7th China Nickel Conference May 2010

Nickel production
7th China Nickel Conference, May 2010
Khayyam Jahangir
Manager – Steel Alloys Research
Roskill Information Services Ltd.
Roskill
Approachable. Independent. Expert.
Disclaimer
The statements in this presentation represent the considered views of Roskill

Information Services Ltd. It includes certain statements that may be deemed
"forward-looking statements." All statements in this presentation, other than
statements of historical facts, that address future market developments, government
actions and events, are forward-looking statements. Although Roskill Information
Services Ltd. believes the outcomes expressed in such forward-looking statements
are based on reasonable assumptions, such statements are not guarantees of future
performance and actual results or developments may differ materially from those in
forward-looking statements. Factors that could cause actual results to differ
materially from those in forward-looking statements include changes in mining
costs, the LME nickel price and general economic, market or business conditions.
While Roskill Information Services Ltd has made every reasonable effort to ensure
the veracity of the information presented it cannot expressly guarantee the accuracy
and reliability of the estimates, forecasts and conclusions contained herein.
Accordingly, the statements in the presentation should be used for general guidance
only.
Roskill
2
Outline
• Production
 Review of historical trends for both mine and primary production
 Production by country/region
• Nickel producing companies

 Review of largest nickel producing companies
• Nickel Production costs

 Weighted industry average costs curve
 Production costs 2008 vs. 2009
 Production cost outlook 2010
• Future nickel supply

 Nickel resources
 Future outlook for nickel production
Roskill
Nickel production
Roskill
World: mine production of nickel, 1993-2009
1,800 15%
1,600 10%
Mine production (000t)
1,400 5%
Year-on-year change
1,200 0%
1,000 -5%
CAGR:
CAGR: 4.7%py CAGR: 4.1%py -8.9%py
800 -10%
600 -15%
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year-on-year change Production
Source: Roskill: Nickel Market Outlook to 2014, INSG, WBMS

Roskill
Mine production has lagged behind the growth in
consumption
Nickel production, consumption and price index, 1992-2009
200 600
180 500
160 400
140 300
120 200
100 100
80 0
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Mine production Consumption Price (RHS)
Source: Roskill, INSG, LME

Note: 1992 = 100 Roskill
World: Nickel mine production by region, 2000-
2009
100%
22% 18% 19% 20% 19%

24% 26% 24% 22% 23%
80% 5% 5% 5% 5%
6% 5% 6%
6% 5% 6%
17% 21% 21% 22%

14% 14% 16% 17% 16%
60% 29%
16% 16% 16% 18% 18% 17% 16% 14%

17%
40% 13%
16% 15% 15% 12% 14% 14% 15% 16% 17%

10%
20%
22% 22% 21% 23% 22% 21% 20% 19% 19% 21%
2% 2% 3% 2% 2% 3% 3% 3% 3% 2%
0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Europe CIS North America South America Asia Africa Oceania
Source: Roskill: Nickel Market Outlook to 2014

Roskill
Only Asia managed to raise output in 2009,
increasing mine production by 17%
Mine nickel production, year-on-year change, 2008-2009
20%
10%
0%
-10%
-20%
-30%
-40%
-50%
Europe CIS North America South America Asia Africa Oceania

Roskill
Russia dominates mine production, accounting
for over 20% of supply
World: Mine production by country, 2009
Cuba
5% Others
Colombia 26%
5%
New Caledonia
7%
Canada
Russia
10%
21%
Australia
12% Indonesia
14%
Source: INSG
Roskill
Primary production
Roskill
Primary production has followed the same
trend as mine production, declining in 2008/09
15% 1,550
10% 1,400
5% 1,250
0% 1,100
-5% 950
-10% 800
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year-on-year change Production

Roskill
World: Primary nickel production by country,
2009
Cuba
Brazil
2% Others
New Caledonia 2% Russia
3% 11% 19%
Finland
3%
Colombia
4%
Norway China
7% 19%
Canada
9% Australia Japan
10% 11%

Roskill
Nickel producing companies
Roskill
Nickel production is dominated by a few
producers
World: Nickel production by company, 2009
MMC Norilsk Nickel

