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Falconbridge

Falconbridge. A nickel copper company. Overview. Agenda. Market Outlook. Strategy. Investment Highlights. World-class nickel and copper assets Positive outlook Nickel: best fundamentals Copper: mid-term improvement Low-cost producer Track record of delivering results

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Falconbridge

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  1. Falconbridge A nickel copper company

  2. Overview Agenda Market Outlook Strategy

  3. Investment Highlights • World-class nickel and copper assets • Positive outlook • Nickel: best fundamentals • Copper: mid-term improvement • Low-cost producer • Track record of delivering results • Financial flexibility to weather the downturns

  4. Falconbridge At A Glance • Founded in 1928 • 74-year history in mining Nickel and Copper • 3rd largest Nickel producer in the world • 12th largest Copper producer in the world • One of the largest metal recyclers and processors • 2001 sales C$2.1 B and C$5.1 B assets • Market capitalization of C$2.7 B • 59.6%-owned by Noranda Inc.

  5. INO Raglan (Nickel) INO Nikkelverk (Nickel) Kidd Creek (Copper) INO Sudbury (Nickel) KoniamboDevelopment (Nickel) Falcondo (Ferronickel) Lomas Bayas (Copper) Collahuasi (Copper) Falconbridge = Nickel + Copper

  6. Nickel and Copper > 80% 2002 Revenues Nickel40% Copper42% PGMs7% Zinc 7% Cobalt 4%

  7. Overview Agenda Market Outlook Strategy

  8. Stainless Steel Production Increase NICKEL – BEST FUNDAMENTALSOFBASEMETALS Stainless Steel Output Growing • 4-5M tonnes capacity is planned for 2002-2004

  9. Scrap Ratio Declining NICKEL – BEST FUNDAMENTALSOFBASEMETALS Shortage of Scrap = Increased Use of Nickel • Structural change in scrap availability • CIS exports down • Tight industrial scrap • As stainless steel capacity increases, more primary is used • 1% decline = 12,000 tonnes nickel required

  10. Chinese Consumption (‘000 MT) Consumption Production NICKEL – BEST FUNDAMENTALSOFBASEMETALS Chinese Consumption Now A Major Factor • Chinese consumption growing ~7% annually • 2002 est. 91,000 tonnes • Major uses - stainless steel, plating & batteries

  11. NICKEL – BEST FUNDAMENTALSOFBASEMETALS Low Inventories

  12. (‘000 MT) 2001 2002 2003 Supply growth (%) +5.1% +3.5% +2.3% Worldsupply 1,150 1,190 1,217 Demand growth (%) +2.0% +5.4% +3.9% Worlddemand 1,129 1,190 1,236 Balance +21 0 -19 Total stocks* 143 146 127 As weeks of consumption 6.6 6.4 5.3 NICKEL – BEST FUNDAMENTALSOFBASEMETALS Demand to Exceed Supply * LME, Producer, Russian Off-Warrant, Merchant

  13. S. Korea China Japan Cu Taiwan COPPER – FUNDAMENTALSIMPROVING Chinese Demand Strong • China is a significant net importer • Chinese copper demand has grown at rate of 10% over past 15 years • Asia now consumes 40% of total demand

  14. COPPER – FUNDAMENTALSIMPROVING Slow Supply Growth • Declining ore grades will reduce production at a number of mines • Capital spending will largely maintain production • Greenfield projects are limited over next 5 years • World needs 500,000 tonnes a year of new capacity to meet 3% growth rate

  15. COPPER – FUNDAMENTALSIMPROVING Cu Stocks Are High But Lower Than 1982

  16. (‘000 MT) 2001 2002 2003 Supply growth (%) +5.0% -6.4% +1.6% Worldsupply 12,587 11,783 11,969 Demand growth (%) -7.2% -0.2% +3.5% Worlddemand 11,777 11,757 12,168 Balance +810 +26 -199 Total stocks* 1,621 1,647 1,448 As weeks of consumption 7.2 7.3 6.2 COPPER – FUNDAMENTALSIMPROVING Copper Market Balance * LME, Comex, Shanghai, Producer, Consumer, Merchant

  17. Agenda Overview Market Outlook Strategy

  18. Grow nickel and copper businesses profitably Ensure a strong financial position Strategy Going Forward Maximize potential of existing operations Grow nickel and copper businesses profitably Ensure a strong financial position

  19. Falcondo INO Raglan INO Nikkelverk INO Sudbury Nickel Operations

  20. Nickel Production – To Increase 2001-2002 were impacted by the strike (‘000 Tonnes)

  21. INO Cash Costs Competitive Cost Position (US$/lb.) Falcondo – swing producer – cost US$2.15 @ $20 oil

  22. Montcalm Increases Our Production • Bankable feasibility in early 2003 • Additional drilling to further define ore body • Annual production 8,000 tonnes/year • Ore to be trucked to Kidd Creek for milling • nickel concentrate to Sudbury

