OneSteel Whyalla Investor Site Tour Presentation

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OneSteel Whyalla Investor Site Tour Presentation

OneSteel WhyallaInvestor Site Tour Presentation24 November 2009Mark Parry – Chief Executive Whyalla


• These presentations contain certain forward-looking statements with respect to the financial condition,results of operations and business of OneSteel and certain plans and objectives of the management ofOneSteel. Forward-looking statements can generally be identified by the use of words such as ‘project’,‘foresee’, ‘plan’, ‘expect’, ‘aim’, ‘intend’, ‘anticipate’, ‘believe’, ‘estimate’, ‘may’, ‘should’, ‘will’ or similarexpressions. All such forward looking statements involve known and unknown risks, significantuncertainties, assumptions, contingencies and other factors, many of which are outside the control ofOneSteel, which may cause the actual results or performance of OneSteel to be materially differentfrom any future results or performance expressed or implied by such forward looking statements. Suchforward-looking statements speak only as of the date of this presentation. Factors that could causeactual results or performance to differ materially include without limitation the following: risks anduncertainties associated with the Australian and global economic environment and capital marketconditions, the cyclical nature of the steel industry, the level of activity in the Australian construction,manufacturing, mining, agricultural and automotive industries and, to a lesser extent, the sameindustries in Asia and New Zealand, commodity price fluctuations, fluctuations in foreign currencyexchange and interest rates, competition, OneSteel's relationships with, and the financial condition of,its suppliers and customers, legislative changes, regulatory changes or other changes in the laws whichaffect OneSteel's business, including environmental laws and the Carbon Pollution Reduction Scheme,and operational risk. The foregoing list of important factors is not exhaustive. There can be noassurance that actual outcomes will not differ materially from these statements.2


ContentsMr Mark Parry, Chief Executive WhyallaIron ore mining 4Reserves and resources 13Manufacturing 253


Iron ore mining


OneSteel operationsMaterialsManufacturingAustralian DistributionNew Zealand DistributionIron ore minesWhyalla SteelworksMerchandisingSteel & Tube Holdings (NZ)Iron ore lumpIron ore finesPelletsOre by-productsDolomite minesAustralian RecyclingInternational RecyclingStructural Rolling MillsRail Products FacilitiesSlabs & Billets (feed to EastCoast mills)Steelmaking by-products(e.g. coke)Laverton Steel MillElectric Arc FurnaceLaverton Rolling MillsSydney Steel MillElectric Arc FurnaceSydney Bar MillWaratah Steel MillElectric Arc FurnaceBar MillMetalandPiping SystemsSheet, Coil & AluminiumMidalia SteelSteel and TubeFagerstaCoil CoatersPipe & Tube MillsOil & Gas Pipe MillPrecision Tube MillsStructural Tube MillsLiteSteel TM TechnologiesARC – Australian ReinforcingCompany(50.3% shareholding)MerchandisingSteel Distribution &ProcessingRoofing Products &ReinforcingPiping SystemsFastening SystemsChain & RiggingStainless SteelHurricane Wire ProductsRail and ForgeGrinding MediaNewcastle Rod & Bar MillsRod MillBar MillWire MillsNewcastle Wire MillGeelong Wire MillWire Ropery5


Iron ore mining• Mining operation – mining in excess of 15 mbcm* pa of Magnetite andHematite ore.• Expect to sell 6.0 mt of hematite iron ore to external customers in FY10.• Key Objectives:• Safety – maintain and accelerate progress towards Goal Zero by developingsustainable leadership capability, behaviors, systems and processes (particularemphasis on risk identification and management)• Ramp up and sustain iron ore mining to:• Enable external sales of 6mt in FY10• Provide feed for Blast Furnace (lump and magnetite)• Schedule and complete mine developments to enable sustainable volumes andgrade for export customers• Match infrastructure requirements to planned volume and mine area sites* mbcm – million bank cubic metres6


Iron ore miningKey objectives• Cost effective processing and transport of hematite ore andmagnetite slurry to meet export and steelworks feedrequirements within defined specifications• Continue exploration program to identify and prove upincreases to reserve to maximise and optimise life of mine7


Iron ore miningProject Magnet recap• Project Magnet is the commercialisation of OneSteel’s magnetite orereserves for producing steel and the sale of hematite ore reserves toglobal markets that adds significant value to OneSteel• Total capital expenditure of $402 million• Hematite• Iron Ore Sales• FY2006• FY 2007• FY2008• FY2009~ 1.700kt iron ore lump and fines (1.5mt originally targeted)~ 300kt ore by-products~ 2.8m tonnes ore (2.5mt originally targeted)~ 266k tonnes ore by-products~ 4.4m tonnes lump and fines (4.0mt originally targeted)~ 500k tonnes ore by-products~ 5.1m tonnes lump and fines~ 275k tonnes ore by-products~ 140k tonnes pellets8


Iron ore mining• During last year’s visit we stated we were working on twopriorities:• Address / action concentrator performance with respect to qualityand rate• Pursue options and selective investment to mine and shipincreased levels of iron oreProgress has been made on both9


