BRAZILIAN PHOSPHATE
FERTILISER MARKET TREND Fertiliser Latino Americano 2013 - Sao Paulo 20-22 January 2013
Ruben Fernandes – CEO, Niobium and Phosphates
2
DISCLAIMER: CERTAIN FORWARD-LOOKING STATEMENTS
Certain statements made in this presentation constitute forward-looking statements. Forward looking statements
are typically identified by the use of forward-looking terminology such as 'believes', 'expects', 'may', 'will',
'could', 'should', 'intends', 'estimates', 'plans', 'assumes' or 'anticipates' or the negative thereof or other
variations thereon or comparable terminology, or by discussions of, e.g. future plans, present or future events,
or strategy that involve risks and uncertainties. Such forward-looking statements are subject to a number of
risks and uncertainties, many of which are beyond the Company's control and all of which are based on the
Company's current beliefs and expectations about future events. Such statements are based on current
expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual
results and performance to differ materially from any expected future results or performance, expressed or
implied, by the forward-looking statement. No assurance can be given that such future results will be achieved;
actual events or results may differ materially as a result of risks and uncertainties facing the Company and its
subsidiaries. The forward-looking statements contained in this presentation speak only as of the date of this
presentation and the Company undertakes no duty to, and will not necessarily, update any of them in light of
new information or future events, except to the extent required by applicable law or regulation.
3
OUR AMBITION IS TO BE THE LEADING GLOBAL MINING
COMPANY, BECOMING THE INVESTMENT, PARTNER AND
EMPLOYER OF CHOICE
Platinum
Diamonds Copper
Nickel
Iron Ore and Manganese
Thermal Coal
Metallurgical Coal Other Mining and Industrial
Anglo American Portfolio
Copebras is now Anglo American’s Phosphates business • We are now officially Anglo American and we continue committed to strengthen our relationship so that we can grow together, always having
safe work and respect for the environment as fundamental values for our development
Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals
Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports
Challenges to Deliver the Projects
Brazilian Market Trends
Anglo American Phosphates
Conclusions
5
KEY MARKET DRIVERS FOR FOOD DEMAND AND BIOFUELS
INDICATE A SHARP EXPANSION OF GLOBAL NEEDS
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986
43
2050 2025 2000 1975 1950
5554445
0
5
10
2010 2011 2012 2013 2014 2015 2016
7
3
7
3 7 3
6
2 6
2
6
2
7
3
World Emerging & devel. econ. Advanced economies
SOURCE: MB Agro; FAO STAT ; IMF World Economic Outlook Sept 2011; AA Phosphates analysis
242221181715
+10%
2017 2016 2015 2014 2013 2012
Population
growth &
urbanization
Economic
growth
Biofuels
production
GDP growth rates
%
Renewable Fuel Standard
Bn gallons
World population
bn
<35
% Urbanisation rate
37 47 58 <60
6
UNDER THIS CONTEXT, BRAZIL IS SEEN
AS A POWERHOUSE AND A KEY STRATEGIC PARTNER...
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Brazil enjoys high national rainfall rates... ... and extensive water resources
Brazil has strong biomass production potential... ... with one of the highest arable land potential
One of world's
highest rainfall
indices
Little or no
water scarcity
Highest biomass
potential 160 14312210917459
China
281
138
India
329
169
Russia
341
220
EU
372
263
USA
444
269
Brazil
453
394
Arable land potential Arable land Arable land
Million hectares
49 51 64 71 61 87
Arable land w/o
Amazonia % Reserves
SOURCE: FAO STAT; FAO SDRN; MB Agro; USDA; AA Phosphates analysis
7
177 189 198
200
69 81 87 93
2011 2013 2015 2017
Brazil Rest of World
800 851 857
873 65
70 72
81
2011 2013 2014 2017
Brazil Rest of World
…WITH MAJOR CROPS IN BRAZIL GROWING CLEARLY
FASTER THAN WORLD PRODUCTION
Sugar production in Brazil
expected to grow four times
faster than world (4% vs 1% p.a.)
Sugar cane production forecast (Mt) Soy (grain) production forecast (Mt)
Soy production in Brazil expected to
grow almost twice as fast as in the
world (5% vs 3% p.a.)
Corn production in Brazil expected
to grow twice as fast as in the
world (4% vs 2% p.a.)
