrial business – unlisted assets European Metals & Mining Paul Cliff - NI plc

[email protected] 14 Earnings summary & sensitivity +44 20 7102 4349

Patrick Jones - NI plc 16 Marketing: cyclical earnings, counter-cyclical cash flow [email protected] +44 20 7102 5486

Ashraf Khan - [email protected] 17 M&A: Xstrata merger unlikely for now +91 22 3053 3231

18 Marketing division European Steel

Jeff Largey - NI plc 19 Noble-Glencore: a closer comparison [email protected] +44 20 7102 0021

Neil Sampat - NI plc [email protected] 22 Industrial division +44 20 7102 1808

25 Zinc

25 Copper

26 Nickel and alumina

27 Energy

28 Agriculture

29 Glencore financial summary

30 Xstrata financial summary

31 Appendix

31 Share lockups, indexation, and key management

33 Appendix A-1

Nomura | ASIA Glencore May 31, 2011

Executive summary: NEUTRAL, HKD70.40 TP We initiate coverage of Glencore with a NEUTRAL recommendation and HKD70.40 target price. Our target price is set at a 10% discount (at enterprise level) to our NPV, which includes Glencore’s stake in Xstrata at our GBP 22/share NPV. Our in-market SoTP valuation, which includes Glencore’s listed stakes at market value and peer group valuation multiples for Glencore’s other mining and marketing businesses, suggests a value for Glencore of HKD57.50/share. Although we think Glencore boasts one of the most entrepreneurial management teams in the sector, we struggle to find value in Glencore relative to its mining and marketing peers. However, our target price still leaves modest upside potential in absolute terms.

On balance, we believe the most appropriate valuation methodology for Glencore is an enterprise value SoTP with a holding company discount. RMIs should not be deducted from net debt, in our view. Peer group EV/EBITDA multiples avoid any distortions attributable to Glencore’s relatively high net debt/EBITDA ratios in its unlisted mining and marketing businesses (unlisted net debt/EBITDA of 3.8x compared with 3.0x and 0.4x for Noble and Xstrata, respectively). We apply a 10% holding company or SoTP discount as a large proportion of Glencore’s value lies in separate listed entities, particularly its non- controlling stake in Xstrata. In addition, we believe that only 15% of Glencore’s marketing volumes (ex oil) originate from Glencore controlled production assets, which suggests to us that the marketing business could be viewed as separate to the mining business rather than one vertically integrated structure from mine to customer. Lastly, we do not deduct RMIs from net debt to value Glencore’s equity, as RMIs represent working capital for a physical commodity trading business.

Fig. 1: Glencore valuation summary: NPV and in-market

2011E Att EV/EBITDA In-Market $mn EBITDA NPVMultiple Value Comments

Industrial Total Listed 6,876 44,712 29,878

Unlisted Managed operations 3,169 12,963 4.2x 13,462 Xstrata multiple (last reported net debt) Goldstream 5,208* 5,208* Attributable 744 koz x $7,000/oz (Russian EV/produced oz average) Russneft, oil 3,620 3,485 oil-related loans: $2.9 bn, Guinean oil resources: $560 mn Total unlisted 3,169 21,792 22,155

Total Industrial 10,046 66,504 52,033

Marketing 3,185 31,751 9.7x 30,989 Noble Group multiple (last reported net debt)

Total 13,231 98,255 83,022 Discount 10% 10% Holding company discount Discounted EV 88,429 74,720

Proforma Net Debt -24,387 -24,387 Convertible Debt 2,132 Excluded for in-market valuation Equity Value 66,174 50,333

Equity value (GBP/sh) 558 449 Equity value (HK$/sh) 70.40 57.50

*Management intends to spin out the goldstream of Kazzinc; thus we value it at an average EV/produced gold ounce of Russian miners Source: Company data, Nomura estimates

Glencore is evolving from a trading house in physical commodities into a company whose mining assets increasingly drive group earnings. This is both a function of a prolonged cycle of high commodity prices and an expansion strategy that increasingly focuses on mining. Glencore plans to use its USD7.9bn primary share issue to fund the

Nomura | ASIA Glencore May 31, 2011

USD2.2bn cash portion of the USD3.2bn proposed acquisition of additional stakes in Kazzinc from 51% to 93%, and approximately USD5bn towards capex over the next three years to expand its major mining assets – Kazzinc, Mopani, Prodeco and various oil E&P assets in West Africa. We forecast Glencore’s mining activities, including stakes in listed assets, to account for 76% of attributable EBITDA, on average, over the next five years. We expect Glencore to deliver strong earnings growth over the next two years, buoyed by best-in-class organic growth from its own managed operations as well as from Xstrata. We forecast Glencore’s attributable EBITDA to grow by 63% in 2011 y-o-y and by nearly 92% by 2012, from 2010 levels. We expect Glencore’s marketing division to account for 24% of group attributable EBITDA, on average, over the next five years with mining, including Xstrata, accounting for the remainder.

Fig. 2: Glencore attributable EBITDA 2010-2015E

$mn Marketing Xstrata Industrial ex Xstrata 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 2010 2011E 2012E 2013E 2014E 2015E

Note: Glencore does not disclose attributable EBITDA; figures are based on our estimates. Source: Company data, Nomura estimates

Excluding Xstrata, we estimate an attributable copper equivalent CAGR for Glencore of 7.5% over 2011-2015, compared with an average of 5.2% for the diversified miners. Glencore’s high growth is partly offset by higher geographical risk and a higher cost profile, with average costs mostly in the third quartile of industry cost curves. However, as projects such as Mutanda come online and Prodeco ramps up, Glencore’s copper and coal divisions will have the potential to move down the cost curve.

Nomura | ASIA Glencore May 31, 2011

Fig. 3: Copper equivalent organic growth 2010-2015E Fig. 4: GLEN managed operations 2011 cost curve positions Investing during the downturn has given Glencore first-mover advantage Positions are approximate

AAL BHP XTA RIO GLEN Industrial 170

160

150

140

130

120

110

100 2010 2011E 2012E 2013E 2014E 2015E

Source: Company data, Nomura estimates Source: Brook Hunt, AME Company data, Nomura estimates.

Valuation (NEUTRAL, TP HKD70.40) Our HKD70.40 target price for Glencore is set at a 10% discount to our SoTP NPV, which includes Glencore’s stake in Xstrata at our GBP 22/share NPV. Our in-market SoTP valuation suggests a value for Glencore of HKD57.50/share. We view Xstrata as the closest peer for Glencore’s mining business owing to a similar mix of copper, coal and zinc. We view Noble as the closest peer for Glencore’s marketing business owing to a similar mix of metals & minerals, energy, and agriculture exposure (although Glencore is more exposed to metals & minerals while Noble is more exposed to agriculture).

Nomura | ASIA Glencore May 31, 2011

Fig. 5: Glencore valuation summary NPV vs EV/EBITDA

2011E Att EV/EBITDA In-Market $mn EBITDA NPVMultiple Value Comments

Industrial Listed Xstrata 6,007 37,076 23,383 Other 870 7,636 6,495 Total Listed 6,876 44,712 29,878

Total Industrial 10,046 66,504 52,033

Marketing 3,185 31,751 9.7x 30,989 Noble Group multiple (last reported net debt)

Total 13,231 98,255 83,022 Discount 10% 10% Holding company discount Discounted EV 88,429 74,720

Q4 10 Net Debt -29,087 -29,087 Primary issue 7,900 7,900 43% Kazzinc Acq -3,200 -3,200 Proforma Net Debt -24,387 -24,387 Convertible Debt 2,132 Excluded for in-market valuation Equity Value 66,174 50,333

Basic Shares 6,923 6,923 Dilutive shares 403 Excluded for in-market valuation Total Shares 7,326 6,923 GBP-USD 1.62 1.62

Equity value (GBP/sh) 558 449 Equity value (HK$/sh) 70.40 57.50 *Management intend to spin out the goldstream of Kazzinc; thus we value it at an average EV / produced gold ounce of Russian gold miners

