Investor Update - Glencore33e323c9-8cb8-4b03... · Investor Update - December 2018 1 Important notice concerning this document including forward looking statements This document contains

Investor Update3 December 2018

Investor Update - December 2018

1

Important notice concerning this document including forward looking statementsThis document contains statements that are, or may be deemed to be, “forward looking statements” which are prospective in nature. These forward looking statements may be identified by the use of forward looking terminology, or the negative thereof such as “outlook”, "plans", "expects" or "does not expect", "is expected", "continues", "assumes", "is subject to", "budget", "scheduled", "estimates", "aims", "forecasts", "risks", "intends", "positioned", "predicts", "anticipates" or "does not anticipate", or "believes", or variations of such words or comparable terminology and phrases or statements that certain actions, events or results "may", "could", "should", “shall”, "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements are not based on historical facts, but rather on current predictions, expectations, beliefs, opinions, plans, objectives, goals, intentions and projections about future events, results of operations, prospects, financial condition and discussions of strategy. By their nature, forward-looking statements involve known and unknown risks and uncertainties, many of which are beyond Glencore’s control. Forward-looking statements are not guarantees of future performance and may and often do differ materially from actual results. Important factors that could cause these uncertainties include, but are not limited to, those disclosed in Glencore’s 2017 Annual Report and 2018 Half-Year Report.For example, our future revenues from our assets, projects or mines will be based, in part, on the market price of the commodity products produced, which may vary significantly from current levels. These may materially affect the timing and feasibility of particular developments. Other factors include (without limitation) the ability to produce and transport products profitably, demand for our products, changes to the assumptions regarding the recoverable value of our tangible and intangible assets, the effect of foreign currency exchange rates on market prices and operating costs, and actions by governmental authorities, such as changes in taxation or regulation, and political uncertainty.Neither Glencore nor any of its associates or directors, officers or advisers, provides any representation, assurance or guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will actually occur. You are cautioned not to place undue reliance on these forward-looking statements which only speak as of the date of this document. Except as required by applicable regulations or by law, Glencore is not under any obligation and Glencore and its affiliates expressly disclaim any intention, obligation or undertaking, to update or revise any forward looking statements, whether as a result of new information, future events or otherwise. This document shall not, under any circumstances, create any implication that there has been no change in the business or affairs of Glencore since the date of this document or that the information contained herein is correct as at any time subsequent to its date.No statement in this document is intended as a profit forecast or a profit estimate and past performance cannot be relied on as a guide to future performance. This document does not constitute or form part of any offer or invitation to sell or issue, or any solicitation of any offer to purchase or subscribe for any securities. The companies in which Glencore plc directly and indirectly has an interest are separate and distinct legal entities. In this document, “Glencore”, “Glencore group” and “Group” are used for convenience only where references are made to Glencore plc and its subsidiaries in general. These collective expressions are used for ease of reference only and do not imply any other relationship between the companies. Likewise, the words “we”, “us” and “our” are also used to refer collectively to members of the Group or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies.

HighlightsIvan Glasenberg - CEO


• Trade/China/Macro fears have impacted financial sentiment◦ Sector reinvestment remains limited, demand is solid, inventories are low and likely to fall further

• Diversified portfolio enabling transition to low carbon economy, while providing access to affordable energy◦ Our copper, nickel and cobalt helps underpin the technologies that enable the looming energy and

mobility transformation◦ Our affordable, premium quality, high-energy thermal coal helps support ongoing economic development in Asia

• Cash generative business model◦ Resilient marketing business and low-cost industrial assets underpin through the cycle free cash flow generation of

$5bn to $10bn(1)

◦ Spot illustrative free cash flow generation of c.$7.5bn from EBITDA of c.$17.1bn(2)

• Capital allocation◦ Confidence in own business prospects and current share trading levels support near-term focus on deleveraging and shareholder

returns/buybacks - $5.2bn of announced distributions/buybacks in 2018◦ 2019 equity cash flows, post base distribution, currently prioritized for buybacks/deleveraging

• Financial policy◦ Commitment to strong BBB/Baa investment grade◦ Targeting a maximum 2x Net debt/Adjusted EBITDA through the cycle, augmented by a Net debt cap of c.$16bn


Highlights 3

Notes: (1) Slide 20 – Illustrative spot free cash flow scenario analysis. (2) See Slide 19 – for assumptions underlying spot illustrative cash flows

Commodity fundamentals still positiveDespite trade/China/Macro fears


4

Policy uncertainty is rising(1) … … and trade/China/Macro fears are impacting sentiment(2)

Global Economic Policy Uncertainty Index

Notes: (1) Bloomberg, Economic Policy Uncertainty Index based on Current Price GDP Weights. Long-term average = 100. (2) Bloomberg