Iron ore miningConcentrator10


Iron ore miningConcentrator performance issues• Issue• The concentrator, as designed, did not provide silicain product at the level predicted (3.2%)Actual silica of > 4.2% compromised the Project Magnet VIU• Resolution• Extensive plant trials and fundamental research on mineralogy wasundertaken to identify a cause• Standard screening technology identified as effective means to reducesilica content• Implementation• Screening of final product to remove large silica / magnetite particles andretain for regrinding provides a robust solution11


Iron ore miningConcentrator performance• Target Commissioning Date (post GFC review) Sept 09 (early)• Actual Commissioning Date (post GFC review) Sept 09 (late)• Target Handover to Operations Oct 09 (mid)• Actual Handover to Operations Oct 09 (late)• Operability and silica reduction targets met (see graph)• Silica reduction between 0.8 and 1.0%• Variability reduction target exceeded• Variability halved12


Reserves and resources


Reserves and resourcesHematite ore statusReserves at announcement of Project Magnet (Reserve statement June 2004)Used/sold ore (end of June 2009)Added to reserves and LGO processedReserves at June 2009 (plus LGO 20.5 x 0.5)33.9 mt24.0 mt22.6 mt42.8mtJune 2007 (Project Magnet Phase 2 ) Reserves (per annual report)low grade ore (LGO) 21.4 x 0.5 (yield at 50%)Total27.9mt10.7mt38.6mtJune 2008 Reserves (includes 13.5mt from mine optimisation and Iron Chieftain)LGO 20.8x 0.5Total37.3mt10.4 mt47.7mtJune 2009 ReservesLGO 20.5 x 0.5Total32.5mt10.3 mt42.8mt• Ore is continually added to LGO stocks, hence small changes in LGO numbers. Typically 800kt to 1mtpa isproduced via beneficiating LGO. Sonic drilling techniques could allow stockpiles to be upgraded to reservestandard.14


Reserves and resources• Expected usage of hematite ore:• 6mt external sales in FY10• 0.4mtpa for internal use in Whyalla blast furnace• As at June 2009• Hematite ore 42.8mt (based on Reserves an Resources statement)• Sufficient supply for 6.7 years (assumes usage of 6.4mtpa)• We add at least 1mtpa to beneficial stockpiles each year, yielding0.5mtpa when processed15


Reserves and resourcesProject Magnet Phase 2 – optimisation and extension work• Optimisation and mine extension drilling to increase reserves andresources• Optimise all existing mines and the new Iron Chieftain mine – 13mt added inFY08, life extended to 2016 at 6.0mtpa external sales• Extension drilling work in FY09/FY10• Reassess previously mined areas at Iron Baron and Iron KnobExtend current SMR sites• Limited success in Iron Baron area• Significant success in Iron Knob, Iron Monarch and Iron Princess• Optimistic for Iron Duchess North - resource estimation in progress16


Reserves and resourcesProject Magnet Phase 2 – optimisation and extension work• New reserves following extension drilling to date (brownfields)• At 30 June 2009• Iron Monarch (to Jorc)• Iron Princess* (to Jorc)• Current total• Plus ongoing LGO additions• From Reserves and Resources statement at June 09• Ongoing additions – expected to be similar to previousyears i.e. 0.5mtpa42.8mt7.1mt6.4mt56.3mt• Some further extension drilling work substantially complete and promising• Expected spend on extension and exploration work in FY09/FY10 $20m• Sufficient ore to maintain external sales at 6mtpa for at least 10 years based onreserves and ongoing beneficiation of LGO* Aboriginal Heritage clearance being sought17


Reserves and resourcesProject Magnet Phase 2 – optimisation and extension work• Fe content will vary slightly year on year, however averages are expected to remainconsistent with recent history• Final investments (cutback, infrastructure etc) to be determined progressively anddependent on finalising mine plans and further exploration work• However, current view is cash investment to be in order of $300-$350m incurredpredominately over first 5-7 years with lower levels in later years, subject to further ongoingexploration etc• Mining costs (loaded onto ship)• Key objective is ensuring we remain a cost competitive producer• We believe we will remain cost competitive, albeit moving to around top end of A$25 toA$40 range per tonne18


Exploration19


Reserves and resourcesProject Magnet Phase 2 – optimisation and extension work• True exploration now commencing – program was delayed due to successof the optimisation and extension work• We have six initial targets• Initial focus on drilling to assess potential (FY10)• Determine priorities then complete (from FY11)• Magnetic and gravity surveys, and history, indicate attractive sitesThere is reason to be optimistic that Hematite ore reserves willextend beyond 202020


Non ferrous explorationWhy explore for non ferrous?• Reasonable prospects for copper-gold• Eastern Gawler Craton world class Iron Oxide Copper Gold (IOCG)terrain (Olympic Dam, Prominent Hill, Carrapateena, Moonta)• OST tenements highly prospective for copper and gold• Grossly under-explored for non ferrous minerals• Geologically favourable – lack of deep cover• Excellent infrastructure21