Source: Company data, Nomura estimates

Nomura | ASIA Glencore May 31, 2011

Fig. 6: SOTP: NPV valuation Fig. 7: SOTP: In-market EV/EBITDA valuation

Marketing 32% Marketing Listed 37% 36% Listed 46%

Unlisted Unlisted 22% 27%

Source: Company data, Nomura estimates Source: Company data, Nomura estimates

On balance, we believe the most appropriate valuation methodology for Glencore is an enterprise value SoTP with a holding company discount. RMIs should not be deducted from net debt for valuing equity, in our view. We view Xstrata and Noble as the closest peers for Glencore’s mining and marketing businesses, respectively. Peer group EV/EBITDA multiples avoid distortions attributable to higher net debt/EBITDA ratios in Glencore’s unlisted mining and marketing businesses relative to Noble and Xstrata. For example, we estimate 2010 net debt to 2011E EBITDA of 3.8x for Glencore’s combined unlisted mining and marketing business, compared with net debt/EBITDA multiples for Noble and Xstrata of 3.0x and 0.4x, respectively. We recognise that our enterprise value methodology is not without its flaws. We think the main issue is the volatility in Glencore’s working capital, which is proportional to changes in commodity prices. This may lead to a volatile net debt which, when deducted from our estimated enterprise value, would also lead to a volatile equity valuation. However, we point out that Noble’s net debt would also be influenced by the same factors, and the market should adjust Noble’s EV/EBITDA multiple accordingly. Any change in Noble’s EV/EBITDA would then be reflected in our in-market SoTP valuation for Glencore. Lastly, we also point out that volatility is hardly new to the mining sector, and Glencore’s in- market valuation will also reflect any volatility in Xstrata’s share price. We apply a 10% holding company or SoTP discount as a large proportion of Glencore’s value lies in separate listed entities, particularly as the stake in Xstrata is a minority one. In addition, we believe that only 15% of Glencore’s marketing volumes (ex oil) originate from Glencore-controlled production assets (around 40% including volumes (ex oil) from associates and investments), which suggests to us that the marketing business could be viewed as separate to the mining business rather than one vertically integrated structure from mine to customer. Lastly, we do not deduct RMIs from net debt to value Glencore’s equity, as RMIs represent the working capital of a physical commodity trading business regardless of how liquid they are or whether price risk has been hedged. For the purposes of valuing the equity of the company, we believe working capital (ie, RMIs) should not be treated as (ie, converted to) cash unless the business is no longer a going concern. We think most of the confusion over whether to treat Glencore’s RMIs (USD14.3bn as at end-2010), as cash stems from whether one is trying to measure balance sheet liquidity or to value the equity of the company. Historically, Glencore’s quarterly financials have been used by credit analysts to assess balance sheet liquidity. When assessing Glencore‘s ability to meet future debt obligations, credit analysts typically treat 80% of RMIs as cash, as inventories are liquid assets and prices have been hedged either on exchange or with a highly rated counterparty.

Nomura | ASIA Glencore May 31, 2011

Fig. 8: Glencore and other supply chain companies We regard Noble as the best comparable with regard to Glencore Market Presence Glencore ADM Bunge Noble Wilmar Olam Agriculture  Oil/Oil Prod.  Coal  Zinc/Copper  Aluminium  Ferroalloys  Industrial asset base   

Source: Company data, Nomura research

Glencore is positioned somewhere between the diversified miners and the supply-chain managers/commodity traders. Our forecast 2011 attributable EBITDA for Glencore is split roughly three-quarters for its mining assets and one-quarter for marketing. Therefore, we think Glencore’s valuation multiples should sit closer to the miners. We note that Glencore’s marketing business is skewed towards metals & minerals (55% of 2011 EBITDA for marketing, on our estimates), while the Singapore listed commodity traders tend to be skewed more to agriculture (eg, agriculture represents 42% of our 2011 trading+midstream EBITDA estimate for Noble). Agriculture-related earnings tend to be less cyclical and command a valuation premium (eg, Wilmar and Olam).

Fig. 9: Mining valuation sheet: Nomura commodity forecasts

Mkt Cap Current Target Potential Base Growth Total Price/P/E EV/EBITDA FCF Yield Company Rating Price Price Upside NPV Options NPV Total NPV 11E 12E 13E 11E 12E 13E 11E Xstrata $66,205 Buy £13.91 £22.00 58% £18.1 £4.4 £22.5 0.62 6.5 5.3 5.7 4.0 3.1 2.8 15.2% Rio Tinto $132,147 Buy £41.48 £61.00 47% £47.8 £9.5 £57.3 0.72 6.3 5.5 5.9 3.7 2.8 2.5 14.8% BHP Billiton $213,177 Reduce £23.44 £24.00 2% £19.0 £5.1 £24.1 0.97 7.3 6.3 6.8 3.9 3.0 2.7 15.0% Anglo American $57,788 Buy £28.81 £46.00 60% £35.2 £9.1 £44.3 0.65 5.3 4.7 4.9 3.7 3.0 2.9 17.2% Glencore $58,819 Neutral HK$64.90 HK$70.40 8% £5.6 n/a £5.6 0.82 8.5 6.5 6.8 6.0 5.0 5.0 15.8% Kazakhmys $10,938 Reduce £12.56 £15.00 19% £13.9 £0.3 £14.2 0.89 4.1 4.1 5.0 2.2 1.7 1.5 20.5% Antofagasta $19,505 Reduce £12.16 £15.00 23% £12.0 £2.5 £14.5 0.84 6.9 6.9 8.9 3.7 3.2 4.0 13.2% First Quantum $11,624 Buy CAD 132 CAD 137 4% CAD 75 CAD 62 CAD 137 0.96 8.5 7.0 9.6 4.5 3.0 3.3 11.4% Vedanta $9,748 Neutral £20.80 £25.00 20% £22.1 £2.4 £24.5 0.85 5.3 4.0 4.4 4.3 3.7 3.8 16.0% Norsk Hydro $15,642 Neutral NOK 41.74 NOK 53.00 27% NOK 53.0 n/a NOK 53.0 0.79 14.5 12.1 10.7 6.2 5.3 5.0 2.0% ENRC $17,432 Reduce £8.32 £9.50 14% £8.3 £1.3 £9.5 0.87 5.8 5.3 5.3 3.9 3.3 3.0 16.8% Average Diversified Mining Sector 0.74 6.4 5.4 5.8 3.8 3.0 2.7 15.6% Weighted Average Mining Sector 0.82 7.0 6.0 6.4 4.1 3.2 3.0 15.0%

Source: Datastream, company data, Nomura estimates

Fig. 10: Mining valuation sheet: Spot commodity prices

Mkt Cap Current Target Potential Base Growth Total Price/P/E EV/EBITDA FCF Yield Company Rating Price Price Upside NPV Options NPV Total NPV 11E 12E 13E 11E 12E 13E 11E Xstrata $66,205 Buy £13.91 £22.00 58% £29.9 £10.4 £40.3 0.35 7.8 6.7 5.9 4.7 3.9 3.8 13.1% Rio Tinto $132,147 Buy £41.48 £61.00 47% £100.1 £36.0 £136.1 0.30 6.2 5.6 5.1 3.7 3.1 2.4 15.5% BHP Billiton $213,177 Reduce £23.44 £24.00 2% £29.7 £11.6 £41.3 0.57 7.4 6.3 5.8 4.0 3.0 2.3 14.8% Anglo American $57,788 Buy £28.81 £46.00 60% £56.0 £25.3 £81.3 0.35 6.0 5.3 4.8 4.2 3.4 2.8 15.4% Glencore $58,819 Neutral HK$64.90 HK$70.40 8% £8.9 n/a £8.9 6.42 9.5 7.5 6.3 6.4 5.5 4.8 14.4% Kazakhmys $10,938 Reduce £12.56 £15.00 19% £18.6 £3.5 £22.1 0.57 4.8 4.4 4.4 2.6 2.0 1.4 17.8% Antofagasta $19,505 Reduce £12.16 £15.00 23% £17.3 £9.4 £26.7 0.46 8.7 8.3 7.4 4.6 4.1 3.4 11.4% First Quantum $11,624 Buy CAD 132 CAD 137 4% £99.0 CAD 136 CAD 235 0.56 10.6 7.8 7.6 5.7 3.6 2.8 8.9% Vedanta $9,748 Neutral £20.80 £25.00 20% £36.9 £2.4 £39.2 0.53 5.8 4.2 4.0 4.8 4.0 3.6 14.8% Norsk Hydro $15,642 Neutral NOK 41.74 NOK 53.00 27% NOK 57.5 n/a NOK 57.5 0.73 14.1 11.7 10.4 6.1 5.2 4.9 1.8% ENRC $17,432 Reduce £8.32 £9.50 14% £11.7 £1.8 £13.5 0.62 5.6 5.4 4.7 3.7 3.3 2.6 17.6% Average Diversified Mining Sector 0.39 6.9 6.0 5.4 4.1 3.3 2.8 14.7% Weighted Average Mining Sector 1.04 7.3 6.2 5.6 4.3 3.5 2.8 14.7%

Source: Bloomberg, Datastream, company data, Nomura estimates

Nomura | ASIA Fig. 11: Asian midstream/integrated producers valuation sheet

P/E P/B EV/EBITDA Div yld (%)

PEG (CY11 Glencore Nomura Market cap Closing Name Country CY10 CY11F CY12F CY10 CY11F CY12F CY10 CY11F CY12F P/E vs CY10- CY10 CY11F CY12F rating (US$mn) price 12F CAGR)

