rodrigo franklin - samarco mineração - megatrends for the iron ore market, positioning samarco to...
DESCRIPTION
The Americas Iron Ore Conference is one of the most respected annual gatherings for North and South American iron ore markets and the agenda covers: iron ore industry and market developments; new project developments and expansions in North and South America; overview of steel demand; iron ore spot market price; infrastructure and transport challenges and investment opportunities. For more information please visit: http://bit.ly/1vlo1DDTRANSCRIPT
November 11, 2014
Americas Iron Ore Conference
Rio de Janeiro
Rodrigo Franklin Samarco Mineração SA.
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
Samarco
SAMARCO IS A BRAZILIAN IRON ORE COMPANY
THAT SERVES LOCAL SOCIETY AND THE WORLD
STEEL INDUSTRY.
Started operation in 1977;
A pioneer in transferring low grade ore
reserves into premium pellets for the World
Steel Industry;
Second largest supplier of iron ore pellets on
the seaborne market (2013);
Private company, controlled in equal parts by
two shareholders: Vale S.A. and BHP Billiton.
Samarco – Key Numbers
2013 2012
2,899 2,517
3,492 3,443
21.1 21.3
3,333 3,366
1. MINE
2. CRUSHING AND SCREENING3. SURGE PILE4. GRINDING / DESLIMING / FLOTATION5. BLENDING TANK AND PUMPING TANKS6. DAM7. PIPELINES TO UBU
Samarco - Production Process Germano
VS2: El. 381 m
VS4: El. 381 m
VS6: EL 381 m
250
500
750
1000
1250
1500
1750
2000
2250
2500
0 50 100 150 200 250 300 350 400
Alt
itu
de
[m
]
Distance from Mine [Km]
Max El. 1.180 m
Terminal
PS1: El. 1.011 m
PS4: El. 968 m
PS6: EL. 1.108 m
VS1: El. 803 m
VS3: El. 803 m
VS5: EL 803 m PS2: El. 814 m
PS5: El. 818 m
PS7: EL 867 m
Samarco - Profile Pipelines
PS = Pump Station, VS = Valve Station
8. THICKENER AND BLENDING TANK 9. FILTRATION 10. INDUSTRIAL WASTEWATER
TREATMENT PLANT 11. ROLLER PRESS 12. MIX PLANT 13. PELLET PLANT 14. ELECTROSTATIC PRECIPITATORS 15. INDURATION FURNACE 16. CLASSYIFING SCREEN 17. STOCKPILE YARD/WIND FENCE 18. PORT
Samarco - Production Process Ubu
Samarco - Geography
Samarco - Sales Distribution Pellets 2013
MENA 30%
Europe 19% China 15%
Americas 14%
Other Asia 22%
Source: Samarco Business Intelligence Area
Samarco - Business Sustainability
Code of conduct Compliance policies Customer relationship management
Community relationship policies Project Best Practice – IPA Institute
71,9
0,7*
2011 2013
71,6
0,7*
P4P –Results Reputation
Global mining industry for general public
in 2013
65,0
•REFERENCE: Excellent:Above 80 Strong 70 – 79 Average 60 – 69 Weak 40 – 59 Poor < 39 •Samarco General count: 2013 = 1930 | 2011 = 1670 •*SIGNIFICANT DIFFERENCE: Pulse index
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
P4P – Project Scope
Increase the pellet production capacity by 37%, via a new:
Concentrator # 3
9.5 Mdmt/year
Pipeline # 3
20 Mdmt/year
Pellet Plant # 4
8.25 Mdmt/year
15
Retaining Samarco's good Safety Performance;
Relationship Communities (860,000 people) and landowners (1,284);
Union relationship – 104 days of stoppage due to 21 strikes;
Social Political Demonstrations (World Cup);
Lack of skilled workforce;
Cost of labor and equipment increasing more than inflation;
P4P - Special Challenges
CHALLENGES
P4P – Cost of Labour for Projects
P4P – Skill Level Workforce
Society:
330 million USD paid in taxes;
140 million USD invested in environmental protection;
5 million USD voluntarily invested in communities.
P4P – Results Timeline and Capex
Target Actual
Schedule (months) 33 35
Capex (x 1,000 USD) 3,265 3,178
P4P – Results Safety
Incident Classification Target Actual Industry Average
Fatality 0 0 6
Recordable (per 1 mln wh) 3.85 1.06 3.65
Restricted or Transfer of Duty (per 1 mln wh)
0.30 0.15 1.40
13,000 workers during peak of construction;
65 million working hours
P4P – Germano Concentrator #3
P4P – Pipeline Pump and Valve Stations
P4P CHALLENGES AND RESULTS
Pipe Line
P4P – Ubu Pellet Plant #4
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
• The growth of the steel industry will continue to be led by emerging economies (BRICS) despite the recent
recovery in developed countries.
• The construction sector will remain the main driver of steel consumption in emerging countries (51.2% of
steel consumption).
Steel Demand Mega Trends
Steel demand will increase driven by long-term macro-economic mega-trends) …
Steel Demand Mega Trends
Steel demand will increase driven by long-term macro-economic mega-trends…
Urbanization
Steel Demand
• There are currently ~660 million people living in Chinese urban areas (~50%) and another ~200million are expected to migrate to urban spaces by 2030.
• India’s average economic growth is expected to reach 7.2 percent per year over the period 2012 to2025
• After a decade of considerable growth a installed steel stock will be created in the form of buildings,bridges, pipelines, railroads, etc. requiring constant maintenance or full replacement which willprovide a solid base for steel demand in the years ahead.
• Chinese growth will be slower but not lower with positive long-term repercussions for iron oredemand growth and prices.