100

120

140

160

180

200

220

240

260

280

300

Feb-16 Oct-16 Jun-17 Feb-18 Oct-18

47

49

51

53

55

57

59

61

Feb-16 Oct-16 Jun-17 Feb-18 Oct-18

Euro-Zone China USA Japan

Manufacturing PMI Index



5

Sector reinvestment remains limited(1) … … demand growth remains solid(2) …

Sector capex ($bn)

1523

37

53

41 44

58

7772

59

42

30 3237 39 37 35 32

13 4 4

4

200

5

200

6

200

7

200

8

200

9

2010

2011

2012

2013

2014

2015

2016

2017

2018

F

2019

F

2020

F

2021

F

2022

F

Notes: (1) Company data, Morgan Stanley Research estimates, Morgan Stanley European Metals and Mining Tracker, 22 November 2018. (2) Company sources for Nickel, Wood Mackenzie Q3 Long-term Outlooks and monthly reports for Copper, Zinc, Lead, Iron Ore, CRU for Aluminium.

0.0%

2.0%

4.0%

6.0%

8.0%

Alu

min

ium

Cop

per

Iron

Ore

Lead

Nic

kel

Ther

mal

Coa

l

Zin

c

2013-2017 CAGR 2018F

Additional 2018 capex

Average: $43bn



6

… and inventories significantly reduced(1)

Global inventories (rebased 100=Jan 2015)

Notes: (1) Inventories comprise various sources including LME, SHFE, Comex , Chinese bonded and non-bonded, Malaysian and Singapore warehouse stocks. (2) Glencore estimates for Nickel, Wood Mackenzie Q3 2018 Long-Term outlook for zinc. Wood Mackenzie November Monthly Outlook for Copper. (3) See Slides 31,32,33 for underlying data.

0

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Dec-15 Jun-16 Dec-16 Jun-17 Dec-17 Jun-18

Days consumptionAverage High Low Today

Copper 17 22 12 12Zinc 13 19 7 7Nickel 110 152 66 66

Copper

Zinc

Nickel

In 2019 continued inventory draw downs are likely(2,3)

What’s the minimum 2019 demand growth needed for inventory draw?

5.4%

2.3%2.7%

7.1%

1.0%

3.1%

-1.0%

0.1%

0.7%

Nickel Zinc Copper

2013

-201

7 CA

GR

Dem

and

2018

F D

eman

d

Minimum demand growth

for continued inventory

draw


7ESG Update

Safety• 12 fatalities from 11 incidents 2018YTD • Fatality reviews undertaken and key focus areas

identified• LTIFR 1.03 increase of 0.8% vs. 2017• TRIFR 3.31 increase of 7.2% vs. 2017

Commitment to transparency • $4.5bn paid in 2017 to governments(2) support the

provision of public services and infrastructure in the countries where we operate

• We publish payments to governments on a project-by-project basis to enable greater transparency

Diversified portfolio enabling transition to low-carbon economy while providing access to affordable energy • Our copper, nickel and cobalt help underpin the

technologies that enable the looming energy and mobility transformation

• We are a major supplier of affordable, premium quality high-energy thermal coal that will help support ongoing economic development in Asia

8.05

5.00

4.35 4.05

3.09 3.31

4.50 4.50

4.704.25 3.94

2013 2014 2015 2016 2017 2018YTD

Glencore ICMM (27 companies)

Total recordable injury frequency rate (per million hours)(1)

Diversified commodity portfolio – 2017 EBITDA(3)

Notes: (1) Lost time incidents (LTIs) are recorded when an employee or contractor is unable to work following an incident. LTIs are recorded when an incident results in lost days from the first rostered day absent after the day of injury. The day of the injury is not included. LTIFR is the total number of LTIs recorded per million working hours. LTIs do not include Restricted Work Injuries (RWI) and fatalities. TRIFR = Total sum of Fatalities, Lost Time Injuries, Restricted Work Injuries and Medical Treatment Injuries per million hours worked. (2) Payments to governments report 2017. (3) 2017 Group EBITDA

Coal

Battery Materials

(Copper, Cobalt, Nickel)Other (Zinc/Lead, Ferroalloys,Oil, Aluminium, Iron Ore, Agri

Maintaining financialstrength and flexibilitySteven Kalmin - CFO



Production updateOverview

9

2018F 2019F 2020F 2021F Δ 2018-2021FCopper – Base(2) kt 1315 ± 15 1255 ± 30 1255 ± 30 1255 ± 30Copper - Katanga guidance(3) kt 150 285 ± 15 285 ± 15 285 ± 15Copper - Group kt 1465 ± 15 1540 ± 45 1540 ± 45 1540 ± 45 +5%

