TiZir Creation of a vertically integrated player in the mineral sands sector Joint venture between ERAMET and MDL October 26, 2011 Jean-Didier Dujardin - CFO Jean-Michel Fourcade - VP Research Innovation Engineering and Purchasing . Chairman of ETI ALLOYS, ORES AND PEOPLE. TIZIR – JOINING TWO HIGHLY COMPLEMENTARY OPERATIONS ERAMET contributes 100% of its shares in ETI and cash of US$30m to TiZir, and MDL contributes its 90% participation in the Grande Côte Project 50% 50% Republic of Senegal 10% 90% 100% +US$30m of cash Grande Cote (Senegal) ETI (Tyssedal, Norway) Mineral Sands Project Titanium Slag & Iron Plant 20+ year mine life Highly strategic asset – 1 of only 5 such facilities Top quartile on revenue/cost Produces an upgraded titanium Production commences late ‐2013 feedstock from ilmenite At full capacity, will produce: At current capacity 1, produces: - 85 ktpa of zircon - 200 ktpa of titanium ‘slag’ - 575 ktpa of ilmenite - 110 ktpa of high purity pig iron - 16 ktpa of rutile/leucoxene TiZir integrates a Tier 1 mineral sands ore body with a highly strategic titanium feedstock upgrading facility which should produce 7% of global zircon & titanium feedstock Note: 1 A feasibility27/10/2011 study is underway 19:28:24to build a second furnace – JV between ERAMET and MDL – October 2011 1 TRANSACTION AND FINANCING STRUCTURE Eramet and MDL contribute respectively ETI together 50% 50% with US$30m in cash and 90% of Grande Côte to TiZir and get a 50/50 ownership Around US$150m Around US$150m of financing of financing contribution to contribution to TiZir Contribution Contribution TiZir The financing requirement of c. US$520m at Grande of ETI and of 90% of Côte level will be financed as follows: US$30m of cash Grande Côte – US$150m minimum via senior project financing at Grande Côte level US$45m Shareholder loan (= c. 150 x 2 + 30 + 45) in US$m shareholder loan to TiZir – The remaining via a shareholder loan from TiZir financed through: Senegalese government (a) 100% 90% 10% – US$30m cash contribution from Eramet to TiZir Banks – US$45m shareholder loan from Eramet to TiZir – c. US$300m financing contribution from Eramet ETI Grande Côte US$150m minimum of and MDL (c. US$150m each) project finance Ownership Financing flows Asset contribution (a) « Free-carried » (a) Free carried 27/10/2011 19:28:24 – JV between ERAMET and MDL – October 2011 2 CREATING AN INTEGRATED PLAYER IN THE MINERAL SANDS INDUSTRY Joint-venture positioning across the value chain Grande Côte Heavy minerals mining Ilmenite Leucoxene Rutile Zircon ore 54.0% – 58.8% TiO2 66% – 91% TiO2 92% – 96% TiO2 Eramet Titanium & Iron (ETI) Upgrading Upgrading - smelting treatment High purity pig iron TiO 2 slag High grade heavy (co-product) 80% – 85% TiO2 mineral concentrate Titanium (feedstock) Ductile iron (1.6% of steel and iron castings production 2009) Wind mill rotor hub Engine parts and other Mechanical engineering materials & parts … Source : TZMI High purity pig iron applications Titanium applications (2010) Zircon applications (2010) 27/10/2011 19:28:24 – Source: TZMI JV between ERAMET and MDL – October 2011 3 ZIRCON DEMAND – CHINA’S URBANISATION IS THE GROWTH ENGINE ‐‐‐ Ceramics (tiles) is the driver Demand by end use (2010 = 1.4 Mt) Ceramics (55% of consumption) is the major demand driver through urbanisation in developing nations (mainly China) ─ zircon enhances the surface finish – masking the body and imparting brilliant whites and colours to the glaze Specialty chemicals and materials (18% of consumption) is the fastest growing end ‐use sector ─ due to versatility of fused zirconia and zirconia chemicals in many products China is the largest consumer Demand by region (2010 = 1.4 Mt) China accounted for 42% of 2010 consumption – up from 17% in 2000 – equating to 12% CAGR 2000 – 2010 TZMI forecasts demand to grow at 4% CAGR through to 2025 Source: TZMI 27/10/2011 19:28:24 – JV between ERAMET and MDL – October 2011 4 ZIRCON SUPPLY – NEW PROJECTS ARE NEEDED Main suppliers : a concentrated market Historically, zircon supply was often constrained by demand – that was the past 2010 production was 1.3mt and 2011 is forecast at 1.4mt However, TZMI forecasts supply from existing mines to: ─ progressively decline to ~1.0mtpa by 2020 ─ then fall substantially to below 0.5mtpa by 2025 Even with Grande Côte and currently identified projects – new projects will be needed Supply b y producer (2010 = 1.3 Mt) More projects are needed Geographical concentration R CAG and % Dem c. 4 -25: 2010 Existing production Grande Côte Currently identified projects Demand Source: TZMI Forecast supply/demand Supply by region (2010 = 1.3Mt) 27/10/2011 19:28:24 – JV between ERAMET and MDL – October 2011 5 TITANIUM FEEDSTOCKS DEMAND – PIGMENT IS THE DRIVER Pigment