Corn production forecast (Mt)
CAGR (2011-17)
CAGR (2011-17)
CAGR (2011-17) 3% 1% 2% 5% 4% 4%
131 130 132 133
34 38 39 43
2011 2013 2014 2017
Brazil Rest of World
SOURCE: MB Agro
8
… AND SHOULD DRIVE FERTILISER DEMAND UP
40
60
80
100
120
140
160
1992 2001 2010 2019
BrazilE27CanadaAustraliaChinaIndiaUSARussiaUkraine
Index 2004-06 = 100
Brazil CAGR (2000-2019): 4.1%
Brazilian agricultural sector by far fastest
growing in the world and …
SOURCE: ANDA, CONAB
41 41 41 42
4 4 5 5
2011 2013 2015 2017
World
Brazil(12%)
...and expected to increase to 5% p.a. from 2011
to 2017, accounting for 12% of global demand
2%
5.2%
CAGR (2010–2017)
Global and Brazilian fertiliser demand (2010 -2017)
Mt P2O5
Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals
Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports
Challenges to Deliver the Projects
Brazilian Market Trends
Anglo American Phosphates
Conclusions
10
4.3
2013
4.5
3.4
2014
1.8
1.4
3.0
1.4
1.6
1.3
1.7
2.6
1.5
1.5
2017
5.0
3.6
2016
4.9
3.6
2015
4.8
2012
4.0
2.4
2011
3.8
2.0
2010
3.5
2.0
THE POSITIVE SCENARIO IS FOSTERING NEW PHOSPHATES
PROJECTS AIMING TO REDUCE THE CURRENT NATIONAL
GAP WITH IMPORTS
39 37
9% 5%
0
10
20
30
40
Demand Supply
World
Brazil
Mt of P2O5
Brazilian’s share of global
phosphate demand/supply (2009)
Brazil represents 9% of world’s
demand, but only 5% of supply...
...and will due to national undersupply remain a
fertiliser importer
Mt P2O5
CAGR (2010-17): 5,2% 8,8%
Brazilian demand/supply balance
Avg.
Gap
(Mt/y)
Gap (Imports)
SOURCE: IFA, ANDA
Supply Demand
1.5
Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals
Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports
Challenges to Deliver the Projects
Brazilian Market Trends
Anglo American Phosphates
Conclusions
12
HOWEVER, THE CHALLENGES FOR EXPANSION PROJECTS
ARE INCREASING AND GETTING MORE COMPLEX ON OUR
CURRENT ENVIRONMENT
1 Federal Government Broadcast Alerts, 3 October; Canadian Mining Industry Employment and Hiring Forecasts, 2011 2 Deutche Bank, Commodity Online, 16 April 2012
SOURCE: BNDES release 2012; AA Phosphates historic prices; Exame Edição 1031
EPCM – Eng., Procurement and Construction Management
Price Volatility Licensing (Environment)
Capital Restrictions
5
6
12
24
Argentina
USA
Brazil
Denmark
Average months to obtain an
environmental permit:
600
-22%
0
400
+60% 800
Average
MAP
Exame
MAP prices - USD / t
2010 2011 2012
• Strategic divestments and reallocation of capital
• Largest mining companies announcing cuts on
budget for capital expenditures in 2013
• Use of resources from BNDES from mining
sector decreases 45% in 2012 (from Jan to Aug)
• Cost Inflation - averaging roughly 5–7% in the last 10
years
• Workforce shortage - Identifying, attracting and
retaining critical operational and construction skills
remains a top priority for the mining and metal sector
• On Safety
• On Time
• On Budget
Projects to be
delivered:
13
THERE IS AN UPWARD TREND COST IMPACTED BY
UNCONTROLLABLE MACROINDICATORS...
.. and logistics costs are largely representative ... inflation has been directly impacted by the lowest
interest rates that Brazil already praticed ...
.. the unemployment rate declining and the average wage rising sustain the upward trend on workforce cost...
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0
1
2
3
4
2011
1,2%
2,7%
2010
2,1%
3,8%
2009
1,3%
3,2%
2008
1,0%
3,4%
2007
3,0% 3,2%
2006
2,6%
4,0% World
Brazil
0
5
10
2012
5,6%
2011
5,8%
2010
6,6%
2009
7,9%
2008
7,7%
2007
9,1%
2006
9,8%
0
2
4
6
8
2006 2007 2008 2009 2010 2011 2012
5,8% 6,5% 5,9% 4,3%
5,9% 4,5%
3,1%
USA
7,4%
0,8% 1,9%
4,7%
Brazil
10,2%
0,7% 3,2%
6,3%
Warehousing
Inventory
Transportation
Annual Average Real Wage Growth (%)
Inflation (%)
Brazilian Unemployment Rate (%)
Logistics Costs Related to GDP (%)
SOURCE: IBGE - Pesquisa Mensal do Emprego; IPEA - Mercado de Trabalho; BC - Relatório de Inflação; Instituto ILOS
Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals
Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports
Challenges to Deliver the Projects
Brazilian Market Trends
Anglo American Phosphates
Conclusions
15
BRAZIL FERTILISER CONSUMPTION IS GROWING FASTER IN
THE NORTH AND A NEW AGRICULTURAL FRONTIER IS
COMING OUT
1,89
1,85
1,74
1,18
2012
29,42
Sul Centro-Oeste
Sudeste Norte / Nordeste
2003
22,80
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Domestic Fertiliser Consumption (last 10 years)1
Fertiliser Consumption
is spreading amongst
Brazil from South for
new areas to the North
CAGR
(03-12)
Share
2003
2012
11%
15%
28%
28%
33%
32%
27%
25%
5,9% 2,8% 2,1% 1,6%
Fertiliser Consumption - Mt
% on
Sector
Growth
29% 28% 26% 18%
• North Region
presents the highest
growth
• Its participation on
fertiliser demand