Cobalt - Base(2) 28 ± 2 31 ± 3 31 ± 5 30 ± 5Cobalt - Katanga guidance(3) kt 11 26 ± 2 32 ± 2 38 ± 2Cobalt - Group kt 39 ± 2 57 ± 5 63 ± 7 68 ± 7 +74%

Zinc(4) kt 1090 ± 15 1195 ± 30 1335 ± 30 1395 ± 30 +28%Lead kt 285 ± 5 345 ± 10 390 ± 10 370 ± 10 +30%Nickel kt 126 ± 2 138 ± 5 140 ± 5 138 ± 5 +10%Ferrochrome kt 1600 ± 15 1690 ± 30 1640 ± 30 1640 ± 30 +2%Coal Mt 132 ± 2 145 ± 3 145 ± 3 145 ± 3 +10%Oil – entitlement interest Mbbl 4.6 ± 0.2 6.2 ± 0.2 7.4 ± 0.2 13.0 ± 0.2 +183%

Group guidance – own source(1)

Notes: (1) With the exception of nickel, 2018F production guidance from Third Quarter 2018 Production Report, Page 16. (2) 2019F, 2020F and 2021F copper and cobalt production outlook under review. (3) Katanga Mining Press release, 3 December 2018, “Katanga Mining Announces Commissioning of Phase 2 of the whole ore leach plant and provides an operational update”. (4) Excludes Volcan


Production updateCopper/Cobalt

10

2018F 2019F 2020F 2021F

Copper guidance (kt) – own source(1,2)

1465±15 1540±45 1540±45 1540±45

Key copper changes• Overall net guidance reduction across the outlook period reflects

a slower ramp up at Mopani (c.-20ktpa), the sale of Punitaqui(-8ktpa) and changes to Mutanda

Mutanda• Production profile currently under review (including Cu/Co

scheduling mix) following drilling results that identified faster than expected transition to sulphide ores

• Undertaking analysis to determine the economics of developing the sulphide resource base taking into account anticipated capex/operating costs and regulatory regime including taxes and royalties

• Significant Cu/Co resource: 2017 M&I resources of 379Mt @ 1.36% Cu and 0.5% Co(3), expected to be materially upgraded in 2018 R&R report

Katanga • Guidance reflects an annual ±15kt range around target levels of

300ktpy(4)

• 2019 cobalt production guidance reduced by 8kt to 26kt(4) to reflect cobalt plant ramp up and associated expected shorter-term recoveries

Notes: (1) 2018F production guidance from Third Quarter 2018 Production Report, Page 16. (2) 2019F, 2020F and 2021F copper and cobalt production outlook under review. (3) 2017 Reserves and Resources report. (4) Katanga Mining Press release, 3 December 2018, “Katanga Mining Announces Commissioning of Phase 2 of the whole ore leach plant and provides an operational update”

2018F 2019F 2020F 2021F

Cobalt guidance (kt) – own source(1,2)

39±2

57±563±7

68±7


Production updateKatanga WOL commissioning update

11

Notes: (1) Katanga Mining Press release, 3 December 2018, “Katanga Mining Announces Commissioning of Phase 2 of the whole ore leach plant and provides an operational update”

Copper from WOL Phase 2Hot commissioning of Phase 2 of whole ore leach (WOL) processing facility successfully completed(1)

• Progressive ramp-up of the plant underway with a view to full capacity of the WOL plant by end Q1 2019

Revised production profile – KML Guidance• 2018: 150kt Cu, 11kt Co• 2019: 285kt ± 15kt Cu, 26kt Co ± 2kt Co• 2020: 285kt ± 15kt Cu, 32kt Co ± 2kt Co• 2021: 285kt ± 15kt Cu, 38kt Co ± 2kt Co

Acid plant• Earthworks complete and civil works have commenced• Commissioning expected Q4 2019, first acid Q1 2020

Cobalt exports• Exports temporarily suspended following the appearance of

uranium in the cobalt hydroxide• Long-term solution in the form of an Ion Exchange plant is

being reviewed.• Planning to work with Gécamines to find alternative interim

solutions


Production updateCoal

12

2018F 2019F 2020F 2021F

Australian coking coal Australian semi-soft coalThermal coal (export) Thermal coal (domestic)

Coal guidance (Mt) – own source(2)

132±2

145±3 145±3 145±3

+13Mt

Notes: (1) Investor update presentation, 12 December 2017, slide 17. (2) 2018F production guidance from Third Quarter 2018 Production Report, Page 16.