MIDSTREAM / INTEGRATED Wilmar (WIL SP) Singapore NEUTRAL 27,362 5.33 24.1 17.4 15.5 2.3 2.1 1.9 20.2 14.0 14.1 0.7 1.3 1.5 1.7 Noble (NOBL SP) Hong Kong BUY 10,369 2.02 19.2 14.5 12.3 2.4 2.0 1.8 13.8 9.7 8.9 0.6 1.3 1.5 2.1 Olam (OLAM SP) Singapore BUY 4,848 2.83 21.4 17.4 14.5 3.1 2.7 2.3 13.6 11.5 10.8 0.8 1.5 1.6 2.0 Mewah (MII SP) Singapore BUY 1,179 0.98 10.5 10.9 9.3 2.0 1.9 1.6 9.8 8.4 7.0 1.7 2.2 na na Singapore Average 18.8 15.1 12.9 2.5 2.2 1.9 14.3 10.9 10.2 0.9 1.6 1.6 1.9 Itochu (8001 JP) Japan BUY 15,953 825.00 7.0 6.0 5.7 1.1 1.0 0.9 10.3 8.4 7.7 0.6 2.5 3.0 3.1 Mitsui (8031 JP) Japan BUY 30,196 1,353.00 7.9 6.1 5.7 1.1 1.0 0.9 9.3 7.7 7.3 0.3 2.9 3.7 4.0 Marubeni (8002 JP) Japan NEUTRAL 11,472 541 7.6 6.4 6.0 1.3 1.1 1.0 10.9 9.5 8.7 0.5 2.1 2.4 2.6 Mitsubishi (8058 JP) Japan BUY 41,894 2,023 8.1 7.0 6.7 1.2 1.1 1.0 12.3 10.1 9.5 0.7 2.8 3.3 3.4 Sumitomo (8053 JP) Japan BUY 16,083 1,054 6.8 6.0 5.6 0.8 0.8 0.7 11.9 10.5 9.8 0.6 3.2 4.1 4.5 Japan traders average 7.5 6.3 6.0 1.1 1.0 0.9 10.9 9.3 8.6 0.5 2.7 3.3 3.5 Ruchi Soya (RSI IN) India BUY 732 99.85 8.7 7.2 6.1 1.0 0.9 0.8 4.1 3.4 2.8 0.4 1.1 1.3 1.5 KS Oils (KSO IN) India BUY 232 25.70 5.4 4.8 3.9 0.8 0.6 0.5 3.7 3.3 2.7 0.3 1.0 1.2 1.4 China Agri (606 HK) Hong Kong BUY 4,317 8.32 12.8 9.5 7.6 1.8 1.6 1.3 18.0 12.4 9.9 0.3 2.0 2.9 3.6 ADM (ADM US) United States N.R. 19,775 31.03 10.0 9.2 8.8 1.3 1.2 1.1 9.0 8.2 8.2 1.3 1.9 2.0 2.1 Bunge (BG US) United States N.R. 10,636 72.24 19.2 11.7 11.0 1.0 0.9 0.8 10.5 8.4 7.8 0.4 1.2 1.2 1.3 Petra Foods Ltd (PETRA SP) Singapore N.R. 843 1.72 21.3 15.4 13.6 2.9 2.6 2.3 14.6 12.0 10.4 0.6 2.0 2.6 2.7 Graincorp (GNC AU) Australia N.R. 1,620 7.76 15.0 11.2 11.5 1.2 1.1 1.1 na na na 0.8 3.4 4.2 4.1 Sri-Trang Agro Industry (STA TB) Thailand NEUTRAL 1,125 26.75 7.0 8.7 8.2 2.5 2.5 2.1 na na na (1.1) na na na Kernel Hdg (KER PW) Ukraine N.R. 2,043 78.00 10.8 8.9 8.4 2.9 2.3 1.9 9.9 7.9 7.5 0.6 0.3 0.7 1.0 Cosan (CSAN3 BZ) Brazil N.R. 5,952 23.80 15.1 14.9 12.9 1.6 1.4 1.3 7.7 7.4 7.8 1.9 1.3 1.9 2.7 Thai Vegetable Oil (TVO TB) Thailand BUY 663 26.25 13.5 10.8 9.6 3.3 2.9 2.6 12.5 9.1 8.1 0.6 5.2 6.5 7.3 MIDSTREAM AVERAGE 12.6 10.2 9.2 1.8 1.6 1.4 11.2 9.0 8.3 0.6 2.1 2.5 2.8

Note: STA TB and TVO TB estimates are provided by Capital Nomura Securities analyst Ploenjai Jirajarus. Source: Bloomberg, company data, Nomura estimates

May 31, 2011 11

Nomura | AEJ Glencore May 31, 2011

The marketing business Our NPV (firm value) for Glencore’s marketing business is USD32bn and is included in our NPV-based target price for Glencore. Our in-market SoTP valuation for the marketing business suggests an enterprise value of USD31bn. We believe Glencore’s marketing business should trade in line with or at a small discount to Noble group (our in- market valuation assumes a 2011E EV/EBITDA multiple of 9.7x, in line with Noble). This is because of Noble’s greater exposure to agriculture, which tends to be less cyclical, and to Noble’s faster earnings growth, offset to some extent by Glencore’s higher returns on capital employed (Please see a detailed comparison between the two businesses later in this report).

Fig. 12: Marketing business valuation: NPV vs EV/EBITDA

EV/EBITDA In-Market $mn EBITDA NPVMultiple Value Comments

Metals & Minerals 1,546 14,577 9.7x 15,045 Metals marketing earnings more cyclical Energy 954 10,369 9.7x 9,282 Agriculture 685 6,805 9.7x 6,661 Agricultural marketing earnings less cyclical Total 3,185 31,751 9.7x 30,989

Source: Bloomberg, company data, Nomura estimates

The industrial business – listed assets Our NPV (equity value) for Glencore’s listed industrial assets is USD44bn while the current market value for these assets is USD30bn. Glencore’s single largest listed asset is its 35% stake in Xstrata. Xstrata remains our top pick in the mining sector with an NPV target price of GBP 22/share. We believe Xstrata’s organic project pipeline remains undervalued, with the market still sceptical on Xstrata’s execution capability. The successful delivery of a suite of major projects in 2012 offers a re-rating catalyst for Xstrata shares, in our view (see our report - Xstrata: Monetizing an undervalued project portfolio, dated 14 April 2011).

Fig. 13: Listed industrial assets Glencore's share of current market cap is used for our valuation for the minor listed stakes Value in Market Cap Listed Assets Stake % model ($mn) ($m) Comment

Century Aluminium 44% 641 641 Included at market cap in both valuations Recylex 32% 71 71 Included at market cap in both valuations UC Rusal 9% 2,148 1,944 Included at Nomura price target (15.1 HKD/sh) Xstrata 35% 37,076 23,383 Included at Nomura price target (£22/sh) Katanga Mining 74% 2,583 2,467 Included at NPV Minara Resources 82% 1,574 753 Included at NPV Nystar 8% 178 178 Included at market cap in both valuations Volcan 4% 176 176 Included at market cap in both valuations Biopetrol Industries 60% 28 28 Included at market cap in both valuations Chemoil 52% 220 220 Included at market cap in both valuations Polymet Mining (US) 6% 17 17 Included at market cap in both valuations

Total 44,712 29,878

Source: Bloomberg, company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

The industrial business – unlisted assets Our NPV (firm value) for Glencore’s unlisted industrial assets is USD22bn while the current in-market value for these assets is also USD22bn, assuming EV/EBITDA valuation multiples in line with Xstrata. Once Glencore increases its stake in Kazzinc from 51% to 93% (expected to complete later this year), Kazzinc will become Glencore’s most valuable unlisted mining asset, on our estimates. We have included Kazzinc’s gold assets at a valuation of USD5.2bn (based on peer group multiples for Russian gold assets) in both our NPV and in-market valuation methodologies. This is because gold assets tend to trade well above their NPVs and so we expect management to create value by spinning out the gold assets into a separate listed vehicle.

Fig. 14: Unlisted mining assets

2011E Att EV/EBITDA In-Market $mn EBITDA NPVMultiple Value Comments Copper (ex KAT) 1,001 4,632 4.2x 4,252 Xstrata multiple (last reported net debt) Zinc 1,258 3,401 4.2x 5,345 Xstrata multiple (last reported net debt) Spun out gold 5,208* 5,208* Attributable 744 koz x $7,000/oz (Russian EV/produced oz average) Alumina 76 565 4.2x 322 Xstrata multiple (last reported net debt) Coal 738 3,842 4.2x 3,135 Xstrata multiple (last reported net debt) Oil & loans 0 3,620 3,485 oil-related loans: $2.9 bn, Guinean oil resources: $560 mn Agriculture 96 523 4.2x 408 Xstrata multiple (last reported net debt) Total 3,169 21,792 22,155 *Management intend to spin out the goldstream of Kazzinc; thus we value it at an average EV / produced gold ounce of Russian gold miners

Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Earnings summary & sensitivity We expect Glencore to deliver excellent earnings growth over the next two years, buoyed by best-in-class organic growth from its managed operations as well as from Xstrata. We forecast Glencore’s attributable EBITDA to grow by 63% in 2011 y-o-y and by nearly 92% by 2012, from 2010 levels. We also expect capex levels to stay elevated over the next several years as the group finances its best-in-class organic growth platform.

