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SYDNEY MINING CLUB PRESENTATION “The voice of the Customer”. MARK CUTIFANI, Managing Director SONS OF GWALIA LTD 6 September 2001. AGENDA. Introduction Business context Tantalum - A case study Sons of Gwalia - Strategic directions Summary - Portfolio position. GOLD Core business
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SYDNEY MINING CLUBPRESENTATION“The voice of the Customer” MARK CUTIFANI, Managing Director SONS OF GWALIA LTD 6 September 2001
AGENDA • Introduction • Business context • Tantalum - A case study • Sons of Gwalia - Strategic directions • Summary - Portfolio position
GOLD Core business Profitable, Significant ADVANCED MINERALS Core business Profitable, Significant Growth SONS OF GWALIA LTD - AN AUSTRALIAN MINER MINERAL SANDS Low risk opportunity
WA SONS OF GWALIA OPERATIONS Gold Advanced Minerals Port Hedland Wodgina Laverton Region Leonora Region Kalgoorlie Southern Cross Region Perth Murray Basin JV Greenbushes
Profit after tax & before abnormals FOCUS ON RESULTS EPS (cents) Profit A$ million
MAJOR GOLD COMPANIES - 2000 ROIC Sons of Gwalia - 24% Source: Merrill Lynch, May 2001
RELATIVE PERFORMANCE Sons of Gwalia
BUSINESS CONTEXT • Changing the rules • Implications of change • Tantalum - A case study
BUSINESS CONTEXT - A CHANGING WORLD • Information and Communication • Faster / Higher - Focus on performance • Life cycle costs • Technology obsolescence • Environment - Energy efficiency THE CUSTOMER IS LOOKING FOR NEW SOLUTIONS TO OLD PROBLEMS
BUSINESS CONTEXT - IMPLICATIONS • A new world - Looking for new solutions • Material Sciences - Identifying possibilities • Light Metals - The new wave • Base Metals - Future position? HOW DOES THE MINERALS INDUSTRY MEET THESE CHALLENGES?
TANTALUM - A CASE STUDY • Properties - A competitive edge • Applications - An emerging position • Market Growth - What can we see • Gwalia’s response to the customer
WHAT IS TANTALUM? • Grey-blue metal • Soft, ductile • High melting (2,997ºC) and boiling points (5,425 ºC) • Low co-efficient of thermal expansion • Excellent capacity to store and release electrical charge • Exceptional resistance to corrosion
TANTALUM APPLICATIONS • Electronics • PCs, Palm Pilots • Video Cameras, Sony Playstations • Automotive electronics • Telecommunications • Mobile Phones • Base Stations • Alloys • Turbine blades in powerstations • Aerospace
CHEMICALS 6% METAL CUTTING 8% SUPER ALLOYS 10% MILL PRODUCTS 15% ELECTRONICS 61% TANTALUM USAGE - 2000 TANTALUM DEMAND - 2000 5 million lbs Tantalum 6.3 million lbs Ta2O5
Historical tantalum demand TANTALUM DEMAND GROWTH Forecast @ 8%pa
OTHER- 12% BRAZIL - 5% CANADA - 8% GLOBAL TANTALUM RESERVE BASE - 2001 Sons of Gwalia - 75% Source: US Geological Survey - January 2001
MAJOR TANTALUM MINES POST EXPANSIONS Canada Brazil China Ethiopia China Brazil
TANTALUM - ORGANIC GROWTH • Dominant Resource position • Regional positions / Established infrastructure • Low cost production • Take or Pay Contracts • Growth profile • Revenues protected • Multiple options for growth FOCUS ON STABILISING THE MARKET AND DELIVERING VALUE TO OUR CUSTOMERS
MANAGING THE MARKET • Customer needs • Value Chain • Supply Chain Integration • Product Research • Promotion
STRATEGIC DEVELOPMENT • Business model • Core skills • Core values • Objectives • Portfolio assessment
STRATEGIC DIRECTIONS - BUSINESS MODEL • Commodity - Growth potential - Resource positions • Capital Intensity - Establishment - Risk profile • Margin Potential - Cost structures - Revenue risks DOES THE INDUSTRY STRUCTURE GIVE AN OPPORTUNITY TO MANAGE RETURNS?
SONS OF GWALIA - CORE SKILLS • Geology - Regional exploration - Working-over ground • Mining - Low Capital intensity - No frills • Process - “Breakers” and “Shakers” - Infrastructure hubs UNDERSTANDING OUR SKILLS BASE KEEPS US FOCUSSED ON WHERE WE CAN ADD VALUE
STRATEGIC DEVELOPMENT OBJECTIVES GOLD - Secure production base - Improve quality of returns - Establish industry relevant position TANTALUM - Secure resource position - Establish critical mass and low cost growth platform - Increase market penetration MINERAL - Establish Resource base SANDS- Establish product quality and market potential - Promote Murray Basin brand POSITION FOR EXCEPTIONAL RETURNS AND PROFITABLE GROWTH
GOLD - A CORE BUSINESS • Profitable, high cash flow business • Underwrite revenue through hedging • Focus on capital efficiency & total returns • Infrastructure hub • Flexible ore sources • Rationalise to reduce costs • 3 strategic regions • Leonora • Southern Cross • Laverton
PACMIN BID - RATIONALE • Strengthen Regional Positions • Secures Production / Cost Base • Enables more Effective Capital allocation • Improves Industry Gold Position • Strengthens Balance Sheet / Cash Flows EARNINGS ACCRETIVE WHILE STRENGTHEN BASE TO MANAGE PROFITABLE GROWTH
‘000LBS TANTALUM PRODUCTION & SALES Forecast GROWTH SECURED BY CONTRACTED TAKE OR PAY SALES
MURRAY BASIN TITANIUM • First mineral sands producer • Commissioned March 01 • Sales contracts in place • First shipments June 01 • Production: • 30,000tpa rutile • 10,000tpa zircon • 30,000tpa ilmenite • Total Resources: 15.4Mt HMC • 156% increase in Resourcesin 12 months • Excellent exploration potential
MURRAY BASIN 2002 BUSINESS OBJECTIVES • Ramp production to full capacity • Establish Murray Basin Titanium Brand • Rutile • Zircon • Consolidate Resource base to underwrite Stage II potential • Confirm ilmenite processing & market quality POSITION FOR NEXT DEVELOPMENT PHASE
SONS OF GWALIA - OPPORTUNITIES • TITANIUM - The third wave? • LITHIUM - The fourth wave? • OTHER - New technologies - New applications FOCUS ON CUSTOMER NEEDS WILL PLAY A SIGNIFICANT PART IN DIRECTING OUR FUTURE DEVELOPMENT
SONS OF GWALIA - ASSET PORTFOLIO • GOLD - Long-term sustainable profits • TANTALUM - Growth profile • MINERAL SANDS - Seeding an Opportunity • OPPORTUNITIES - Identifying strategic fit PORTFOLIO STRUCTURED TO DELIVER RETURNS AND PROFITABLE GROWTH
Profit after tax & before abnormals SONS OF GWALIA - FOCUS ON RESULTS EPS (cents) Profit A$ million
SONS OF GWALIA www.sog.com.au SONS OF GWALIA LTD