Key changes:

• 2019: +2Mt, 2020: +3Mt vs previous guidance(1)

Hail Creek• Acquisition completed early August 2018. c.10Mt

predominantly hard coking coal (100%; Glencore 82% interest). Re-design of the mine plan and shift to truck and shovel mining (from dragline operations) expected to generate c.$110M per annum reduction in costs, post restructure

Progress update• HVO – acquisition completed May 2018. c.15Mt saleable

semi-soft and high quality thermal coal (100%; Glencore 49% interest). c.$75M per annum reduction in spend identified to date

• Prodeco – operations normalised from 2019 at c.17-18Mt, following production impact from 2018’s prioritisation of overburden removal


Production updateZinc

13

2018F 2019F 2020F 2021F

Kazzinc Australia North America South America

Zinc guidance (kt) – own source(2,3)

1090±15

1195±30

1335±301395±30

+305kt

Key changes – subject to market conditions:

• 2019: +35kt, 2020: +35kt vs previous guidance(1)

McArthur River• Recent EIS approval allows production of c.300ktpy from

2019 (2017 production of 210kt)

Progress update • Lady Loretta - restart H1 2018, full capacity expected from

2019, with mine life expected to 2023• Zhairem - c.160ktpy contained zinc; first production

expected from 2020, with initial 14 year mine life• Volcan (Peru) – high potential mines in Peru’s premier

mining district. Integration focus to date on safety, mine efficiencies and organizational structure. Long-term focus on creating safe, world class, low-cost, high-margin assets

Notes: (1) Investor update presentation, 12 December 2017, slide 17. (2) 2018F production guidance from Third Quarter 2018 Production Report, Page 16. (3) Excludes Volcan

Key changes:

• 2018 reduction of 6kt reflects timing of own unit feed processing at INO and slightly slower ramp up at KNS

• 2020: 2kt lower reflecting slower ramp at KNS• 2021: slightly lower overall Ni unit production driven by INO

production levels (subsequently recovers)

Koniambo• Operation of both furnace lines in 2018 • Continued progress in site debottlenecking along with

improved metallurgical plant technical capabilities in dual line operation

• Ramp up to full capacity expected by 2021/22 as previously guided

Progress update • INO – Raglan Phase II and Onaping Depth mine extension

projects on track for 2021-2024 completion. Budgeted $1.2bn capex over 2018-2024

• Further upside potential at Norman West and Nickel Rim Depth with Vale


Production updateNickel

14

2018F 2019F 2020F 2021F

INO Koniambo Murrin Murrin

Nickel guidance (kt) – own source(2)

126±2

138±5 140±5 138±5

+12kt

Notes: (1) Investor update presentation, 12 December 2017, slide 17. (2) 2018F production guidance from Third Quarter 2018 Production Report, Page 16.


152019 unit costs/margins

• Robust unit cost / margin outlook(1) for our two largest Industrial businesses – Copper and Coal. Nickel in transition mode with the achievement of “commercial” production at Koniambo

• Copper: 92¢/lb – improvement YoY with benefit of higher cobalt volumes more than offsetting lower by-product pricing/credits for 2019E. Spot FX assumptions for 2019E also supportive

• Zinc: 13¢/lb (36¢/lb ex Au) – higher YoY volumes from Lady Loretta ramp-up more than offset by lower smelter contribution

• Nickel: 368¢/lb – majority of YoY cost increase reflects the addition of Koniambo with expectation of achieving “commercial” production (accounting term, whereby up to now all net costs have been capitalised, which will cease as of 1 January 2019) as well as lower by-product credits and higher costs at Murrin Murrin, in line with 2019 planned maintenance

• Coal: $40/t margin – Modestly higher margin (+$1/t) reflects lower unit costs (the benefit of the Cost Out / Margin Up initiatives that have delivered >$450M of recurring benefits) more than offsetting assumed lower average realised price

Cu costs(1,2) vs price (c/lb)

Ni costs(1,2) vs price (c/lb)

87 87 103 92

221

280 297 282

2016A 2017A 2018E 2019E

265 191 180 368

436 472

595505

2016A 2017A 2018E 2019E

-5 -16-3

1316 10 24

36

95

131 132 120

2016A 2017A 2018E 2019E

Zn costs(1,2) vs price (c/lb)

39 46 52 48

18

3239 40

2016A 2017A 2018E 2019E

Coal costs(1,2) vs margin ($/t)

Ex Au

Margin @ $103/t NEWC

Spot LME

Ex Katanga and Mopani in 2016/2017

Spot LME

Includes Koniambo

Ex Au

Ex Au Ex Au

Notes: (1) Disclosed cost is full cost including all cash costs and credits to allow reconciliation and generation of primary product illustrative EBITDA as per slide 19. See slide 9 for production volumes underlying 2019 full year cost guidance. (2) Spot LME price as at 30 November 2018.