Fig. 15: Glencore earnings summary

$ mn 2010 2011E 2012E 2013E 2014E 2015E 2016E Group revenue 144,978 198,108 224,543 215,161 214,769 207,305 205,628 Attributable EBITDA 8,126 13,231 15,573 14,542 13,698 12,549 11,320 Glencore Reported EBITDA 6,201 11,664 14,104 13,538 13,256 12,443 11,554 Net Income 3,751 7,340 9,547 9,132 9,052 8,597 8,284 Undiluted EPS n/a 1.06 1.38 1.32 1.31 1.24 1.20 Diluted EPS n/a 1.00 1.30 1.25 1.24 1.17 1.13 Capex 1,657 2,039 1,489 1,197 876 912 651

Note: Attributable EBITDA is Nomura estimate as it is not reported by the company. Source: Company data, Nomura estimates

We expect earnings from Xstrata to continue to be the largest portion of the group’s attributable EBITDA over the next several years. We expect marketing earnings will be less volatile than industrial earnings.

Fig. 16: Attributable EBITDA by business division Fig. 17: 2011E attributable EBITDA by commodity segment Industrial ex XTA includes copper, coal, zinc, nickel, and other

$mn Marketing Xstrata Industrial ex Xstrata 18,000 16,000 14,000 Industrial Marketing ex Xstrata 24% 12,000 31% 10,000 8,000 6,000 4,000 Xstrata 45% 2,000 0 2010 2011E 2012E 2013E 2014E 2015E

Note: 2010 attributable EBITDA is Nomura estimate and not reported by the company. Note: 2011 attributable EBITDA is Nomura estimate and not reported by the Source: Company data, Nomura estimates company. Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Fig. 18: Earnings sensitivity to commodity price changes

10% Change in Price of % Change in CY2011E EPS of

BHP Rio Xstrata Glencore Anglo Anto Kaz FQM ENRC Vedanta Base metals: Copper 3% 2% 7% 6% 5% 14% 9% 17% 0% 4% Zinc 0% 0% 1% 2% 0% 0% 1% 0% 0% 2% Nickel 1%0%1%2%1%0%0%0%0%0% Aluminum 1% 3% 0% 0% 0% 0% 1% 0% 3% 7% Lead 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Molybdenum 0% 0% 0% 0% 0% 1% 0% 0% 0% 0% Ferrochrome 0% 0% 1% 0% 0% 0% 4% 0% 11% 0% Manganese 1% 0% 0% 0% 0% 0% 0% 0% 0% 0%

Bulks and oil: Iron ore 6% 11% 0% 0% 4% 0% 2% 0% 7% 4% Thermal Export Co 1% 1% 6% 3% 4% 0% 0% 0% 0% 0% Met Coal 2% 1% 3% 1% 4% 0% 0% 0% 0% 0% Oil 2%0%0%0%0%0%0%0%0%0%

Precious metals: Gold 0% 0% 0% 1% 1% 0% 1% 2% 0% 0% Platinum 0% 0% 0% 0% 2% 0% 0% 0% 0% 0% Palladium 0% 0% 0% 0% 0% 0% 0% 0% 0% 0% Rhodium 0% 0% 0% 0% 1% 0% 0% 0% 0% 0%

Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Marketing: cyclical earnings, counter-cyclical cash flow Although we expect earnings from Glencore’s marketing business to be less cyclical than mining, its real attribute is counter-cyclical cash flow. As commodity prices fall, Glencore’s working capital shrinks and this more than offsets any decrease in EBITDA. We calculate that a 20% fall in commodity prices from our estimates would increase operating cash flow by 40% or USD1.3bn in 2012. Alternatively, in a period of rising commodity prices, more capital is tied up in working capital, so the inverse impact is felt. We have assumed that working capital is roughly three-quarters of marketing capital employed (readily marketable inventories averaged 72% of marketing capital employed between 2008 and 2010).

Fig. 19: Marketing segment 2012 sensitivity analysis Impact from across-the-board changes to our commodity price assumptions % -20% -10% +10% +20% EBITDA -16% -8% 8% 16% Operating cash flow 40% 20% -20% -40%

$mn -20% -10% +10% +20% EBITDA -530 -265 265 530 Operating cash flow 1,281 641 -641 -1,281

Source: Company data, Nomura estimates

Fig. 20: Glencore marketing EBITDA 2010 - 2014E

$mn Metals & Minerals Energy Agriculture Other 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 -500 2010 2011E 2012E 2013E 2014E

Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

M&A: Xstrata merger unlikely for now We would be surprised to see Xstrata’s board recommend a nil-premium merger of equals for as long as Glencore trades on a relative valuation premium. On our estimates, Xstrata and Glencore trade on 2011 P/E multiples of 6.5x and 8.5x, respectively.

Equally, we are sceptical of the view that Glencore would be prepared to pay a significant takeover premium for Xstrata, as Glencore’s M&A history is much more opportunistic (eg, increasing its stake in Katanga during the global financial crisis). In practice, we think that any potential merger between Xstrata and Glencore may be difficult to consummate, for the same reason that Xstrata’s merger proposal to Anglo American was never consummated – one party is perceived as the target and wants a full takeover premium, while the other party is not prepared to pay one. Any potential merger between Xstrata and Glencore may run the risk of diluting the marketing business (12% of combined 2011E EBITDA), to such an extent that the market would simply de-rate the marketing earnings to a mining multiple. If no merger agreement can be reached between the two parties, then we would expect Glencore to eventually sell its stake in Xstrata as we see the current ownership structure as unsustainable. With Glencore now armed with an acquisition currency, we see the potential for increasing tension between the two companies who may end up bidding for the same assets (eg, Drummond Coal’s Colombian operations). Any synergies from a potential merger between Xstrata and Glencore would likely originate from feeding Xstrata’s production volumes through Glencore’s marketing business (as opposed to synergies at the asset level). Glencore is the exclusive marketing agent for Xstrata alloys and takes an advisory fee on Xstrata’s coal exports from Australia and South Africa. Glencore also distributes Xstrata’s nickel, cobalt and ferronickel. The Relationship Agreement regulates the relationship between the two parties, but we think the associated bureaucracy may actually hinder Glencore’s ability to add value. If any potential marketing synergies are very large then we think they could be realised by broadening the scope of current marketing agreements and terminating the Relationship Agreement by selling the stake in Xstrata.

Fig. 21: XTA-GLEN NewCo 2011E attributable EBITDA Glencore's marketing business could potentially be de-rated as part of NewCo

Other 6%

Marketing 12%

Copper 40%

Coal 25%

Zinc 11% Nickel 6%

Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Marketing division Glencore’s marketing business is a supply-chain management business rather than a proprietary commodities trading business. This flow business produces high-quality earnings that are not purely dependent on the direction of commodity prices. Profitability is enhanced through three key arbitrage strategies: geographical (regional price differentials), product (price differentials between grades, and blends, among others) and timing (price differentials across different delivery dates). Glencore’s business model benefits from high barriers to entry, such as its global logistics network, financing and risk management skills, and long-term supplier/customer relationships.

Although Glencore will sometimes take proprietary positions on the direction of commodity prices, we believe that this normally accounts for less than 10% of earnings from the marketing division. However, this percentage is not disclosed by Glencore. Recent press comments suggest a growing interest by politicians and regulators in the influence of commodity price speculators on commodity prices. However, we think this is unlikely to have a large impact on Glencore’s core logistics business. With the possible exception of cobalt, Figure 27 shows that Glencore’s total market shares, which we think are more relevant to global commodity markets than ‘addressable market’ shares, are not particularly dominant. In addition, as we believe Glencore only controls around 16% of its marketing volumes via its own production, we think it would be difficult to prove that Glencore was the price setter in these markets (price is set by supply and demand). However, any proprietary-based earnings may be more at risk from greater regulation, while the potential for greater regulation and disclosure on inventories held in warehouses owned by Glencore and other commodity traders could also reduce the profitability of arbitrage strategies related to time differences (ie, carry trades).