OD CorridorMoonta CorridorNon ferrous explorationOlympic Cu-Au provinceCu-Au DepositAu DepositOST22(Base map after Skirrow et al 2007)


Non ferrous explorationProgram• IOCG Targets identified forpreliminary work• New Tenement secured• Includes 3,500m RC andDiamond drilling• Collaborative research withCMXUC/PIRSA• Aim to generate targets forsignificant resource definitiondrilling FY2010-201123


“These ironstone outcrops may, insome cases, harbour copper ore at adepth”24Sir Douglas Mawson (1907)BHP Report No GEO 001


Manufacturing


OneSteel operationsMaterialsManufacturingAustralian DistributionNew Zealand DistributionIron ore minesWhyalla SteelworksMerchandisingSteel & Tube Holdings (NZ)Iron ore lumpIron ore finesPelletsOre by-productsDolomite minesAustralian RecyclingInternational RecyclingStructural Rolling MillsRail Products FacilitiesSlabs & Billets (feed to EastCoast mills)Steelmaking by-products(e.g. coke)Laverton Steel MillElectric Arc FurnaceLaverton Rolling MillsSydney Steel MillElectric Arc FurnaceSydney Bar MillWaratah Steel MillElectric Arc FurnaceBar MillMetalandPiping SystemsSheet, Coil & AluminiumMidalia SteelSteel and TubeFagerstaCoil CoatersPipe & Tube MillsOil & Gas Pipe MillPrecision Tube MillsStructural Tube MillsLiteSteel TM TechnologiesARC – Australian ReinforcingCompany(50.3% shareholding)MerchandisingSteel Distribution &ProcessingRoofing Products &ReinforcingPiping SystemsFastening SystemsChain & RiggingStainless SteelHurricane Wire ProductsRail and ForgeGrinding MediaNewcastle Rod & Bar MillsRod MillBar MillWire MillsNewcastle Wire MillGeelong Wire MillWire Ropery26


Whyalla manufacturing overview• OneSteel’s manufacturing segment comprises:• Whyalla Manufacturing• Market Mills• Whyalla Manufacturing includes the following operations:• Pellet Plant• Ironmaking (including coke ovens, blast furnace and power &services)• Steelmaking (including BOS, ladle treatment, billet caster andcombi caster)• Steel Products (including Rolling Mills and Trak-lok)27


Whyalla manufacturing overview• Products produced:• Pellet• Coke and coke by-products• Flat iron• Slabs• Billet (feed for Market Mills)• Hot Rolled Structurals• Rail• Sleepers and sleeper systems28


Whyalla manufacturing – output levelsOperating Unit H1 H2FY10 ForecastOutputPellet Plant 770 kt 830 kt 1.6 mtIronmaking 580 kt 600 kt 1.18 mtSteelmaking 560 kt 570 kt 1.13 mtBillet Caster 320 kt 330 kt 650 ktRolling Mill 190 kt 180 kt 370 kt29


Whyalla manufacturing – focus and deliverablesFocus:• Delivering superior andsustainable returns to OSTshareholders by holdingleading market positions inconstruction, resources, ruraland industrial marketspredominantly in Australasiathrough our manufacturing,value chain and peoplecapabilitiesDeliverables:• Safety – maintain and accelerate progresstowards Goal Zero by developing sustainableleadership capability, behaviours, systems andprocesses (particular emphasis on riskidentification and management)• Customers – sustainable competitive advantagethrough superior value propositions and effectiveoperational and supply chain performance(Meeting our Promise to Customers)• Value chain strategies driving our business planand financial outcomes in alignment with MM,OSD and Recycling• Total delivered cost – deliver a sustainable stepchange improvement in delivered cost throughoperational excellence and supply chain capability• People – attraction and retention of a skilled andcapable workforce through workforce planningperformance management and employeedevelopment30


Whyalla manufacturing – market conditions• We are seeing a small but steady increase in domestic demand for hotrolled structurals (but off a low base) as distributors demand increases.Commercial and Non Residential Construction continues to besluggish• BER demand is expected to partially compensate for softness in thismarket segment.• Demand for rail products is varying by customer, but demand in linewith management expectations overall• Do not expect any significant rail demand flowing through fromGovernment stimulus initiatives until FY11.• High exchange rate is improving the competitiveness of importedproduct prices, resulting in price pressure across the product range31


Whyalla – response to GFC“Back to Basics” initiatives• Implemented aggressive cost reduction programs• Increased focus on meeting our promise to customers and the deliveryof superior value propositions• Aligned output with demand (facilities on maximum turn down andplanned shuts to control and reduce inventory and maximise annualleave)• Maximised billet make to allow EAFs to reduce output and operatinghours32


Whyalla – response to GFC“Back to Basics” initiatives• Aggressive cost reductions, including:• Reduced overtime and shift patterns• Moved some shift workers to dayshift• Reduced use of contractors• Reduced discretionary expenditure• Improved sourcing/procurement management, e.g. alloys, refractories,contractor rates• Deferred coal purchases• R & M reduced in line with lower demand• Labour reduction of 183 in direct employee numbers through naturalattrition, performance management and voluntary redundancies33