have been raising
due to:
- Land and water
availability
- Good weather
conditions
• The challenge is the
infrastructure to leak
grain production
(ports, roads, rails,
etc)
• Centre West is the
biggest region in
terms of fertiliser
consumption
1 ANDA – Associação Nacional para Difusão de Adubos 2 Representing a share of at least 1% of the national market
Fertiliser Consumption
is spreading towards
new areas in the North
PA MA
TO
PI
BA
States with 10-year
Growth (2003-2012)
greater than 50%2
16
TECHNOLOGIES DEVELOPMENT HAS ENABLED BRAZIL TO
HAVE 2 CROPS/YEAR
Mini crop concentrated in Midwest
New technologies and better expertise have been raising the productivity of the mini
crops with the “plantio direto” system
For the first time mini corn crop surpassed normal crop in terms of volume produced
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4.9175.133
4.1633.5403.6433.592
966540
+811%
12/13* 11/12* 10/11
3.641
09/10 08/09 07/08 02/03 94/95
2.069
89/90 79/80
"A safrinha do milho se tornou safrão. Foi surpreendente
e sem dúvida contribuiu de forma decisiva para que
tivéssemos a maior safra de grãos da história do país em
2011/2012”
“The mini corn crop has become a huge crop one. It’s surprising,
we have no doubts that it contributed for the largest grain
harvest of our history in 2011/2012”
Mendes Ribeiro (Agriculture Minister)
2012/13* 37,5
2011/12* 39,1
2010/11 22,5
2008/09 17,3
2006/07 14,8
2004/05 7,7
+92%
Productivity mini corn crops – kg/ha Mini corn crop
production - Mt
% of total
corn crop
22%
29%
34%
52%
39%
4%
5%
26%
65%
Mini Corn Crop 2012 Production by Region
Changing Brazilian scenario,
therefore fertiliser dynamics
SOURCE – CONAB
* Estimation
North/Northeast
Southeast
South
Midwest
54%
17
NPK DISTRIBUTOR SECTOR IS ALSO FACING IMPORTANT
CHANGES
Phosphate Industry Chain
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Blenders Sector Trend
• Market share of regional blenders falling
year by year
• Decrease number of blenders: 100 today
against more than 300 in the beginning
of twenties
• Increasing number of acquisitions and
new entrants
• Producers not going downstream
Mining Operation
Acid Plants Fertilisers
Plants
Integrated
Producers
• Roles on Phosphate Chain are clearer on the past few years
• Blenders performing a crucial role for fertiliser distribution
• Producers are not interested to go downstream
• Blenders being pressured since farmers are more capitalized
and have more bargaining power
SOURCE: AMA; Sales Team Analysis
Blenders Farmers
Non
Integrated
Regional
National
Traders
Producers are Price Takers
(Highly dependant on international market)
Farmers
are more
capitalized
• Blenders continue to be important and
strategic for the Brazilian fertiliser
industry
• Blenders market concentration might
increase in the coming years
Blenders
Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals
Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports
Challenges to Deliver the Projects
Brazilian Market Trends
Anglo American Phosphates
Conclusions
19
Ouvidor – GO
Mine – 1,3 Mt
@P2O5 – 12% in mine
@P2O5 – 36% after
beneficiation
Catalão Site
7 km from the mine
Current Capacity:
- SSP – 600 kt
- MAP/GTSP – 200 kt
- DCP – 100 kt
Cubatão Site
Favourable logistic for
being close to Santos
Port and to meet SP
and MT market
Current Capacity (final
product):
- SSP – 400 kt
- Phosp Acid – 150 kt
- DCP – 60 kt
Cubatão
Catalão
ANGLO AMERICAN PHOSPHATES IS INVESTING TO MEET
FERTILISER DEMAND GROWTH IN BRAZIL
Anglo American Phosphate is very well located to meet
Brazilian Fertiliser demand at a competitive cost...
..and Anglo has also a relevant project to duplicate
the phosphate rock capacity at Catalão site
Main characteristics:
Additional capacities:
- Phosphate Rock – 1,4 Mt
- Phosphoric Acid – 0,5 Mt
- Sulphuric Acid – 1,1Mt
- Fertiliser – 0,7 Mt
Stage: FEL 2
Brownfield Project with low Capex /
additional capacity
In-house knowledge
Long Life of Mine (more than 40
years)
Highest P2O5 content in Brazil
Brazilian Phosphate Fertiliser Demand – Strong and Positive Fundamentals
Brazilian Phosphate Fertiliser Supply – Focusing on Reducing Imports
Challenges to Deliver the Projects
Brazilian Market Trends
Anglo American Phosphates
Conclusions
21
CONCLUSIONS
Agriculture
positive
environment
Brazil plays a
crucial market
role
There are still
challenges on
expanding
Interdependent Fertilizer Value chain
Producers Blenders Farmers
• Value chain integrants need to work together to:
- Overcome the Brazilian challenges
- Support the country to achieve its targets
• Anglo American Phosphates is committed to
efficiency and growth, contributing to the market
expansion
• Expand
production • Distribute
efficiently
• Increase
productivity