Fig. 22: Commodity value chain Glencore plays a part at every step of the value chain Extraction Marketing/Distribution Consumers

Inputs processed Inland from own production & storage & Shipped Warehouse Delivered to final consumers 3rd party sources logistics

Purchase: $12/MT + Freight: $22/MT + Rent: $4/MT + Freight: $20/MT Sale:$100/MT Profit: $27/MT Insurance/financing over 30 day period:$15/MT

Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Noble-Glencore: a closer comparison We believe that Glencore’s marketing division should trade in line with or at a modest discount to Noble group. This is because of Noble’s greater exposure to agriculture, which tends to be less cyclical, and to Noble’s faster earnings growth, offset to some extent by Glencore’s higher returns on capital employed.

Earnings mix: How much is supply-chain (marketing) versus upstream? The key difference between Noble and Glencore is the break-up of their earnings mix. Glencore’s earnings are mostly driven by its upstream assets (which comprise its stakes in various mines and listed entities such as Xstrata), whereas Noble is still primarily a trader, evolving gradually into an asset manager. We estimate that for FY11, Noble’s mix would be ~17% upstream (ie, asset-based) as compared with Glencore’s 73%. Please note that we are including Noble’s midstream businesses with supply chain as they have an element of processing value addition in them, and as a result earnings from that segment are not significantly correlated to commodity prices.

Fig. 23: Noble: earnings mix Fig. 24: Glencore: earnings mix

Noble Industrial Noble Marketing Glencore Industrial Glencore Marketing

100% 100% 27% 24% 80% 80% 41% 38%

60% 88% 87% 83% 83% 60%

40% 40% 73% 76% 59% 62% 20% 20% 12% 13% 17% 17% 0% 0% FY09 FY10 FY11F FY12F FY09 FY10 FY11F FY12F

Note: Noble does not disclose earnings mix by function; these are based on Source: Company data, Nomura estimates our estimates. Source: Nomura estimates

Fig. 25: Noble marketing: earnings mix Fig. 26: Glencore marketing: earnings mix

$mn Agriculture Energy Metals & Minerals Agriculture Energy Metals & Minerals Other 2,500 4,000

2,000 3,000

1,500 2,000

1,000 1,000

500 0

0 -1,000 FY09 FY10 FY11E FY12E FY09 FY10 FY11E FY12E

Source: Company data, Nomura estimates Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Glencore’s scale and market shares are much larger than Noble’s in metals, energy; Noble dominates agriculture trading Glencore and Noble have three operating segments in common: metals and minerals, energy, and agriculture. (Noble historically reported a fourth logistics segment, which it merged with the other three from 1QFY11.) Glencore offers much greater scale and scope than Noble, with Glencore’s marketing volumes (and market share) for most commodities (except agriculture) materially higher than Noble's.

Fig. 27: Glencore and Noble: relative presence

Glencore Glencore approximate total FY10 volumes (mn mT) Unit Glencore Noble Comment addressable market market share share

Noble is much larger in iron ore, iron related alloys and Metals and minerals mt 20.5 22.1 aluminium. However its presence in other commodities is very small Zinc metal mt 1.7 60% 13% Zinc concentrates mt 2.4 50% 10% Copper metal mt 1.4 50% 7% Copper concentrates mt 1.8 30% 4% Lead metal mt 0.3 45% 3% Lead concentrates mt 0.6 45% 10% Alumina mt 6.7 38% 8% Aluminium mt 3.9 22% 9% Nickel kt 200.0 14% 14% Cobalt kt 18.0 23% 23% Ferrochrome mt 1.5 16% 16%

Noble and Glencore deal in similar commodities, Energy products mt 226 (ex-oil) 85.2 however Noble has much smaller scale.

Oil mbpd 2.5 3% 3% Thermal coal mt 196 28% 4% Met coal mt 30 12% 4%

Noble has a larger presence in oilseeds and sugarcane, but a smaller presence in grains. Noble is - One of the top 5 oilseed crushers in Argentina Agricultural products mt 27.0 23.1 - One of the top 5 sugarcane crushers in Brazil - A large trader of coffee and cocoa - One of the top 5 oilseed crushers in China

Grains mt 19 9% 1% Oils and oilseeds mt 8 4% 1%

Note: Noble’s volumes are not consolidated. Noble does not disclose volumes by commodity. Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Glencore’s supply chain business is much more focused on metals and minerals, in contrast to Noble's growth in agriculture and energy For Glencore, roughly 55% of the total supply chain earnings correspond to the metals and minerals segment, compared with 23% (Nomura estimate) in metals for Noble’s midstream and supply chain earnings combined. Agriculture and energy occupy a much smaller share of earnings for Glencore at 19% and 26%, respectively. Noble’s dominant exposure is agriculture, which accounts for over half of earnings (midstream+supply chain), which is generally less cyclical owing to its relative price inelasticity. This suggests that Glencore’s earnings growth may face greater headwinds as metals prices eventually return to mid-cycle levels.

Fig. 28: Noble 2010 marketing earnings mix Fig. 29: Glencore 2010 marketing earnings mix

Metals & Minerals 23% Agriculture Metals & 26% Minerals Agriculture 55% 54% Energy Energy 23% 19%

Source: Company data, Nomura research Source: Company data, Nomura research

Fig. 30: Glencore marketing summary

$mn 2010 2011E 2012E 2013E 2014E 2015E

Total Revenue 133,977 182,810 206,745 197,635 197,242 190,410 growth % 37% 36% 13% -4% 0% -3%

EBITDA Metals 1,401 1,546 1,572 1,512 1,533 1,543 Energy 470 954 1,133 1,082 1,066 1,007 Agriculture 659 685 646 612 680 721 Other -163 0 0 0 0 0 Total 2,367 3,185 3,351 3,206 3,279 3,271 EBITDA margin % 1.8% 1.7% 1.6% 1.6% 1.7% 1.7%

Total EBIT 2,337 3,175 3,351 3,206 3,279 3,271

Capital employed Metals 9,304 10,103 9,842 9,183 8,972 8,839 Energy 4,522 5,864 6,460 5,994 5,729 5,371 Agriculture 3,958 4,676 4,568 4,471 4,711 4,853 Other 275 0 0 0 0 0 Total 18,059 20,642 20,870 19,648 19,412 19,062 EBIT ROCE 12.9% 15.4% 16.1% 16.3% 16.9% 17.2%

Marketing NPV Summary Metals & Minerals 14,577 Energy 10,369 Agriculture 6,805 Total Marketing 31,751

Source: Company data, Nomura estimates

Nomura | AEJ Glencore May 31, 2011

Industrial division Excluding Xstrata, we estimate an attributable copper equivalent CAGR for Glencore of 7.5% over 2011-2015E compared with an average of 5.2% for the diversified miners. Glencore’s high growth is partly offset by higher geographical risk and a higher cost profile, with average costs mostly in the third quartile of industry cost curves.

Fig. 31: Big 5 copper equivalent organic growth Investing during the downturn gives Glencore organic growth ahead of its peers Glencore boasts the most impressive AAL BHP XTA RIO GLEN Industrial growth profile of the diversified 170 miners.

160 Katanga is expected to expand to 150 308ktpa copper in 2015 from 58ktpa 140 in 2010. The greenfield Mutanda project is set to come online in 2011 130 and ramp up to 103ktpa copper and 23ktpa cobalt by 2012. 120

110 Prodeco is set to ramp up from around 10mtpa thermal coal 100 production in 2010 to 21mtpa by 2010 2011E 2012E 2013E 2014E 2015E 2015.

The Alen and Aseng Guinean oil projects are due to come online in 2014 and 2012, respectively, and achieve peak production of 75kbpd in 2014. Source: Company data, Nomura estimates

Although Glencore’s managed industrial assets offer the best growth profile among the major diversified miners, their relative cost position is less attractive. Glencore’s assets sit mostly in the third quartile of industry cash costs, but the relative positions of copper and coal should improve with the commissioning of Mutanda and the ramp up of Prodeco. The other diversified miners have a much greater concentration of assets in the first and second quartiles. Also, Glencore’s strategy of targeting return on equity means that owning low-cost assets is not as crucial as attaining assets at a cheap valuation to achieve high returns on equity.

Nomura | AEJ Glencore May 31, 2011

Fig. 32: Glencore generic 2011 cost curve position for managed operations Cost curve positions are approximate We estimate the group’s average coal cost to be mid- third quartile, but the division should move down the cost curve as Prodeco ramps up.

Alumina and nickel both reside in the mid third-quartile of industry cash costs

Glencore’s copper assets occupy the fourth quartile of the cost curve, on average, although they have scope to reduce unit costs as production ramps up. Kamoto, Nkana and Mufulira are high-cost mines. Mutanda enjoys significant cobalt by-products that help it achieve a first-quartile position.