Whyalla manufacturing – indicators of improvementPellet Cost $/tonneHot Metal Cost $/tonne30 %improvement36%improvementFY09FY10 YTDFY09FY10 YTDBillet Cost $/tonne24%improvement• Performance improving comparedto 2H FY09• Increased utilisation rate• Labour reduction program• Reduced repairs and maintenance• Other cost reductions• Operational improvementsFY09FY10 YTD34


Whyalla manufacturing – focus looking forward• Accelerate rate of improvement towards Goal Zero• Continue to reduce and sustain cost reductions based on:• Yield and efficiency improvements (Six Sigma Lean and equipmentreliability)• Retain tight control of costs (overtime, employment, DOA’s)• Reducing and improving effectiveness of maintenance spend (OneCareand equipment reliability)• Contractor rates and usage• Procurement and supply initiatives• Balance operating levels to demand (cost and inventory management)35


Whyalla manufacturing – focus looking forward• Meet our Promise to Customers• Deliver to market offer• Low cost billet to Market Mills• Opportune sales of flat iron, slab and pellets• Clear expectations of our people• Clear objectives• Performance management• Development plans36


CPRSScope 1Scope 1 and 2MtMtIron and Steelmaking 2.16 2.20Rolling Mill and Ancillaries 0.06 0.14Mining / Concentrating 0.01 0.08FY09 data372.23 2.42• Energy efficiency has always been a major cost driver with the business continuing todevelop and implement initiatives to improve efficiency levels. The CPRS is not likely tomaterially change this focus but may result in the acceleration of some projects.• A number of abatement projects focussed on efficiency, yield and waste reduction have beenidentified but decision to proceed with each project is subject to factors such as the cost ofcarbon• These projects are not likely to materially reduce Whyalla’s emissions• emissions are largely direct from Iron and Steelmaking, using coal as a reductantFe 2 O 3 + C → Fe + CO 2• There is no practical alternative to carbon as the reductant


Appendix


Whyalla Pellet Plant• Whyalla Pellet Plant currently produces approximately 1.6 milliontonnes of pellets for use in Blast furnace• Key Objectives• Priority to deliver low-cost efficient supply to the Blast furnace• Pellet consistency, so that there is minimal variation of pellet feed into theBlast Furnace• Ensure pellet is in specification and at rate required to meet Blast Furnaceproduction requirements• Maximise throughput to facilitate export opportunities• Implementing initiatives focussed on maximising up-time and minimisingcost• Additional production of export pellets to export market39


Whyalla Coke Ovens• Whyalla coke ovens produce in excess of 560,000 tonnes of blastfurnace quality coke from 108 battery ovens• Key Objectives• Maximise productivity and yield to minimise cost and maintain selfsufficiency in blast furnace coke feed in line with increased iron productionassociated with Project Magnet• Additional production of coke available to export market• Continue to identify markets for by-product sales40


Whyalla Blast Furnace• Historic average production of approximately 1.16 million tonnes ofiron per annum• Blast Furnace is operating stably at a running rate of 1.2 million tonnes• Key Objectives• Supply low cost feed at required specification to BOS requirements• Extract productivity improvements from relined furnace and value in usefrom utilising magnetite feed• Benchmarking operations against international Blast Furnaceoperators41


Whyalla Steelmaking• Key Objectives• Reducing steelmaking cost and sustaining operationalimprovements• Utilise available hot metal and convert for billet, bloom and slabfeed• Utilise existing technical partners to benchmark operationalpractices to identify opportunities to enhance productivity andreduce costs to make• Ensure steelmaking can utilise increasing blast furnace output• Optimise production mix to maximise returns based on scrap andslab price movement as opportunities arise42


Whyalla Structural Mill• Operational objectives• A step change reduction in cost to serve through a combination ofoperational excellence and selected improvement projects• Maximise productivity and throughput of bottleneck assets to meet targetedcustomer demand• Strategic objectives• Reduce cost structure through selected improvement projects based onbenchmark activities• Improve value proposition and efficiency of supply chain43


Community commitment• Community Support• Focus on youth and disadvantaged groups• Council contribution increasing annually• Indigenous Support• Support new Company ‘Walga Mining’• Conservation• Land gift to Whyalla conservation park – 1,000 ha• Proposed Iron Magnet reserve – 4,000 to 20,000 ha• Environment• $60 million spent to reduce fugitive dust issue44


Labour• Whyalla OneSteel Employees• 1,707 (as at end Oct 09)• Significant Contractor Base ~ 40% of hours• Mining - HWE• Railways – Genesee Wyoming• Materials Handling - Brambles / Metserv• Oxygen - BOC• IT Support - CSC• Laboratories - Amdel• Engineering – Worley Parsons• Sea Transport - CSL/ISM• Focus on reducing number of contractors and service delivery costContractor focus on reducing service delivery cost45