Spot LME

Average c.$0.3bn p.a. uplift over Dec 2017 guidance

• Reinvestment in fast payback/high returning acquisitions/brownfield extension options

Key 2019-2021 capex changes include:

• Collahuasi copper (44%): c.$200M – expected 170ktpd mill expansion, +c.18ktpa copper, >30% IRR

• Alen Gas Equatorial Guinea and Cameroon OAK field development: c.$150M combined – LNG pipeline infrastructure for Alen gas phase, all projects <3yr payback

• Hail Creek coal acquisition: c.$200M capex over the period

• Mt Owen life extension: c.$220M – additional 35Mt coal, first production 2021, >30% IRR. Main expenditure is new fleet in transition away from contract mining (opex will be commensurately lower)

• Integra extension: c.$70M – access to 5 extra coking coal long-wall blocks, >40% IRR

• Asturiana de Zinc new jumbo cell house: c.$40m – higher efficiency/lower operating cost, c.25% IRR

• General inflation: c.$110M p.a. (energy, labour, consumables)


Capex update2019-2021 guidance – Industrial total capex average of c.$4.8bn per annum

16

4.4

4.9

5.0

4.8

4.0

4.7

4.8

2021F

2020F

2019F

2018F

2017 Guidance 2018 Guidance

Industrial total capex ($bn)(1)

2019 +$0.3bn* : Hail Creek, Integra, Alen Gas, Zhairem timing delay

2020 +$0.9bn* : Collahuasi, some oil, Hail Creek, Mt Owen, Integra

*Totals also include various existing project spend / timing differences

048

12

200

6

200

8

2010

pf

2012

pf

2014

2016

2018

F

2020

F

Industrial Capex history ($bn)

Notes: (1) 2017 Guidance from Investor update presentation, 12 December 2017, Slide 11.

Exp capex: $1.4bn

Exp capex: $1.4bn

Exp capex: $1.1bn

Exp capex: $1.0bn


Marketing2018 update

17

Marketing Adjusted EBIT ($bn)Marketing Adjusted EBIT guidance revised to $2.7bn ± $100M(1)

• Previous 2018 guidance expected to be within the top half of the $2.2bn to $3.2bn long-term guidance range

Lowered guidance largely reflects the following second half impacts:• Alumina – basis risk impact relating to long-term % LME linked

legacy sales contracts, being covered from index based alumina sourcing (rallied during the period in excess of the metal proxy % based hedging). The basis risk exposure reduces significantly from 2019

• Cobalt – some customer contractual non-performance amid weaker H2 pricing conditions and marketing impact from the time lag of internal Group purchase commitments (DRC), not perfectly matched back to back with sales activities (illiquid / immature derivative hedging tools available)

Agricultural products – in line with its increasing independence (guarantees now removed), governance and stand alone capital structure, GAL will no longer be proportionately consolidated (at 50%), in favour of retaining its associate accounting treatment. This is expected to reduce reported marketing 2018 EBIT by c.$100M(2); no net earnings impact

2.42.8

2.5

2.9 3.0

1.5

2013 2014 2015 2016 2017 Revised FYguidance

2.6-2.8

Notes: (1) Pre Agricultural Products reporting change, see below and Slide 26. (2) See Slide 26 for pro-forma adjustments to selected 2017 full year and 2018 half-year financials


Marketing2019 guidance

18

Long-term Marketing Adjusted EBIT guidance ($bn)Unchanged long-term guidance range of $2.2-$3.2bn for Marketing Adjusted EBIT• Additional business/volume opportunities from recent M&A

(Hail Creek, HVO, Chevron SA, Alesat) expected to offset the accounting impact on EBIT from discontinuation of proportionate consolidation (50%) of Agricultural Products in favour of associate reporting which recognises Glencore’s lower share of GAL’s net income

2019 Marketing Adjusted EBIT guidance expected to be around the mid-point of the $2.2-$3.2bn long-term range

As consistently commented, performance towards the top end of the long-term range requires the alignment of conditions for many/all commodities that reflect:• Production/volume growth• Tight/tightening physical market conditions• Selective deployment of additional working capital• Higher interest rates