Source: Brook Hunt, AME, company data, Nomura estimates

Fig. 33: Glencore industrial EBITDA (attributable) Associates are included on an attributable basis (35% of Xstrata's EBITDA) Metals & Minerals Energy $ mn Agriculture Corporate (inc associates) 14,000

12,000

10,000

8,000

6,000

4,000

2,000

0 2011E 2012E 2013E 2014E 2015E

Source: Company data, Nomura estimates

Nomura | ASIA Fig. 34: Glencore managed industrial operations

$mn Country Stake UnitProduction Growth Capex 2011E Cash costs C1 Quartile Status WACC Attributable NPV Copper 2011 2015 Gross Net Katanga DRC 74% Mined Copper kt 121 308 902 245 c/lb 182 c/lb 4 ramping up 16% 2,583 Glencore Cobalt kt 5 15 Mopani Zambia 73% Mined Copper kt 101 134 635 276 c/lb 241 c/lb 4 ramping up 16% 1,320 Copper Metal kt 236 242 Cobalt kt 2 2 Mutanda DRC 40% Mined Copper kt 41 103 460 260 c/lb 33 c/lb 1 start-up: 2011 16% 706 Cobalt kt 6 23 Cobar Australia 100% Mined Copper kt 63 102 140 135 c/lb 135 c/lb 3 operating 8% 2,518 Pasar Smelting Philippines 78% Copper Metal kt 183 183 n/a n/a operating 12% 88 Zinc Los Quenuales Peru 97% Mined Zinc kt 119 119 0 92 c/lb 37 c/lb 3 operating 11% 423 Mined Lead kt 24 24 AR Zinc Argentina 100% Mined Zinc kt 44 44 0 83 c/lb 54 c/lb 3 operating 11% 347 Mined Lead kt 14 14 Sinchi Wayra Bolivia 100% Mined Zinc kt 103 103 0 80 c/lb 49 c/lb 2 operating 11% 370 Mined Lead kt 8 8 Kazzinc Kazakhistan 94% Mined Zinc kt 260 183 0 n/a n/a 2 operating 12% 7,351* Mined Lead kt 42 34 Mined Copper kt 45 20 Mined Gold koz 620 599 Mined Silver koz 6 3 Portovesme Smelting Italy 100% Zinc Metal kt 108 126 0 n/a n/a operating 8% 117 Lead Metal kt 0 0 Nickel Murrin Murrin Australia 82% Nickel kt 28 39 0 $7.5 /lb $5.9 /lb 3 operating 8% 1,574 Cobalt kt 3 3 Aluminium Columbia Falls United States 100% Aluminium kt idled 8% Sherwin Alumina United States 100% Alumina mt 1.4 1.4 0 $306/t $306/t 3 operating 8% 565 Coal & Coke Prodeco Colombia 100% mt 12 19 1,104 $63/t $63/t 3 ramping up 11% 3,365 Shaduka Coal South Africa 70% mt 13 13 0 $46/t $46/t 2 operating 10% 477 Oil & Gas Aseng & Alen Guinea 24%, 25% kbpd 0 68 705 $12/boe $12/boe n/a start-up: 2012 16% 695 Agriculture Moreno Argentina 100% Sunflower oil mt 1.3 1.3 0 $1,758/t $1,758/t n/a operating 11% 523

Total 23,024 *Management intend to spin out the goldstream of Kazzinc; thus we value it at an average EV / produced gold ounce of Russian gold miners Source: Brook Hunt, AME, company data, Nomura estimates

May 31, 2011 24

Zinc The group’s largest zinc asset is Kazzinc, which operates a fully integrated zinc business in Kazakhstan. Glencore owns 51% of Kazzinc and expects to increase its ownership to 93% with USD2.2bn in cash from the IPO proceeds and USD1bn in issued share capital, for a total consideration of USD3.2bn. Glencore also possesses options to increase its stake to 99.4%. Kazzinc produces around 300ktpa of zinc metal (which includes between 200ktpa and 250ktpa mined zinc production, topped off with purchased concentrate). It also produces around 40ktpa mined lead and around 30ktpa mined copper. Mined gold production is set to increase from around 326koz in 2010 to 636koz in 2014 with the ramp-up of the greenfield Vasilkovskoye gold mine. Management has indicated that it intends to list the goldstream via an IPO (totalling around 800koz refined gold output). Based on a Russian gold producers’ average of EV/produced ounce of USD7,000, the spun-off Altyntau Gold would be valued at around USD5.2bn. This appears to be a positive strategy for the assets, in our view, as gold operations normally fetch a multiple to NPV in the market and tend to be de-rated within a diversified mining structure. Glencore owns and manages four major operations in zinc across South America and Kazakhstan. In South America, Glencore owns 97% of Los Quenuales, which owns and operates the Yauliyacu and Isyacruz zinc mines in Peru. Together, they produce around 120ktpa of zinc, 24ktpa of lead, and around 3.5moz of silver. Glencore also owns Sinchi Wayra, which operates five Bolivian zinc mines that produce around 100ktpa of zinc, 7ktpa of lead and around 2.5moz of silver. Lastly, the group also operates AR Zinc (Aguilar) in Argentina, which produces around 40ktpa of zinc, 14ktpa of lead and around 1moz of silver.

Copper Glencore’s copper operations lie predominantly in the Copperbelt along the border of Zambia and the Democratic Republic of Congo (DRC). The largest and most notable of these is Glencore’s 74.4% owned, publicly-listed subsidiary, Katanga Mining, which is 75% owner of the Kamoto-KOV copper complex (DRC state mining company, Gecamines owns the other 25%). Located in the Katanga province of the DRC, KCC’s copper production is expected to ramp up from 58ktpa in 2010 to more than 300ktpa by 2015. The operation is also expected to delivery cobalt production of 15ktpa by 2015 (from 3ktpa in 2010). The current Katanga Mining was created out of the merger of Nikanor and Katanga Mining, in both of which Glencore held a stake. Also in the DRC, Glencore owns a 40% stake in and is operator of the Mutanda copper- cobalt project. The project will eventually ramp up through several stages to 104ktpa by 2013. Cobalt production will reach 23ktpa by 2013. The adjacent Kansuki deposit is expected to deliver a 100ktpa copper project. Glencore management expects synergies between Kansuki and Mutanda and is expediting the project. Across the Zambian-Congolese border lies Glencore’s third Central African copper investment, Mopani Copper Mines. The group owns 73.1% of the complex, which includes the Nkana and Mufulira mines. Together, the two produce around 100ktpa mined copper and around 2ktpa mined cobalt. Mopani is to deliver total metal production of around 240ktpa through both own mined production and tolled concentrate from Mutanda and Katanga. Lastly, Glencore is 100% owner and operator of the Cobar copper mine in New South Wales, Australia. Cobar produces around 90ktpa copper-in-concentrate. The construction of a hoisting shaft extension (USD139m capex) to increase production by around 30ktpa copper-in-concentrate by 2013 is in the final stages of the feasibility study.

Nickel and alumina Glencore possesses an effective 82% holding in the Murrin Murrin integrated nickel- cobalt operation in Western Australia through a 71% stake in Minara Resources and a 40% ownership in Murrin Murrin (Minara owns the other 60%). The laterite nickel operation utilises high-pressure acid leaching technology for extraction. Murrin Murrin produces around 36ktpa nickel and around 3ktpa cobalt. Murrin Murrin occupies the third quartile of the 2011 Brook Hunt nickel cost curve. Glencore is 100% owner and operator of the Sherwin Alumina refinery located in Corpus Christi, Texas, US. It has refining capacity of 1.6mtpa, but has averaged around 1.3mtpa production since 2008 (average capacity utilisation of around 81%). Sherwin utilises natural gas for power, which has helped contain costs. The refinery occupies the third quartile of the 2011 Brook Hunt alumina cost curve.

Fig. 35: Industrial metals & minerals segment summary Mined production includes by-products $mn 2011E 2012E 2013E 2014E 2015E Consolidated production Copper (kt) 372 391 540 615 679 Cobalt (kt) 16 31 38 46 43 Zinc (kt) 525 471 518 508 448 Lead (kt) 88 97 97 90 79 Gold (koz) 620 542 614 636 599 Silver (koz) 12,634 11,956 11,798 11,564 10,083 Nickel (kt) 28 36 37 38 39 Alumina (kt) 1,400 1,400 1,400 1,400 1,400

Revenue 10,741 12,019 11,647 11,462 11,350

Costs 6,777 7,524 7,373 7,195 7,198

EBITDA 3,964 4,495 4,274 4,268 4,152 Copper 2,222 2,625 2,717 2,886 2,907 Zinc 1,330 1,407 1,152 1,050 909 Nickel 336 375 316 251 256 Aluminium 7688888080 EBITDA margin % 36.9% 37.4% 36.7% 37.2% 36.6%

Depreciation 1,103 1,044 872 716 736

EBIT 2,862 3,451 3,402 3,552 3,416

Capex by operation 1,422 1,074 958 648 734

Capex by type 1,422 1,074 958 648 734 Sustaining 527 554 470 433 505 Expansionary 895 520 488 215 229

Total NPV 16,998 Total attributable NPV 17,963

Source: Brook Hunt, company data, Nomura estimates

Energy Glencore is developing two key organic growth projects in the energy division. The first of these is the brownfield expansion of Prodeco in Colombia. This thermal coal operation is scheduled to expand from 10mtpa in 2010 to 21mtpa by 2015. Glencore exercised its call option on Prodeco from Xstrata in early 2010 after selling it to Xstrata as part of Xstrata’s rights issue in early 2009. Glencore’s second coal asset is Shanduka, located in South Africa, which has production capacity of 13mtpa of thermal coal. Around two-thirds of Shanduka’s production is sold to Eskom and one-third is sold on the seaborne market through Richards Bay Coal Terminal. Glencore’s second major project in the energy division are the Guinean oil blocks Alen (25% ownership) and Aseng (24% ownership). These two operations are due to achieve first oil in 2014 and 2012 respectively, reaching peak production of around 75kbpd in 2014 on a consolidated basis. Glencore also holds interests in a number of exploration blocks in the vicinity of Alen and Aseng.