OneSteel Whyalla – facility upgradesEventOre Products46Pellet PlantRailPP starts as export facility 1968Flux pellets for Whyalla 1981Waste Gas Cleaning Plant 1998Kiln and cooler upgrade 2002-2005Roller Feeder replacement 2002Grate Upgrade 2006Filter Flux commissioned 2007Major track upgrade, (inc 40 to 60km/h) Comp (2006)New fleet (56) higher capacity wagons Comp (2006)Upgrade 75 RSK wagons Comp (2006)Ore Beneficiation Plant commissioned 2005Crushing and Screening commissioned 2007Concentrator commissioned 2007Export Ore Facility Commissioned 2007Coke OvensBattery 1 (72 ovens) 1968Battery 2 (36 ovens) 1980Reed Beds 1996Refractory Asset Life extensionYearOngoingThrough wall repairs (8 ovens complete, 2 in progress) 2006-2008Weak Ammonia Liquor Still 2008Continuous Maintenance and Capital Investment


OneSteel Whyalla – facility upgradesBlast Furnace History and Operations1) Better management of material quality and flow into the furnaceNo. 2 Furnace Blown in 1965Reline 1 1972BurdenTop Gas100 o CReline 2 1981Casthouse Floor Revamp 1993Coke500 o CRecord Production 1999900 o CDust Catcher 2001Water Treatment Plant 2002Near Record CampaignLife of 23 years2004Reline 2004Cohesive ZoneDeadmanRacewayTuyereHearthTaphole1100 o C1450 o C2) Critical zone for smoothiron and slag flow.New operating parametersaimed at increasing thermalreserve at this level.47


OneSteel Whyalla – facility upgradesBasic Oxygen SteelmakingEventYear2 vessels @ 130t 1965Hot Metal Desulphuriser 1991IRUT/Sublance/Electric/Controls 1992Ladle Met Furnace/Alloy System 1999New Vessel Shells 1999/2000BOC Oxygen Plant Commissioned 2001Desulphurisation Plant Commissioned 2007Continuous Maintenance and Capital Investment48


Integrated Steelworks facilitiesCasterEventYearCombination slab/bloom/billet caster 1992Five-strand billet caster 1999160 mm billets 2008Route to Market – Semi-Finished ProductsProduct Distribution Channel End UseBillets Inter-divisional to Market Mills Used to produce rod and barSlabs Direct to re-roller Used to produce various flatproductsSemi-Finished ProductsSlab Bloom Billet~12m600 ~ 1850 mm~8m300– 450mm 250mm~12m127 &160mm127 & 160mm49


Integrated Steelworks facilitiesRollingEventYearCommenced rolling ingots 1964Rail finishing end 1982Revamp for slabs/blooms (new rolling stands, etc) 1992Cooling beds/Capacity Upgrade 1996Finished products route to marketColumns* Channels* Rail-direct to end-user100 mm to 310 mm150 mm to 380 mmBeams* Angles* Sleeper section (direct toend-user125 mm to 200 mm41 Kg/m – 68 Kg/mPlain Carbon - Head Hardened150 mm to 610 mm150 x 90 & 150 x 100Mainline– 6.5 mm to 10 mm* Structural products are distributed by domestic steel distribution companies, including OneSteelDistribution. They are used in structural frames for buildings, factories, bridges and otherinfrastructure50


Technology / Operational alliances• Ore Products - BHPB (Export)- Runge / HWE (Mine Planning / Scheduling)- JK Tech, PDS (Crushing and Screening)- Midland / Jim Wennan (Concentrator)- Frank Salt (Pipeline)- Coffey (Tailing Dam)- Thompson Clark Shipping (Port)• Ironmaking - Danieli Corus• Steelmaking - Kobe (BOS)• Steel Products - Nippon Steel Corporation51


Safety is a Core ValueYour Safety is Important to us!1 Your safety whilst you are our guests is our highest priority.2 Wearing Personal Protective Equipment (PPE) - including safety helmets, safetyglasses, reflective safety vests, dust coats and adequate footwear isMANDATORY.3 Sign-in procedures apply at OneSteel Whyalla to ensure that visitors to PlantDepartments can be accounted for at all times. You will be asked to sign LocationTags for the Plant areas you will be visiting.4 When visiting Plant Departments, always stay within the designated walkways.5 To ensure your visit remains on schedule and is conducted safely, please alwaysremain with the group, your guide and our departmental hosts.6 OneSteel Whyalla has a drug and alcohol policy which could require you toundertake a test based on a random selection process and/or testing for cause.OneSteel Whyalla welcomes you and hopes that your visit is informative and enjoyable(P729B324)Page 53


OneSteel WhyallaInvestor Site Tour - Iron Ore Marketing24 November 2009Greg Waters – Chief Executive Recycling


OneSteel is a niche player in the iron oremarket• Rapid project implementation – from mine& infrastructure development to marketsales• OneSteel can supply ~1% of China’simported iron ore needs• 6Mtpa out of 620Mtpa• Forecast sales all to China• Original contracts struck in “sellers market”and as was norm included freight coveragefrom Whyalla• Original contracts covered >80% of volumecirca 2.4Mtpa• Jinxi, Guofeng, Rizhao + Haixin ~ Central toNorth China• Product mix• Fines and lump – 6mtpa• Some pellets and other by products –volumes variableDomestic45% Imports55%Source: Tex ReportOther25%Chinese Iron Ore SupplyBHPBilliton,Rio, Vale3 Largest Producers share of world iron 75% ore supplySource: KPMG Analysis2