  23. Sudbury Exploration – Track Record of Success • Exploration found 85 M mt ~1.75% Ni equivalent • Exploration cost = 10 cents Cdn./pound 1960-2001

  24. Sudbury Exploration Program • Work continues on Nickel Rim South • Identified resources of 4.6 M MT of 2.2% Ni and 4.9% Cu • Six drills operating • Fraser Morgan • Could increase total reserves in Sudbury by 25% Sudbury Basin – still great potential

  25. Capacity: 85,000 tonnes Maximizing Nikkelverk Refinery (‘000 MT)

  26. Collahuasi Kidd Creek Lomas Bayas Major Copper Operations

  27. Copper Production > 300,000 Tonnes (‘000 MT)

  28. Falconbridge Low-Cost Copper Producer (US$/lb.) Industry Average Cash Costs 14% Below Industry

  29. Kidd Creek – Positioning for Long Term Status • FL and Noranda smelters brought together to unlock value • New contract with production and maintenance workers October 1 Outlook • Mine D continues to be on schedule and on budget • Extends life to 2024

  30. Status Running above capacity Q3/02 cash costs US$0.38/lb. Outlook Transition to Rosario 35% complete Remains on schedule Mill expansion will maintain production level Milling Capacity(’000s tonnes/day) Collahuasi – Operating Well

  31. Lomas Bayas – Performing Well Status • Cash costs Q3/02 US$0.45/lb. • Operating better than expected • Total costs US$0.63/lb. Plans • 58,000 tonnes in 2002 and 2003

  32. Rigorous Project Management Falconbridge Stage-Gate Process • Multi-disciplinary representation • Consistent methodology and assumptions • Well-defined project charter • Post-audit follow-up

  33. Strategy Going Forward Maximize potential of existing operations Grow nickel and copper businesses profitably Ensure a strong financial position

  34. Growth Projects – Koniambo: Overview • One of the world’s best nickel laterite deposit • Resources: measured and indicated of 80M tonnes at 2.6% Ni • Inferred: 71M tonnes of 2.5% Ni • 60,000 tonnes/year nickel in ferronickel • Substantial expansion potential Koniambo New Caledonia

  35. One of World’s Best Deposits (% Ni) • High grade • 60-year production horizon

  36. Using Proven, Updated Technology • Proven pyrometallurgical process with modern equipment • Conservative, sequential approach = rapid start-up • No tailings

  37. Extensive Development Program Government Relations Consultations Organization Studies Extensive publicconsultations 200+ presentations Thorough geotechnical, engineering and environmental baseline studies, etc. Coordination with French, provincial and local governments Strong organization and clear accountability

  38. Attractive Financial Returns • Cost US$1.57B includes • $450M, power generation (2 x 125 MW) • $241M, significant 18% contingency • Expect 15% target return

  39. Supply growth limited until at least 2006 New Nickel Supply Needed (‘000 MT) +4.2% growth p.a.

  40. Koniambo: Status & Next Steps Status • Q4/01: Baseline study • Q3/02: Pre-feasibility study • Q4/02: 70% of Environmental Impact Study (EIS) completed Next Steps • Q1/03: File EIS • Q3/03: Decision on Bankable Feasibility Study • 2004: Finalization of project bank debt • Late 04: Decision on project go-ahead • 07/08: Production to start

  41. Strategy Going Forward Maximize potential of existing operations Grow nickel and copper businesses profitably Ensure a strong financial position

  42. Financial Objectives Return on equity Pre-tax return on net assets 18% 15% Investment grade Credit rating

  43. Goal = 18% Average = 14% RONA Since IPO Return on Net Assets – % (1) Average LME cash nickel and copper prices

  44. Goal: 15% 8% ROE Since IPO

  45. Earnings Cash Flow $303 $40.3M $36.5M $236 EPS $0.17 – up from $0.16 9 Months 2002 Earnings and Cash Flow

  46. $364 $348 Capital Expenditures CDN$ M Capex 2003: $500-600 million

  47. Financial Flexibility (As at September 30, 2002) • US$500 M commercial paper program authorized • US$ equivalent of $108 M outstanding • Cash balances of C$262 M • Evergreen bank credit facilities • US$465 M total capacity • Totally undrawn • No major maturities until 2005 • Flexibility – capital expenditure programs Total availability ~$US400 M

  48. Why Invest in Falconbridge • World-class nickel and copper assets • Management team with history of delivering results • Financial flexibility to weather the downturns • Low-cost producer • Maximizing potential of existing operations • Improving Nickel and Copper outlook

  49. Forward-Looking Statements Falconbridge cautions that statements made to describe the Company’s intentions, expectations or predictions may be “forward-looking statements” within the meaning of securities laws. The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and that the Company’s actual results could differ materially from those expressed or implied in such statements. Reference should be made to the most recent Annual Information Form for a description of the major risk factors.

  50. Falconbridge A nickel copper company

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