Fig. 36: Industrial Energy segment summary

$mn 2011E 2012E 2013E 2014E 2015E Consolidated production Coal (kt) 25,480 27,080 28,920 31,270 31,630 Oil & Gas (mboe pa) 0 18 18 21 25

Revenue 2,175 3,397 3,498 3,683 3,163 Coal & Coke 2,175 2,890 3,151 3,285 2,703 Oil & Gas 0 506 347 399 460

Costs 1,388 1,712 1,724 1,809 1,790 Coal & Coke 1,388 1,656 1,671 1,748 1,719 Oil & Gas 0 56 53 61 70

EBITDA 787 1,684 1,774 1,875 1,373 Coal & Coke 787 1,234 1,480 1,537 984 Oil & Gas 0 450 294 338 389 EBITDA margin % 36.2% 49.6% 50.7% 50.9% 43.4%

Depreciation 225 303 311 314 303 Coal & Coke 225 249 257 252 232 Oil & Gas 0 54 54 62 71

EBIT 562 1,381 1,463 1,561 1,070 Coal & Coke 562 985 1,223 1,285 752 Oil & Gas 0 397 240 276 318

Capex by operation 598 395 219 208 158 Coal & Coke 598 278 102 138 135 Oil & Gas 0 118 118 71 24

Capex by type 598 395 219 208 158 Sustaining 34 39 38 55 58 Expansionary 564 356 181 153 100

Total NPV 7,667 Total attributable NPV 7,463

Source: Noble Energy, AME, company data, Nomura estimates

Agriculture Glencore’s main agricultural industrial asset is the Moreno sunflower oil plant. It has annual production capacity of around 1.9mtpa and has average capacity utilisation over the past three years of 66%. Glencore also holds various stakes in wheat and rice mills, farms, and sugar-processing facilities.

Fig. 37: Industrial Agriculture segment summary

$mn 2011E 2012E 2013E 2014E 2015E Revenue 2,382 2,382 2,382 2,382 2,382

EBITDA 96 96 96 96 96 EBITDA margin 4.0% 4.0% 4.0% 4.0% 4.0%

Depreciation 40 40 40 40 40

EBIT 56 56 56 56 56

Capex 20 20 20 20 20

Total NPV 523 Total attributable NPV 523

Source: Company data, Nomura estimates

Glencore financial summary

Fig. 38: Glencore summary sheet

$ mn 2010 2011E 2012E 2013E 2014E 2015E 2016E Commodity prices Zinc ($/tonne) 2,158 2,200 2,200 2,250 2,300 2,100 2,100 Copper ($/tonne) 7,536 11,023 10,582 7,937 7,165 6,614 6,063 Nickel ($/tonne) 21,795 25,000 22,509 21,010 18,739 18,739 18,739 Gold ($troy ounce) 1,225 1,400 1,300 1,150 1,000 950 950 Colombian Thermal Coal FOB ($/t) 75 122 153 153 135 108 85 Industrial - Zinc (inc Altyntau) Mined zinc production (kt) 462 525 471 518 508 448 493 Revenue 2,756 3,323 4,048 3,995 3,733 3,547 3,481 Costs 1,716 1,994 2,641 2,842 2,683 2,638 2,389 EBITDA 1,040 1,330 1,407 1,152 1,050 909 1,091 Industrial - Copper (inc Katanga) Mined copper production (kt) 215 326 361 509 585 660 652 Mined cobalt production (kt) 4 13 28 35 43 40 40 Revenue 3,431 6,114 6,561 6,295 6,448 6,503 5,896 Costs 2,831 3,892 3,936 3,578 3,562 3,597 3,464 EBITDA 600 2,222 2,625 2,717 2,886 2,907 2,432 Industrial - Coal Mined coal production (kt) 19,052 25,480 27,080 28,920 31,270 31,630 33,700 Revenue 1,246 2,175 2,890 3,151 3,285 2,703 2,363 Costs 921 1,388 1,656 1,671 1,748 1,719 1,750 EBITDA 325 787 1,234 1,480 1,537 984 613 Industrial - Other Share of Xstrata EBITDA (as reported) 1,500 3,573 4,402 4,113 3,664 3,476 3,251 Other industrial EBITDA 369 566 1,085 870 840 897 853 Total Industrial EBITDA 3,834 8,479 10,753 10,332 9,978 9,172 8,240

Marketing Revenue 133,977 182,810 206,745 197,635 197,242 190,410 189,786 Growth y-o-y 37% 36% 13% -4% 0% -3% 0% EBITDA 2,367 3,185 3,351 3,206 3,279 3,271 3,314 EBITDA margin 1.8% 1.7% 1.6% 1.6% 1.7% 1.7% 1.7% Capital Employed 18,059 20,642 20,870 19,648 19,412 19,062 18,943 Growth in Capital Employed 12.4% 14.3% 1.1% -5.9% -1.2% -1.8% -0.6% EBIT Return on Capital Employed 12.9% 15.4% 16.1% 16.3% 16.9% 17.2% 17.5%

Glencore Reported EBITDA 6,201 11,664 14,104 13,538 13,256 12,443 11,554 Net Income 3,751 7,340 9,547 9,132 9,052 8,597 8,284 Diluted EPS n/a 1.00 1.30 1.25 1.24 1.17 1.13 Net Debt 29,087 20,234 19,237 14,000 9,319 4,132 -410 Net Debt/EBITDA 4.7x 1.7x 1.4x 1.0x 0.7x 0.3x 0.0x Capex 1,657 2,039 1,489 1,197 876 912 651 Total attributable firm NPV ($mn) 98,255 10% Discounted firm NPV ($mn) 88,429 Net Debt Q4 2010 ($mn) 29,087 Primary issuance ($mn) 7,900 Cost of 42% Kazzinc Stake ($mn) 3,200 NPV of firm 98,255 Less Proforma Net Debt ($mn) 24,387 Marketing 31,751 Convertible debt ($mn) 2,132 Industrial 66,504 NPV of Equity ($mn) 66,174 Xstrata 37,076 NPV per diluted share (GBp) 558 UC Rusal 2,148 Current share price (GBp) 522 Minor listed stakes 1,332 Target Price (GBp) 550 Other industrial 25,949 Target Price (HK$) 70.40