Agency arrangement with BHPB• BHPB acts as our “Agent”• Strategic Advice (Market analysis)− Provide support in China for any issues relating to the iron ore business includingvessel discharge and documentation issues− Supply freight services and freight advice− Facilitate meetings with Chinese customers• OneSteel ‘owns’ the customer relationship and is responsible for allcontractual positions and terms3


Iron ore market severely impacted byGFCChina• GFC triggered a collapse of the steel market• Iron ore buyers abandoned the market - Sept/Oct 08,Mar/April 09• All suppliers were impacted• Some contract customers could not pay whichforced decision to enforce and damage customerrelationships or work with them to meet theircontractual commitments• Spot customers reneged/walked and refuseddemurrage• March “mini price collapse” (25% in 15 days)sucked confidence and set a “tone” of “peak/trough”that still applies today• During this time OST shipped all tonnes thanks to:• Strength of relationships with contract customers• Customer visits and on ground sales effort• Reputation as a supplier4


Market has been disrupted by a range ofactionsChina:• Iron Ore is classified as a “Strategic Commodity”and is central to the Economic Model• Negotiations not settled this year due to severalfactors• Most import licenses are held by “Traders” who bynature look to “pick” market cycles andopportunities• Speculative activity compounded by availability anddirection of “stimulus funds”• Japan/Korea “benchmark” agreement not wellreceived by China (Biggest importer of Iron Ore)• Very tense mid year & some tension still appliestoday• Arrest of the Rio 4• Purchase/ sale cycle also moved from short to longto short….• OST very careful to highlight our performance andsupport to key customers5


Why we have contract customers• Core customers• Enable a range of acceptable products - claims reduced to almost nil• We can sequence spot/contract in line with Mine outputs & mix• Qualified – greater confidence re LC’s, strategic positions in the region andgrowing• Longer term opportunities from relationships• Revenue consistency/predictability• Whyalla Supply Chain – managing minimal system redundancy• Supply chain runs well, it is efficient but there is limited sprint capacity.− Miss 1 ship and it cannot be caught up• Spot market falls or moves to oversupply then Whyalla has to competeaggressively with other sources• Avoid spot market gaming eg holding vessel nominations/LC’s etc to latestpossible time• Market challenges in China (hope for best but plan for issues)• Market volatility is greater than typically observed by “market watchers”(reported in indexes)• A “formal position” creates some order, otherwise volatile and unpredictable• Provides very good basis to cover issues6


Contract sales• Initially we had long term contracts totalling 2.4mtpa but working onmoving contract sales closer to our target range of 70-80% of total iron oresales• Will announce new contracts – some expected shortly• Core customers require a benchmark price (or a clear pricing mechanism)• In the absence of a benchmark price being settled it is common forprovisional prices to be based the Japan/Korea benchmark price• Potentially move to formula’s or alternatives should benchmarkagreement(s) not be reached (final stages) in the future7


Key market drivers – ore prices & ChinesedemandUSD / DMT250200150100500Iron Ore Price - CIF China63.5% Fe finesSpot China CIFContract - CIFBrazil22%China - Import SourceAust41%India18%RSA6%Other13%Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Apr-08Jul-08Oct-08Jan-09Apr-09Jul-09Oct-09Source: Tex Report:Source: CRU:China - Iron Ore Imports MtpaChina - Domestic Production Mtpa100075050025002006 2007 2008 2009eIron Ore100075050025002006200720082009eIron OreSteel8Source: Tex Report:Source: Tex Report:


14,00012,000910,0008,0006,0004,0002,0000Key market drivers - freightBaltic Dry Index• Declining spot iron ore cargoes –shifting back to traditional levels ofFOB contract customers (coveredby dedicated vessels)• Decline in freight distances asBrazil reverts to European supply• Decline in port congestion inNorthern China equivalent to ~10%of Cape capacity• New build deliveries slowing• But capesize capacity could morethan double by 2013 with limiteddemolition prospects2/01/20012/07/20012/01/20022/07/20022/01/20032/07/20032/01/20042/07/20042/01/20052/07/20052/01/20062/07/20062/01/20072/07/20072/01/20082/07/20082/01/20092/07/20094002000-200-400-600-800-1,000BDI - Daily VolatilitySource: BHPBilliton and Metal Bulletin3/01/20013/07/20013/01/20023/07/20023/01/20033/07/20033/01/20043/07/20043/01/20053/07/20053/01/20063/07/20063/01/20073/07/20073/01/20083/07/20083/01/20093/07/2009


OneSteel WhyallaInvestor Site Tour - Recycling24 November 2009Greg Waters – Chief Executive Recycling


We recycle metalsCustomersCollect &TransportSort &ProcessConsolidate& PackCustomersIndustrialShredTruckSteel MillsAuto WreckersCut to SizeBulk ShipFoundriesDemolitionBaleContainerSecondary SmeltersWaste MgmtSortersDoor Trade2