• Construction and machinery will account for the vast majority of the steel demand growth while theautomotive sector will also grow at an increased speed.
• Developed countries will continue requiring maintenance or full replacement of their existingbuildings, bridges, pipelines, railroads which will require a considerable amount of steel in thecoming years.
Industry Mega Trends
Raw Material Quality deterioration
Quality Deterioration
Environmental Concerns
• Between 2014-2016 the most of the seaborne supply growth will be in low and medium grades.
• Decreasing quality of mining reserves impacts availability of high grade pellets and scarcity of prime-grade scrap supports the use of DRI.
• The deterioration of quality should increase the price difference between the ores of different levelsof Fe or other chemical and physical parameters.
Availability of Scrap
• Pollution controls: Governments have been putting pressure on the steel industry to reduceemissions: China (SOx & NOx).
• Reduced sinter use: closure of outdated / inefficient capacity including sinter plants.
• Mining bans in India will turn it to iron ore importer
• In China, given the maturity of steel production in the country, generating local scrap not presentsubstantial increase to the point of affecting the international market in the medium and long term.
• China should not become a major exporter of scrap in the next 10 to 15 years, but its domesticconsumption for scrap may intensify which may bring a negative impact on the demand for iron orein the medium and long term.
• Despite the tendency of higher scrap availability worldwide the quality of this material has beendeteriorating over time.
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
Iron Ore – Mega Trends (Samarco View)
Samarco Position to meet expected Demand
P4P Update
Presentation Outline
Samarco
Samarco - Sales Evolution (wmt)
5,4 6,1
4,9 5,2 5,8 6 6,1 5,8
9,5 10,5
12,7
9,5
12,3
13,7 14,1 14,1 14,1 14,5
16,6 17,1
21,8 22,1 21,8 21,5
3,2 2,7 2,6 2,8 3,5 3,5
4,1 3,8
2,2 1,9 2 2 2,5 2,7 2,2 1,4 1,9 1,9
0,7 1,8 1,3 0,9 1,0 0,7
0
5
10
15
20
25
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
pellets Fines
20
14
25.0
30.0
20
15
Source: Samarco Business Intelligence Area
1997 2008 2014
92 USD/dmt pellet* 271 USD/dmt pellet*
P2P
Strategy
Asset optimization
SCOPE
Concentrator revamp
New Pelletizing
Stockyard revamp
P3P
Strategy
Customers’ needs
SCOPE
New Concentrator
New Pipeline limited
New Pelletizing
Stocking and loading
system revamp
P4P
Strategy
Customers’ needs and
Reserve increase
SCOPE
New Concentrator
New Pipeline spare
capacity
New Pelletizing
Stocking and loading
system revamp
352 USD/dmt pellet*
Time Line – Samarco’s Past Investments
* Values updated in May/2014
Time Line – Premium Quality Evolution
Fe %
Delivered Direct Reduction Pellets Quality Delivered Blast Furnace Pellets Quality
Main developments: • Reserve increasing • % Fe decreasing • Iron ore getting coarser and
harder
Results: • Process developments, R&D
and Investments have allowed Samarco to keep delivering the same high quality products since 1977
Source: Samarco Production Area
35
Idle Pipeline Capacity after the P4P and offers opportunity for further expansion
Future – Maximum Capacity Project (PMC)
2020
30.9
10.3
8.3
12.3
2019
29.4
10.3
7.7
11.4
2018
30.2
10.5
8.2
11.5
2017
29.9
9.4
8.0
12.5
2016
30.6
10.4
8.2
12.0
2015
32.2
10.5
8.5
13.2
2014
32.2
10.4
8.9
12.9
Conc. 3 Conc. 2 Conc.1
36.5
20.0
0.0
16.5
2019
36.5
20.0
0.0
16.5
2018
36.5
20.0
0.0
16.5
2017
36.5
20.0
2020
0.0
16.5
2016
36.5
20.0
0.0
16.5
2015
36.5
20.0
0.0
16.5
2014
36.5
20.0
0.0
16.5
8.3
8.2
2020
28.6
8.2
7.5
4.6
2019
29.4
8.3
7.5
5.4
2018
29.4
8.3
8.2
7.5
5.4
2017
28.2
8.3
8.2
7.5
4.2
2016
30.4
8.3
8.2
7.4
6.5
2015
29.6
8.2
8.2
7.2
6.0
2014
28.9
7.1
8.2
7.1
6.5
Plant 4 Plant 3 Plant 2 Plant 1 Pipeline 3 Pipeline 2 Pipeline 1
Detailed chain
Concentrator I
Concentrator II
Concentrator III Pipeline III
Plant I
Plant II
Plant III
Plant IV
Pipeline I
Pipeline II
Mine Concentration Pipeline Pelletizing Shipping
Standby
8.5 Mtpy
Concentration - estimated capacity Million dmt
Pipeline – installed capacity in use Million dmt
Pelletizing – installed capacity in use Million dmt
PIER I
33.5 Mtpy
45.0 Mtpy
Future – PMC Phases 1 and 2
P4P
Strategy
Customers’ needs and
Reserve increase
SCOPE
New Concentrator
New Pipeline spare
capacity
New Pelletizing
Stocking and loading
system revamp
1997 2008 2014
PMC (1 and 2)
Strategy
Debottleneck and Asset
Optimization of
Germano
Customers’ needs?
SCOPE
New Concentrator
New Filtering area
Stocking and loading
system revamp
2018 and ?
P2P
Strategy
Asset optimization
SCOPE
Concentrator revamp
New Pelletizing
Stockyard revamp
P3P
Strategy
Customers’ needs
SCOPE
New Concentrator
New Pipeline limited
New Pelletizing
Stocking and loading
system revamp