is the main driver of titanium consumption 90% of titanium minerals are used to make titanium dioxide (TiO 2) pigment ─ TiO 2 is the absolute white pigment of choice Other 10% used for titanium metal and in welding sector Pigment produces high ‐quality surface finishes in paint, plastics and paper – imparting opacity, brightness and whiteness Europe and Americas currently the main users – China is catching up fast, representing only 21% of pigment demand in (a) First stage in the titanium metal sector (b) Includes the manufacture of welding electrode fluxes and other minor end ‐uses – which mainly consume 2010 rutile and leucoxene Titanium feedstock consumption (2010 = 6.3 M TiO2 units) China has a strong growth potential Pigment is mainly used for paints and coatings 5 Germany 4 Italy Korea 3 US 2 Japan consumption(kg/capita) 2 2 1 Brazil TiO China Vietnam Russia India Indonesia Egypt 0 Ethiopia 100 1 000 10 000 100 000 GDP/capita (US$/capita/year) Source: TZMI JV between ERAMET and MDL – October 2011 6 THE TIO 2 PIGMENT PRODUCERS’ STRUCTURE Pigment producer market share (2010 capacity = 6.0 Mt) Pigment production is dominated by: ─ 7 individual producers with 64% of combined capacity; and ─ China with 22% of capacity across many plants Two distinct processes produce TiO 2 pigment: ─ sulphate process (current market for ETI slag) ─ chloride process (ETI has the know-how to produce slag for this process) Sulphate process Chloride process Major TIO 2 pigment producers ex-China (Mt) 48% of capacity 52% of capacity Sulphuric acid used to dissolve titanium Chlorine gas used to liberate titanium High ‐TiO feedstocks (titanium slag, Ilmenite (low ‐TiO ) main feedstock 2 2 rutile) used Largely dominant in China Dominant in the Americas Dominant in Europe Near ‐zero in China Near ‐zero in Americas Source: TZMI 27/10/2011 19:28:24 – JV between ERAMET and MDL – October 2011 7 TITANIUM FEEDSTOCK SUPPLY – ALSO VERY TIGHT Half of ilmenite is upgraded into Ti slag and synthetic rutile Ilmenite (containing ~45% – 60% TiO 2) accounts for ~90% of titanium feedstock supply ─ however, 50% of TiO 2 is consumed in enriched form (slag or synthetic rutile) Australia, South Africa and Canada account for ~60% of 2010 supply – India and Mozambique are growing sources China needs to import increasing tonnage due to lack of domestic resources (a) Increasing supply deficits are forecast Supply by product New projects are needed The first 4 producers represent 55% of supply GR d CA an .7% Dem c. 3 -25: 2010 Existing production Grande Côte Currently identified projects Demand Source: TZMI Forecast supply/demand Market share of supply (2010 = 6.3 MTiO2 units) (a) Net of ilmenite used to produce titanium slag and synthetic rutile (b) Includes27/10/2011 100% of Richards Bay 19:28:24Minerals – JV between ERAMET and MDL – October 2011 8 SUPPLY DEFICITS HAVE DRAMATICALLY ALTERED PRICING DYNAMICS TZMI forecasts continuing strong price increases for titanium feedstock and zircon over the medium term ─ Supply tightness and increasing competition between consumers to secure feedstock Demand appears inelastic to price New projects generally take at least 7 years from exploration to commissioning – hence widening supply deficits are expected Zircon prices evolution - Zircon Bulk from Australia Ilmenite prices evolution - Sulfate ilmenite from West Australia 2 500 300 250 2 000 200 1 500 150 1 000 US$/t FOB US$/t US$/t FOB US$/t 100 500 50 0 0 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sept-10 Feb-11 Jul-11 Aug-08 Jan-09 Jun-09 Nov-09 Apr-10 Sept-10 Feb-11 Jul-11 Zircon prices could reach US$3,500/t by 2013 according to TZMI Ilmenite prices exited 2010 at ~US$100/t (FOB) and some spot (FOB real 2010) prices have reached c. US$250 – 300/t in H2 2011 27/10/2011 19:28:24 – JV between ERAMET and MDL – October 2011 9 GRANDE CÔTE – A TIER ONE ASSET IN THE MAKING MDL started studying Grande Côte in 2002 History Mining Concession granted in 2007 DFS started in 2009 and concluded in 2010 Concession 25 years extendable 20+ years – potential for significantly longer at lower Mine life cut-off grades 85 ktpa Zircon 575 ktpa Ilmenite Full capacity ─ 400 ktpa 54% TiO2 + 175 ktpa 59% TiO 2 16 ktpa Rutile & Leucoxene 5% royalty Fiscal 10% government production share arrangements 15 year tax free period Capex estimate Estimated at circa US$520m Development in ramp ‐up mode Timing Production commencement late ‐2013 27/10/2011 19:28:24 – JV between ERAMET and MDL – October 2011 10 SENEGAL, WEST AFRICA Senegal French is the official language Stable democracy, location of many foreign embassies and international banks for West African region Small population (13m) World standard mining laws MDL in Senegal MDL is a ASX and TSX listed resource company