brazilian phosphate fertiliser market …/media/files/a/anglo-american-plc...brazilian phosphate...

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

Click View > Header and Footer to add footer text

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...


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


…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


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






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






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...


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






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


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


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


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






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






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

THANK YOU

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