A strong core business with a nationalfootprintShredderYard3


A strategic international footprint createsoptionsMaine – Arundel, Augusta,Bangor & Oakland YardsUK – Stratfordon AvonBelgiumVirginia – ChesapeakeFlorida - Tampa Shredder& Port, ClearwaterIndia - ChennaiThailandVietnamChina - ShanghaiChina – Hong KongPhilippinesMalaysiaPNGFijiSydney - HOOperationsRSA - Cape TownAuckland NZJoint VentureTrading OfficesSub Agents – Turkey, Mexico, Korea4


A clear strategic intent• We are creating a sustainablyprofitable, international metal recycler• Delivering a packaged customerservice solution• built on:− cost effective metal recyclingcapability (buy/process/sell)− strong trading capability− speed and flexibility from multipletrading and value chain options5


Supported by a simple operating style• Passion• For safety, environmentalsustainability and the enduringcontribution of our business• For meeting our promise tocustomers• For our reputation with allstakeholders• People• A safe and rewarding workplace thatpromotes teamwork, respect,accountability and personaldevelopment.• Clarity of direction, role &responsibility• Simplicity & consistency of approach• Performance• Growing the value of our business• Decisions based on the best availablemarket & business intelligence• Speed in resolving critical businessissuesKey strategic relationshipsTrading expertise/leverageStrong operational platformand continuous improvementCost base – lowest quartile6


OneSteel is a natural ownerA full value chain model embraced byOneSteel, Nucor, Steel Dynamics, Schnitzerand others• A value creating investment in Metal Recycling• Enhanced earnings quality - volatility mitigationfrom full value chain participation• Synergy and service consistency• A source of:• Growth options• Market intelligence7


Some statistics to scope our businessFY09 Sales - SourceFY09 Sales - DestinationUSA15%SE Asia12%USA8%Nth Asia4%Australia67%Asia15%Other3%China28%Aust42%India3%Turkey3%8


Financial performanceRecyclingFY09$MFY08$MRevenue 1,124 1,404EBITDA (22) 98EBIT (39)* 87Sales Margin (EBIT) (%) (3.4) 6.2Assets 614 742Funds Employed 538 621Return on Funds Employed (%) (6.7) 13.9Employees (#) 1,016 1,127*Includes $30m inventory write down and $10m cost relating to contract cancellations in 1H FY099


Business environment is recovering slowlyMarket conditions are improving slowly, but:• Variable market sentiment, herd effect drivingferrous prices volatility• Steel capacity coming back• Chinese return to the ferrous scrap marketunderwrote demand through the GFC and stillshapes price etc• Turkish & Italian buyers all in or all out• Chinese demand has underpinned non ferrousmarkets, continued uncertainty elsewherecreates volatility• Developed economies manufacturing andconstruction activity is still down on pre GFClevels – prompt and obsolete scrap supply is stilltight, compounded by high collection rates prethe GFC• Intense competition for share of scrap metalssupply is compressing margins10


Record volatility in ferrous pricesBut prices are coming back towards an equilibrium reflecting marginalpig iron costs (in turn a function of spot iron ore and coal) and scarcityBenchmark HM1 - US West Coast to Nth Asia(Tex Price - USD / tonne, C&F, ROK)750700650600550500450400350300250200150100Tex HM1 Scrap C&F ROK - USD$800$700$600$500$400$300$200$100$0Jun-07Aug-07Oct-07Dec-07Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08Feb-09Apr-09Jun-09Aug-09Oct-0911CFR - USD / TonneJul-95Jul-96Jul-97Jul-98Jul-99Jul-00Jul-01Jul-02Jul-03Jul-04Jul-05Jul-06Jul-07Jul-08Jul-09


Non ferrous prices impacted by effects of GFC• Major price correction triggered bythe GFC• Rapid depreciation of the AUDprovided some mitigation• Equally rapid appreciation hascapped recoveryLME Prices - USD - IndexedLME Prices - AUD - Indexed120120100100806040806040AluminiumCopperNickel202000Jun-07Aug-07Oct-07Dec-07Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08Feb-09Apr-09Jun-09Aug-09Oct-09Jun-07Aug-07Oct-07Dec-07Feb-08Apr-08Jun-08Aug-08Oct-08Dec-08Feb-09Apr-09Jun-09Aug-09Oct-09Source: OST & AMR data12


Intake impacted by effects of GFC• Impact from GFC led to much lower industrial and construction activityaffecting supply of arisings• Intake volumes have been recovering steadily as industrial activityrestarts and stimulus spending starts to kick inGlobal Intake Tonnes - Index120100806040FeNon Fe200Q1FY09Q2FY09Q3FY09Q4FY09Q1FY10Source: OST Recycling13


Intake impacted by effects of GFC (cont.)• Buy prices impacted in Q1 FY10 due to short supply of arising• By September buy prices were around 30% above trend basedpredictions, still plus 15% in OctoberFerrous Buy Price - Index120100806040200Q1FY09Q2FY09Q3FY09Q4FY09Q1FY10Source: OST Recycling14