0

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3500

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200

9

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2014

2015

2016

2017

2018

F

2019

+

Long-term guidance

range: $2.2-$3.2bn

H1: $

1.5bn


192019 illustrative “spot” annualised cashflows

Notes: (1) Other industrial EBITDA includes Ferroalloys, Oil and Aluminium less c.$400M corporate SG&A. (2) Marketing Adjusted EBITDA of $2.85bn is calculated from the mid-point of the of the $2.2-$3.2bn EBIT guidance range plus $150M of Marketing D+A. (3) Industrial capex including JV capex plus marketing capex of c.$100M in 2019E. (4) Excludes working capital changes and distributions. (5) Copper spot annualised adjusted EBITDA calculated basis mid-point of 2019 production guidance Slide 9 adjusted for copper produced by other departments. Spot LME price as at 30 November 2018, less 4% discount reflecting payabilities on product mix. Costs include by-products, TC/RCs, freight, royalties and a credit for custom metallurgical EBITDA. (6) Nickel spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 9. Spot LME price as at 30 November 2018. (7) Coal spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 9. Spot NEWC price of $103/t, as at 30 November 2018, less $15/t portfolio mix adjustment and mine costs of $48/t (Slide 15) gives a $40/t margin to be applied across overall forecast group mid-point of production guidance of 145Mt (slide 9). (8) Zinc spot annualised adjusted EBITDA calculated basis mid-point of production guidance Slide 9 adjusted for zinc produced by other departments less adjustment for 85% payability. Spot LME price as at 30 November 2018. Cost includes credit for by-products and custom metallurgical EBITDA

Copper(5) GuidanceTotal copper production (kt) 1540Cu from Zn & Ni departments. (kt) -140Net relevant production (kt) 1400Realised Cu price (c/lb) – 96% LME 271Cost guidance (c/lb) -92Margin ($/lb) 179Margin ($/t) 3950Spot annualised Adj. EBITDA ($M) 5530 Zinc(8) Guidance

Total zinc production (kt) 1195Zn from Cu department (kt) -10585% payability (kt) -164Net relevant production (kt) 927Spot Zn price (c/lb) 120Cost guidance (c/lb) -13Margin ($/lb) 107Margin ($/t) 2368Spot annualised Adj. EBITDA ($M) 2194

Nickel(6) GuidanceProduction (kt) 138.0Spot Ni price (c/lb) 505Cost guidance (c/lb) -368Margin ($/lb) 137Margin ($/t) 3022Spot annualised Adj. EBITDA ($M) 417

Coal(7) GuidanceTotal coal (Mt) 145.0Average Cal19 NEWC price ($/t) 103.0Portfolio mix adjustment @ December 2018 ($/t) -15.0Cost guidance (c/lb) -48.0Margin ($/t) 40.0Spot annualised Adj. EBITDA ($M) 5800

Group $bnCopper EBITDA 5.5Zinc EBITDA 2.2Nickel EBITDA 0.4Coal EBITDA 5.8Other Industrial EBITDA(1) 0.3Marketing EBITDA(2) 2.9Group EBITDA 17.1Cash Taxes, Interest + other -4.5Capex(3) -5.1Illustrative spot free cash flow(4) 7.5


20Illustrative spot free cash flow scenario analysis(1)

Free cash flow through the cycle: c.$5-10bn

Unsustainable

0 2000 4000 6000 8000 10000 12000 14000 16000

Trough$3.6bn

Downside$4.9bn

Spot$7.5bn

Upside$10bn

Supercycle$14.4bn

Through the cycle free cash flow

Notes: (1) See slide 28 for underlying scenario assumptions

$M

2018 Half-Year Results

21Capital allocation

• Our capital allocation framework seeks to balance the preservation of our optimal capital structure, with attractive business reinvestment / growth opportunities and shareholder distributions

• 2018E distributions / buybacks total $5.2 bn• $2.85bn base distribution, looking back at 2017 cash flows• $0.3bn H1 2018 share trust purchases (1)

• $2.0bn cumulative share buyback program

• Confidence in own business prospects and current share trading levels points to near-term focus on deleveraging and shareholder returns / buybacks

• 2019 distribution in respect of 2018 cash flows to reflect the current distribution policy of $1bn of marketing cash flows + a minimum of 25% of Industrial FCF

• Balance of 2019 equity cash flows prioritised for :• Net funding - focus on selective RMI reduction,

consistently targeting levels below $20bn(2); and • Buybacks funded by cash generation

Note: (1) See note 14, page 54, 2018 Half-Year Report. (2) ex Agricultural Products

Distributions / buybacks

M&A +Other

Maintain strong

BBB/Baa

Equity cash flows

Focusing on the long-termIvan Glasenberg - CEO


Investor Update – December 2018

23Our Management structureExperienced management team with a proven track record of value creation