21%
Others
34%
Jinchuan Group
10%
Xstrata BHPB
7% Vale 14%
14%
Source: Roskill
Roskill
The leading companies are increasingly
accounting for a larger share of production
Nickel production by company, 2004-2009
100%
90%
33%
80% 43% 39%
43% 44% 45%
70%
7%
60% 5%
6% 6% 5% 5% 14%
50% 18%
18% 16% 15%
16%
40% 14%
11% 11%
30% 11% 10% 12% 10%
7%
5% 7% 7%
20% 7%
10% 18% 18% 21% 22%

17% 16%
0%
2004 2005 2006 2007 2008 2009
MMC Norilsk Nickel Jinchuan Group BHPB Vale Xstrata Others
Source: Roskill
Roskill
However, there has been a lack of consistent
year-on-year increases in output
30%
Leading companies nickel prodcution, year-on-year change, 2005-
2009
20%
10%
0%
-10%
-20%
-30%
-40%
2005 2006 2007 2008 2009
MMC Norilsk Nickel Jinchuan Group BHPB Vale Xstrata
Source: Roskill
Roskill
Nickel production costs
Roskill
The global downturn has helped pushed the
average industry operating cost down in 2009
Weighted industry average operating cost, 2000-2009
14,000
12,000
10,000
Operating cost (US$/t)
8,000
6,000
4,000
2,000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Roskill
Weighted industry average cost down by
almost 30% in 2009, with prices also falling
Industry operating cost
1,200
1,000 2008 = US$21,100/t
800
-32%
2009 = US$15,000/t
(USc/lb)
600
400
200
0
0 200 400 600 800 1,000 1,200
Cumulative nickel production (000t)
2009 industry cost curve 2008 industry cost curve 2008 average nickel price 2009 average nickel price
Source: Mine Cost

Roskill
In 2009 25% of world output was removed from
the market, from various points on the cost curve
Industry production cost curve, 2009
900
800
700
Operating cost (USc/lb)
600
500
400
300
200
100
0
0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200
Cumulative production (000t)
Source: Mine Cost, Roskill

Roskill
Weighted average industry cost to rise by
around 5% in 2010, although all eyes on Goro
Industry cash operating costs, 2010
Goro
1,200
1,000
SLN Mines FeNi

Ontario Division
Falcondo
Yabulu
Pomalaa FeNi
Operating cost USc/lb
SLN Mines matte

Manitoba Division
Murrin Murrin
Hachinohe
800
Larco
Loma de Niquel
Punta Gorda
Sth Kambalda
Ramu
Soroako
Cerro Matoso
Voiseys Bay
Mt Keith
Nkomati
600
Moa Bay
Tocantins
Raglan
Leinster
Norilsk
400
200
0
0 100 200 300 400 500 600 700 800 900 1,000 1,100 1,200 1,300
Cum ula tive nicke l production (000t)
Source: Mine Cost

Roskill
Future nickel supply
Roskill
Laterite ores account for the vast
majority of global nickel resources
World nickel resources by ore type, 2008
Sulphide
27%
Laterite
73%

Roskill
But it is sulphide ores that are more traditionally
processed
World primary nickel production by ore type
Laterite
44%
Sulphide
56%
Source: INSG, ValeInco

Roskill
New announced capacity will be increasingly
processing laterites
Future announced capacity by ore, 2011-2015
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
2011 2012 2013 2014 2015
Laterite Sulfide

Roskill
New laterite capacity will require leaching
technology (1)
Process HPAL Atmospheric Heap leaching

leaching
Ore type Saprolite & Limonite ore Various

limonite ores
Acid 300-500kg/t Ni 700-900kg/t Ni 500-700kg/t Ni

consumption

Roskill
technology (2)
Problems with leaching process:
 Capital cost can run into US$ Billions – Goro, Ravensthorpe

 Complicated process
 Maintenance issues
 Large acid consumption
Positives with leaching process:
 Can process a mix of limonite & saprolite ores

 Can generate excess power from the sulphur used to produce acid,
which can be sold to local grid

Roskill
technology (3)
Project Capital Cost
Murrin Murrin US$1.5bn+
Ravensthorpe US$3bn+
Goro US$4bn+
Ramu US$3bn+

Roskill
Majority of new capacity earmarked for Australia –
what impact will the new mining tax have?
Potential future nickel capacity, 2010-2015