Getting the basics rightA change program aiming to upgrade the organisation’s culture andestablish sustainable core capability:• Safety• Operating Excellence• Sales and operations planning• Maintenance planning• LEAN• 6 Sigma• Organisation Effectiveness• Structure• Training15


Driving a lower cost baseCritical Elements of the current change programWhat:• Labour• Redesign (central / local) – ensure retain critical knowledge/expertise• Productivity – new targets, right incentives, EBA’s• Contractors – process designed around “value add” and demandmanagement• Contractor Management• Centralised where appropriate• New capability – asset support, waste management, recoveries of metals.• Processes - selective investment to improve operational performanceand built off the “experience of the customer”• Intake to despatch, site layouts x turn times,• Bin & truck sizes / collections / scheduling & systems• Asset performance & design− Shredder / bailer OEE / uptime− Excavator – right type / reliability for our intake and design− Selective investments to upgrade• Systems – removed “non supported” and non value adding16


Driving a lower cost base (cont.)Critical Elements of the current change programHow:• LEAN – systematic waste reduction, eliminating non value addingprocesses• 6 Sigma – project management tool delivering solutions grounded infacts and data and delivering change at a scale beyond the capacity ofLEAN• Equipment Reliability & Integrity – an enabling piece designed to set abaseline for effective asset management ultimately contributing toestablishing the right asset footprint and capability• Systems - centralised with access by yards on pricing, volumes andtargeted material17


Significant cost reductionsThe business has delivered significant cost reductions in responseto the GFC and changing business conditionsExpenses - Index1401301201101009080706050ActualPer Fe TonnePer Non Fe TonneQ1FY09Q2FY09Q3FY09Q4FY09Q1FY10Source: OST Recycling18


Value chain benefits• Recycling as a raw material business is ‘earlier in the curve’ havingexposure to international as well as domestic markets• The company has created communications channels that enable currentmarket intelligence to inform the greater organisation of situational change• The fuller value chain similarly facilitates the recycling business gainingimportant insights into the key customers’ situation• To capture synergies and transfer intelligence we actively work with millsthrough an upgraded Sales and Operations Planning mechanism• OneSteel also has a ‘management process’ capability typically beyondthe realm of recyclers – access to this capability is proving invaluable tothe speed and sustainability of Recycling’s change efforts19


The business has clear prioritiesGiven recent business circumstances our action plans focus ongetting the basics right, but, in anticipation of continued recovery, ourstrategic planning activity stretches our thinking:Getting thebasics rightSafetyMargins & costs, profitability & cashOperating Excellence – Trading Effectiveness – Organisation EffectivenessExtend & defendthe core businessGrowth optionsStep Outs20


Looking forward• Australian Business transformation• Building a stronger brand− Continued renewal of the business driven by – safety, operating excellence, trading andorganisation effectiveness• US Growth− Focus on safety, human capital, recapitalisation, tonnes @ source, competitiveness,professionalism and ethics.− Leverage “Trading” linkages (including Iron Ore) and market cycles− Includes normal business development activity, greenfield yards, bolt on acquisitions− Building upon increasing consumer demand for ‘recycling’ and political direction• OneSteel Recycling has a beach-head established in the US South East which isa prospective market for expansion. The region is a growing sub-economy withinthe worlds largest recycling market with space to create strong local positionsand effective niches• Leverage International trading opportunities• Non FE – core customers• China/Asia knowledge + relationships− Iron Ore/Fe Scrap customers21Bangor - Maine


• These presentations contain certain forward-looking statements with respect to the financial condition,results of operations and business of OneSteel and certain plans and objectives of the management ofOneSteel. Forward-looking statements can generally be identified by the use of words such as ‘project’,‘foresee’, ‘plan’, ‘expect’, ‘aim’, ‘intend’, ‘anticipate’, ‘believe’, ‘estimate’, ‘may’, ‘should’, ‘will’ or similarexpressions. All such forward looking statements involve known and unknown risks, significantuncertainties, assumptions, contingencies and other factors, many of which are outside the control ofOneSteel, which may cause the actual results or performance of OneSteel to be materially differentfrom any future results or performance expressed or implied by such forward looking statements. Suchforward-looking statements speak only as of the date of this presentation. Factors that could causeactual results or performance to differ materially include without limitation the following: risks anduncertainties associated with the Australian and global economic environment and capital marketconditions, the cyclical nature of the steel industry, the level of activity in the Australian construction,manufacturing, mining, agricultural and automotive industries and, to a lesser extent, the sameindustries in Asia and New Zealand, commodity price fluctuations, fluctuations in foreign currencyexchange and interest rates, competition, OneSteel's relationships with, and the financial condition of,its suppliers and customers, legislative changes, regulatory changes or other changes in the laws whichaffect OneSteel's business, including environmental laws and the Carbon Pollution Reduction Scheme,and operational risk. The foregoing list of important factors is not exhaustive. There can be noassurance that actual outcomes will not differ materially from these statements.22

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