CopperMarketingNico ParaskevasIndustrialMike Ciricillo

ZincMarketingDaniel MatéIndustrialChris Eskdale

AluminiumMarketing & IndustrialRobin ScheinerDavid Streule

FerroalloysMarketingJason KlukRuan Van SchalkwykIndustrialJapie Fullard

NickelMarketingKenny IvesIndustrialMarc Boissonneault

Iron OreMarketing & IndustrialJyothish George

CoalMarketingTor PetersonIndustrialGary Nagle

OilMarketing & IndustrialAlex Beard

AgricultureMarketing & IndustrialChris Mahoney

General CounselShaun Teichner

HRGerda Schwindt

ITDerek WaylandMichael Moore

SustainabilityAnna KrutikovMichael FarbachStephen Eichstaedt

StrategyPaul Smith

IR and CommunicationsMartin Fewings

Risk ManagementCarlos Perezagua

CFOSteven Kalmin

Internal AuditNam Phong Ho

CEOIvan Glasenberg

Board Audit Committee

Our functions structure

• Corporate development• Treasury and trade finance• Accounting• Insurance• Tax• Procurement

• IT• IS

• Sustainable development• HSEC assurance• HSEC risk management

CFOSteven Kalmin

CEOIvan Glasenberg

Head of Industrial Mining AssetsPeter Freyberg

• Legal• Ethics and Compliance

• Diversified portfolio enabling transition to low-carbon economy while providing access to affordable energy ◦ Our copper, nickel and cobalt helps underpin the technologies that enable the looming energy and

mobility transformation◦ Our affordable, premium quality, high-energy thermal coal helps support ongoing economic development in Asia

• Commodity fundamentals still positive◦ Sector reinvestment remains limited, demand is solid, inventories are low and likely to fall further

• Cash generative business model◦ Resilient marketing business and low-cost industrial assets underpin through the cycle free cash flow generation

of $5bn to $10bn(1)

◦ Spot illustrative free cash flow generation of c.$7.5bn from EBITDA of c.$17.1bn(2)

• Confidence in our own business prospects vs current share price levels◦ 2019 equity cash flows, post base distribution, currently prioritized for buybacks/deleveraging


24Focusing on the long-term

Notes: (1) Slide 20 – Illustrative spot free cash flow scenario analysis. (2) See Slide 19 – for assumptions underlying spot illustrative cash flows

Appendix



26New reporting presentation for Agricultural Products

• In line with the continued progression of Glencore Agricultural Limited’s (GAL) independence since its sale in 2016, segmental reporting for GAL will no longer be proportionally consolidated, as of the 2018 financial year

• The results of GAL will be reported consistently with its statutory associate accounting treatment

• GAL is now fully independent of Glencore plc ◦ Previous financial guarantees

have now been removed, governance has developed and stand alone funding secured. Glencore continues to guarantee the one remaining legacy Viterra bond maturing in August 2020

2017 H1 2018

Financial review

Less: Agri50%

Add: Agriassociate

net income AdjustedFinancial

review

Less: Agri50%

Add: Agriassociate

net income AdjustedAdjusted EBITDA 14,762 (316) 99 14,545 8,270 (109) 19 8,180 D&A (6,210) 124 - (6,086) (3,151) 62 - (3,089)Adjusted EBIT 8,552 (192) 99 8,459 5,119 (47) 19 5,091

Net finance and income tax expense in respect of material associates and JVs (591) 67 - (524) (281) 37 - (244)

Net finance costs (1,451) - - (1,451) 746) - - (746)Income tax expense (1,572) 25 - (1,547) (932) 28 - (904)

Non-controlling interests 570 1 - 571 133 1 - 134

Income attributable to equity holders of the parent pre-significant items 5,508 (99) 99 5,508 3,293 19 19 3,331

Significant items 269 - - 269 (517) - - (517)

Income attributable to equity holders of the parent 5,777 (99) 99 5,777 2,776 19 19 2,814

Non-current borrowings 24,259 (282) - 23,977 23,839 (271) - 23,568 Current borrowings 10,875 (1,636) - 9,239 10,402 (1,666) - 8,736 Total borrowings 35,134 (1,918) - 33,216 34,241 (1,937) - 32,304 Less: cash and cash equivalents (2,236) 73 - (2,163) (2,347) 76 - (2,271)Net funding 32,898 (1,845) - 31,053 31,894 (1,861) - 30,033 Less: RMI (22,225) 1,388 - (20,837) (22,897) 1,606 - (21,291)Net debt 10,673 (457) - 10,216 8,997 (255) - 8,742 Net debt:Adjusted EBITDA 0.72 1.45 0.70 1.09 2.34 1.07


272019 Key EBITDA sensitivities

Approximate estimated impact on FY2019 EBITDA given a change of: $M$100/t on copper price 140