South Africa
2%
PPNG Tanzania Albania
Russia
3% 3% 2%
2%
Philippines
8% Australia
31%
New Caledonia
12%
Madagascar
6%
Indonesia Brazil
11% Canada 15%
2%
Guatemala
2% Finland
1%

Roskill
Around 800kt of new nickel capacity could
enter the market by 2014
Proposed additional annual nickel capacity, 2010-2014 (t)

250,000
200,000
150,000
100,000
50,000
0
2010 2011 2012 2013 2014
Goro Koniambo Onca Puma Ambatovy Honeymoon Well Vermelho
Pujada Marlborough Weda Bay Yakabindie Kalgoorlie Santa Rita
Ramu Western Areas Kokogllave-Devolli Sherlock Bay Canegrass Shakesphere
Fox Resources Barro Alto Kun Manie Kabanga Nornico Nunavik
Fenix Acoje & Zambales Talvivaara

Roskill
Primary nickel production forecast to grow by
7%py over the next five years
Forecast primary nickel production, year-on-year change, 2010-2014

10%
9%
8%
7%
6%
5%
4%
2010 2011 2012 2013 2014

Roskill
Steel Alloys – Minor Metals – Industrial Minerals
New reports for 2010:

Nickel (Q1) – 15% delegate offer
Molybdenum (Q1)
Iron ore (Q3)
Contact:
Khayyam Jahangir
Manager – Steel Alloys Research
+44 20 8944 0066
khayyam@roskill.co.uk
Roskill
28

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Nickel production

7th China Nickel Conference, May 2010

The statements in this presentation represent the considered views of Roskill

• Nickel producing companies

• Nickel Production costs

• Future nickel supply

Year-on-year change Production

Source: Roskill: Nickel Market Outlook to 2014, INSG, WBMS

Nickel production, consumption and price index, 1992-2009

Mine production Consumption Price (RHS)

Source: Roskill, INSG, LME

22% 18% 19% 20% 19%

17% 21% 21% 22%

16% 16% 16% 18% 18% 17% 16% 14%

16% 15% 15% 12% 14% 14% 15% 16% 17%

Europe CIS North America South America Asia Africa Oceania

Source: Roskill: Nickel Market Outlook to 2014

Europe CIS North America South America Asia Africa Oceania

Source: Roskill: Nickel Market Outlook to 2014

World: Mine production by country, 2009

Year-on-year change Production

Source: Roskill: Nickel Market Outlook to 2014

Source: Roskill: Nickel Market Outlook to 2014

World: Nickel production by company, 2009

MMC Norilsk Nickel

Nickel production by company, 2004-2009

10% 18% 18% 21% 22%

MMC Norilsk Nickel Jinchuan Group BHPB Vale Xstrata Others

MMC Norilsk Nickel Jinchuan Group BHPB Vale Xstrata

Source: Roskill: Nickel Market Outlook to 2014

1,000 2008 = US$21,100/t

Source: Mine Cost

Source: Mine Cost, Roskill

SLN Mines FeNi

SLN Mines matte

Source: Mine Cost

World nickel resources by ore type, 2008

Source: Roskill: Nickel Market Outlook to 2014

World primary nickel production by ore type

Source: INSG, ValeInco

Future announced capacity by ore, 2011-2015

Source: Roskill: Nickel Market Outlook to 2014

Process HPAL Atmospheric Heap leaching

Ore type Saprolite & Limonite ore Various

Acid 300-500kg/t Ni 700-900kg/t Ni 500-700kg/t Ni

Source: Roskill: Nickel Market Outlook to 2014

Problems with leaching process:

 Capital cost can run into US$ Billions – Goro, Ravensthorpe

Positives with leaching process:

 Can process a mix of limonite & saprolite ores

Source: Roskill: Nickel Market Outlook to 2014

Project Capital Cost

Murrin Murrin US$1.5bn+

Source: Roskill: Nickel Market Outlook to 2014

Potential future nickel capacity, 2010-2015

Source: Roskill: Nickel Market Outlook to 2014

Proposed additional annual nickel capacity, 2010-2014 (t)

Source: Roskill: Nickel Market Outlook to 2014

Forecast primary nickel production, year-on-year change, 2010-2014

Source: Roskill: Nickel Market Outlook to 2014