Source: Datastream, company data, Nomura estimates

Xstrata financial summary

Fig. 39: Xstrata summary sheet

$ mn 2010 2011E 2012E 2013E 2014E 2015E 2016E Coal Shipments (Mt) Hard coking coal 8888888 Semi Soft Coking coal 7789999 Export Thermal Coal 54 59 66 81 81 81 81 Domestic Coal 13 14 15 16 16 16 16 Prices ($/tonne) Hard coking coal 206 279 260 230 190 160 160 Semi Soft Coking coal 137 199 186 164 136 114 114 Export Thermal Coal 83 124 159 159 142 114 92 Revenue 7,788 11,830 15,195 17,520 15,421 12,613 10,681 Total Operating Costs 4,727 6,186 6,862 8,035 7,747 7,324 6,989 per Tonne Coking coal 92 107 107 104 99 95 95 Thermal coal 49 56 56 56 54 52 50 EBITDA 3,061 5,644 8,333 9,485 7,674 5,289 3,692 Copper Mined Production (kt) 913 978 1,083 1,204 1,282 1,363 1,545 Copper Price ($/tonne) 7,536 11,023 10,582 7,937 7,165 6,614 6,063 Revenue 14,004 19,426 20,242 15,851 14,637 16,300 16,156 Cost of production 8,952 10,485 10,692 8,851 8,316 8,815 8,731 EBITDA 4,693 8,940 9,537 6,958 6,341 7,595 7,613 Nickel Mined Production (Kt) 61 80 91 121 151 153 157 Nickel Price ($/lb) 9.89 11.34 10.21 9.53 8.50 8.50 8.50 Revenue 2,738 3,212 3,107 3,439 3,606 3,606 3,661 Operating Costs 1,765 1,920 1,919 1,993 2,043 2,051 2,094 EBITDA 973 1,292 1,187 1,447 1,562 1,555 1,566 Other segment EBITDA Zinc 1,327 1,614 1,618 1,343 1,298 1,035 1,028 Ferrochrome 337 810 987 879 775 780 780 Other (2) 308 368 396 422 421 420 Xstrata Consolidated EBITDA 10,386 18,608 22,031 20,509 18,072 16,675 15,100 Net Income 5,152 10,387 12,795 11,956 10,651 10,104 9,449 Diluted EPS 1.74 3.48 4.28 4.00 3.56 3.38 3.16 Net Debt 7,750 3,538 (4,900) (15,494) (25,778) (36,388) (46,370) Net debt/EBITDA 0.7x 0.2x -0.2x -0.8x -1.4x -2.2x -3.1x Capex 6,117 7,041 6,337 4,180 3,447 2,457 2,447 Total attributable firm NPV 93,493 Less net debt 7,750 NPV of equity ($ mn) 85,743 NPV of firm: breakup 93,493 NPV per share (GBp) 1,806 Coal 30,091 Value of growth options (GBp) 440 Copper 41,042 Total NPV per share (Gbp) 2,247 Nickel 7,393 Share Price (GBp) 1,391 Zinc 7,308 Target Price (GBp) 2,200 Other 7,658

Source: Datastream, company data, Nomura estimates

Appendix

Share lockups, indexation, and key management

Fig. 40: Share lockups

Share lockup arrangements Lockup duration Lock up overview on all shares Board and Staggered lockups 5 years executive directors Both sales and hedging transactions prohibited Four year Includes all commodity department heads locked-up 4 years Staggered lockups managers Both sales and hedging transactions prohibited Two years locked-up Staggered lockups 2 years managers Both sales and hedging transactions prohibited Other existing 360 days Both sales and hedging transactions prohibited shareholders Further primary issuance by Glencore prohibited (excluding employee share option programme awards in the ordinary course, issuances of shares with an Glencore 180 days aggregate value of up to $1bn to fund an acquisition, merger or takeover, and other customary carve-outs) Cornerstone 180 days Lockup from admission, subject to certain customary exceptions investors Non-cash consideration to be issued in accordance with planned acquisition of Kazzinc minority 180 days Kazzinc stake (42.3%) investors Lockup duration starting from completion of transaction Convertible Bonds converted into shares after the IPO are restricted from sale until 90 days 90 days bondholders post listing

Source: Company data, Nomura research

Fig. 41: Indexation

Indexation FTSE Fast entry to FTSE 100 and FTSE All-world indices on close of business of first day of unconditional trading Immediately post IPO, Glencore's index investability weighting will be 12% FTSE will consult with market practitioners on the appropriate approach for future weighting changes as the free float increases to more closely reflect the availability of shares Classification under Basic Material industry, Basic Resource super sector, Mining sector and General Mining subsector MSCI Early inclusion into the Large Cap segment of the MSCI Global Standard Indices on an accelerated basis (expected to become effective on 1 June 2011) Foreign Inclusion Factor (index free float weight) will be 12% Global Industry Classification Standard (GICS) is Diversified Metals & Mining STOXX Review for fast-track addition to STOXX 'blue chip' indices at next quarterly review (Sept. 2011) Eligibility for inclusion anticipated after increase in free-float

Source: Company data, Nomura research

Fig. 42: Key management

Glencore Board of Directors and management team Simon Murray Aged 71 Independent Non Executive Chairman of GEMS Executive Chairman Board member of Richemont and Essar Energy Executive Directors Ivan Glasenberg Aged 53 CEO BoD Member since 2002 CEO of Glencore since 2002 27 years with Glencore Steven Kalmin Aged 40 CFO CFO of Glencore since 2005 12 years with Glencore Independent Non Executive Directors Aged 53 Anthony Hayward Former CEO of BP Board member of TNK-BP and partner of AEA Investors Aged 65 Peter Coates 40 years of experience in the resource industry Member of the Boards of Santos and Amalgamated Holdings Aged 48 Leonhard Fischer CEO of RHJ International and former CEO of Wintherthur Member of the Boards of Julius Baer Gruppe, AXA Konzern and Arecon Aged 65 William Macaulay Chairman and CEO of First Reserve Chairman of Dresser-Rand Aged 54 Li Ning Executive Director of Henderson Land Development Company Director of Hong Kong (Ferry) Holdings

Source: Company data, Nomura research

Appendix A-1

Analyst Certification

We, Tanuj Shori, Paul Cliff and Patrick Jones, hereby certify (1) that the views expressed in this Research report accurately reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

Issuer Specific Regulatory Disclosures Mentioned companies

Issuer name Ticker Price Price date Stock rating Sector rating Disclosures Glencore 805 HK 67.40 HKD 30-May-2011 Neutral Not rated 49 Xstrata plc XTA LN 1424 27-May-2011 Buy Bullish

Disclosures required in the U.S. 49 Possible IB related compensation in the next 3 months Nomura Securities International, Inc. and/or its affiliates expects to receive or intends to seek compensation for investment banking services from the company in the next three months.

Previous Rating

Issuer name Previous Rating Date of change Glencore Not rated 30-May-2011 Xstrata plc Rating Suspended 20-Oct-2009

Glencore (805 HK) 67.40 (30-May-2011) Chart Not Available

Valuation Methodology Our HKD70.40 price target is based on SoTP of net present values, discounted back to the last reporting period (FY10). We utilise different WACCs for different segments of the business to account for different geopolitical risks in the various locales (eg different WACCs for Katanga and agricultural marketing). We take a 10% discount from enterprise value to account for the difficulties encountered by companies that derive significant proportions of their value from either non-controlling stakes in other companies (eg Glencore’s interest in Xstrata) and from disparate businesses (production and marketing). Risks that may impede the achievement of the target price Glencore is exposed to commodity price risk, particularly copper, coal, and zinc. It is also exposed to operational and geopolitical risk in both its mining and marketing business. The marketing business is exposed to counterparty risk.

Xstrata plc (XTA LN) 1424 (27-May-2011) Buy (Sector rating: Bullish) Rating and target price chart (three year history)

Date Rating Target price Closing price 09-Jan-2011 2200.00 1500.50 06-Jan-2011 1800.00 1515.00 10-Sep-2010 1700.00 1135.50 02-Mar-2010 1500.00 1098.00 04-Dec-2009 1400.00 1066.00 20-Oct-2009 1300.00 1002.00 20-Oct-2009 BUY 1002.00 23-Jul-2009 SUSPENDED 778.90 28-Apr-2009 770.00 563.50 11-Mar-2009 630.00 346.25 22-Jan-2009 1630.00 408.71 17-Nov-2008 1350.00 496.17 17-Nov-2008 BUY 496.17

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our 2200p target price is based on DCF valuation (WACC=8.5%, terminal growth 0%). We discount back to the latest reporting period (FY 10). The benchmark index for this stock is the FTSE 350 Mining Index. Risks that may impede the achievement of the target price Xstrata is exposed to commodity price risk (especially coal, copper, chrome, nickel and zinc), various operational risks common to all mining companies, and political risks in different parts of the world.

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Explanation of Nomura's equity research rating system for Asian companies under coverage ex Japan published prior to 30 October 2008 STOCKS Stock recommendations are based on absolute valuation upside (downside), which is defined as (Fair Value - Current Price)/Current Price, subject to limited management discretion. In most cases, the Fair Value will equal the analyst's assessment of the current intrinsic fair value of the stock using an appropriate valuation methodology such as Discounted Cash Flow or Multiple analysis etc. However, if the analyst doesn't think the market will revalue the stock over the specified time horizon due to a lack of events or catalysts, then the fair value may differ from the intrinsic fair value. In most cases, therefore, our recommendation is an assessment of the difference between current market price and our estimate of current intrinsic fair value. Recommendations are set with a 6-12 month horizon unless specified otherwise. Accordingly, within this horizon, price volatility may cause the actual upside or downside based on the prevailing market price to differ from the upside or downside implied by the recommendation. A 'Strong buy' recommendation indicates that upside is more than 20%. A 'Buy' recommendation indicates that upside is between 10% and 20%. A 'Neutral' recommendation indicates that upside or downside is less than 10%. A 'Reduce' recommendation indicates that downside is between 10% and 20%. A 'Sell' recommendation indicates that downside is more than 20%.

Target Price A Target Price, if discussed, reflect in part the analyst's estimates for the company's earnings. The achievement of any target price may be impeded by general market and macroeconomic trends, and by other risks related to the company or the market, and may not occur if the company's earnings differ from estimates.

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