$10/t on NEWC thermal coal price 480

$10/t on coking coal (HCC) price 60

$100/t on zinc price 130

$1000/t on nickel price 140

$1/lb on realized cobalt price 100

Australian (1c AUD/USD) operations 50

South African (1 ZAR/USD) operations 130

Chile (10 CLP/USD) operations 10

Canadian (1c CAD/USD) operations 10


28Illustrative spot free cash flow scenario analysisScenario assumptions

Trough (Q1 2016)

Downside (FY 2016 ave.) Spot Upside Supercycle

EBITDA $bn 9.0 11.1 17.1 21.7 29.0

Free cash flow $bn 3.6 4.9 7.5 10.0 14.4

Copper $/t 4678 4867 6227 7000 10000

Zinc $/t 1686 2094 2655 3250 3750

Nickel $/t 8548 9606 11135 15000 25000

Cobalt (realised) $/lb 7.3 8.1 18.9 24.5 31.5

Thermal Coal (NEWC) $/t 51 65 103 120 140

AUD 1.38 1.34 1.37 1.37 1.35

ZAR 15.8 14.7 13.9 13.9 13.0

CAD 1.37 1.32 1.33 1.33 1.30

Total capex $bn 3.6 3.6 5.1 5.6 6.1


29Listed entity market valuations and selection of other entities

Listed entities % owned Market value $MRussneft 25.0% 587Volcan 23.3%(1) 515Century 47.4% 374Rusal 8.8% 371Rosneft 0.6% 380Yancoal 6.8% 215Other(2) Various 333Total 2744

Selection of other entities

US oil infrastructure

BaseCore (50% owned royalty company)

American Zinc Recycling (10% owned)

Notes: Market values as at November 29 2018 (1) Economic interest – assumes no additional value to reflect majority holding in A shares. (2) Other includes Trevali Mining, Polymet, Recyclex, Aurelia Metals, Oz Minerals, Paranapanema and Merafe

$2bn announced buy backs

• 358,442,002 shares purchased to date for $1.45bn(1)

• Completion of the balance of program can run until close of dealings on 20 February 2019

Shares eligible for distribution (thousand shares):


30Buy back updateShares eligible for distribution

Shares eligible for distribution (million shares)

Issued share capital(2) 14,586,200 Less Treasury shares (@30 November)(1) 519,901 Less Trust shares(2) 170,647 Shares eligible for distributions 13,895,652

12800

13300

13800

14300

FY14 H115 FY15 H116 FY16 H117 FY17 H118 12/18

Issued share capital

Shares eligible for distribution – issued share

capital less treasury and trust shares

Notes: (1)As at 30 November 2018, http://www.glencore.com/investors/shareholder-centre/Share-buy-backs. (2) Note 15, Page 160 Annual Report 2017

http://www.glencore.com/investors/shareholder-centre/Share-buy-backs

2016 2017 2018F 2019F 2020F

SupplyDemand

Commodity fundamentals: our key commodities have capacity to buffer a demand slow-down


31

Copper: demand growth has been resilient…Copper demand (kt)(1) Copper supply vs. demand scenarios (kt)(2)

… and inventory drawdowns persist in a slow-down

2013 2014 2015 2016 2017 2018F

2013-2017 CAGR +2.7%

+3.1% 2013-2017 CAGR demand

0.7% demand

Inventory draw down

2018-2020 supply:

+1.5% CAGR

+1.1% supply growth YoY in 2019

Notes: (1) Source: Wood Mackenzie (2) Source: Wood Mackenzie, adjusted for new Company guidance

2016 2017 2018F 2019F 2020F

SupplyDemand



32

Nickel demand growth has been strong …Nickel demand (kt)(1) Nickel supply vs. demand (kt)(1)

… inventory drawdowns likely to persist in a slow-down, even allowing for strong supply scenarios

2013 2014 2015 2016 2017 2018F

2013-2017 CAGR demand

-1.0% demand

2018-2020 supply:+6.5% CAGR

+7.8% supply growth YoY in

2019

Inventory draw down

2013-2017 CAGR +5.4%

+7.1%

Notes: (1) Source: Glencore

2013 2014 2015 2016 2017 2018F 2016 2017 2018F 2019F 2020F

Supply

Demand



33

Zinc demand growth has been resilient (kt)(1) …Zinc supply vs. demand (kt)(1)

… inventory drawdowns are likely even with the potential of significant supply growth

Inventory draw down

2018-2020 supply:

+5.7% CAGR

+8.6% supply growth YoY

in 2019

2013-2017 CAGR demand

0.1% demand

2013-2017 CAGR +2.3%

+1.0%

Notes: (1) Source: Wood Mackenzie

Zinc demand (kt)(1)

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Investor Update - Glencore33e323c9-8cb8-4b03... · Investor Update - December 2018 1 Important notice concerning this document including forward looking statements This document contains