Whyalla Analyst Presentation - Arrium

VISIONTo be the safest and most profitable manufacturer anddistributor of steel and other industrial products inAustralasia focused on delivering value toshareholders, customers and employees1 April 2004Safety 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 is MANDATORY.3 Sign-in procedures apply at the Steelworks 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.OneSteel Whyalla Steelworks welcomes you and hopes that your visit isinformative and enjoyable.1

3Contents1 Our Business2 Our Markets3 Our Current PositionP729B242Presentation to Analysts1 April 200441 Our BusinessP729B242Presentation to Analysts1 April 20042

5OneSteel OperationsOperating StructureOneSteelAustralian ManufacturingWhyalla SteelworksMarket Mills• Mining Operations• Sydney Steel Mill• Integrated Steelworks• Rod Mill• Structural Rolling Mills• Bar Mills• Rail Products Facilities• Wire Mills• Wire Ropery• Pipe and Tube Mills• Bright Bar MillAustralian Distribution10314 SteelOneSteeland TubeDistributionsites14 Sheet, Coil &sitesAluminium sites39 Reinforcing Mesh and38 Reinforcing sitesRebar14 PipingsitesSystems sites89 47 METALAND Metaland sites Franchises50 Metaland Franchises11 Midalia Steel sitesInternationalDistributionSteel & Tube Holdings• 50.3% shareholdingP729B242Presentation to Analysts1 April 20046Whyalla Steelworks Business OverviewCoffin Bay Mines• Iron Ore• Dolomite• Ancillary Fluxes Integrated Steelworks• Ore Processing →Finished Steel Products OneSteel TrakLok• Sleeper Manufacture• Rail Fastening SystemP729B242Presentation to Analysts1 April 2004Key Competitive Advantage –Low Cost Iron Ore (~63% Iron)3

7Management Team Whyalla Steelworks has an experienced steelmaking managementteamJim WhiteGeneral ManagerWhyallaSteelworksGavin HobartManagerOreProcessing andMinesBob PittsManagerRolling Millsand OperationsPlanningJohn BaggsManagerIronmakingTrevor HansfordManagerSteelmakingand CastingDon DartManagerMines AssetDevelopmentArthur GoodeManagerTechnology andEnvironmentSteve BushnellManagerEngineeringGraeme BarkwayManagerMarketingWhyallaSteelworksSid WilsonManagerBlast FurnaceAssetDevelopmentRon HardmanManagerCommercialWhyallaSteelworksScott OrpinManagerHuman ResourcesWhyallaSteelworksP729B242Presentation to Analysts1 April 20048Mining – Raw Materials SupplyWhyalla Steelwork’s key competitive advantage is itsaccess to low cost iron ore• Iron Ore Mines (All mines ~ 80 km by rail from WhyallaSteelworks)• Iron Duke• Iron Duchess• Iron Knight• Metallurgical Flux Mines• Ardrossan, Dolomite• Coffin Bay, Limesand• Quartz Quarry• Imported Raw Materials• Coal, NSW• Limestone, Japan• Ferrous Alloys – VariousP729B242Presentation to Analysts1 April 20044

9Iron Ore Resources and ReservesOperating Mines – High Grade HematiteYearOpenedResource>50% IronMtReserve toJORC Std.MtIron ReserveGradeIron Duke199017.613.063.3%Iron Duchess199822.811.463.6%Iron Knight199933.513.662.0%73.938.062.8%Contract Mining - HWEIntellectual Property - OneSteelIron Ore Reserves Current Life ~ 2020P729B242Presentation to Analysts1 April 200410Iron Ore Resources and ReservesNKatungaHillsEyre HighwayIRON KNOB(CLOSED)QUARTZ QUARRYCoffin BayIron KnobIron BaronIron DukePort AugustaWHYALLAArdrossanADELAIDENorthMiddlebackRangeCamel HillsCooyerdooIRON BARON(CLOSED)Kangaroo IslandSouth AustraliaWHYALLAIRON KNIGHTIRON DUCHESSIRON DUKESouth MiddlebackRangeLincoln HighwaySpencer GulfP729B242Presentation to Analysts1 April 20045

11Iron Ore Resources and ReservesOre Beneficiation Project• Reprocess off spec ore• Same cost ~ as mined ore• Contract mining – commence mid 2004• 5.4 mt at SMR5.7 mt at Iron BaronProject MagnetP729B242Presentation to Analysts1 April 2004• $6m feasibility study well underway to– Mine and beneficiate magnetite ore– Lower production cost of steel – lower impurities– Allow sale (export) of hematite– Allow the sale of more pellets• Extend Whyalla asset life beyond 2020• Iron Magnet mine will be below / adjacent to the Iron Duke mine• Outcome known around July 200412Iron Ore Resources and ReservesIron Ore Resources - Project Magnet• Project Magnet – Update• Drilling program completed – 49 holes• Current indications show similar geology and Fe recoveryto initial estimates• Metallurgical & pelletising testwork underway (CSIRO)• Mine planning commenced (RSG)• Engineering studies have commenced, inc equipmentlogistics & options• EIS commenced• Financial modelling underwayP729B242Presentation to Analysts1 April 2004• Getting independent validation of the ‘Value In Use’ ofmagnetite feed (Kobe)6

13SMR Mine AreaProject Magnet - Resource LocationMagnetiteDrilling AreaIron DukeMineP729B242Presentation to Analysts1 April 200414Production ProcessHotMetalSlagBillet CasterRod & Bar MillsIron Ore3.0 MtpaPellets &Lump Ore2.0 MtpaBlast Furnace1.2 MtpaCokeBOSSteelmaking1.2 MtpaLMForIRUTBlueScope Steel1.0 MtpaSlab/BloomCasterStructural MillDomestic / ExportRerollingCoal1.0 MtpaP729B242Presentation to Analysts1 April 20047

15Integrated Steelworks Facilities Pellet PlantEventExport PelletsFluxed Pellets from WhyallaWaste Gas Cleaning PlantCooler and Kiln Upgrade Coke OvensEventBattery 1Battery 2Continuous Oven Rebuilds from Blast FurnaceEventNo. 2 Furnace Blown InRefurbishmentCast House Floor RevampWorld Record ProductivityDust CatcherWater Treatment PlantYear1968198119982002Year196819801997Year196519811993199920012002P729B242Presentation to Analysts1 April 2004Continuous Maintenance and Capital Investment16Blast Furnace RebuildThe ScopeWhat:Hearth shell & refractoryStaves and Cooling SystemPaul Wurth TopWhen: June / July 2004How long:Approx 65 daysCost:$80M capitalImpact:Stock build to limit customers impactSydney Steel Mill fully loadedApprox $95M inventoryP729B242Presentation to Analysts1 April 2004Furnace will be modernised8

17Blast Furnace RebuildPre-RelineDetail planning continuing• Prework• Reline outage• Ramp upStockbuild – currently $57m, ultimately ~$95mApprox 90% of money committedLong lead time items• Most items in store• Final delivery staves and refractory March ’04Major contracts awarded• Electrical – Downer• Mechanical / Refractory – UKG• Process control S/W – Honeywell and McQuarrieP729B242Presentation to Analysts1 April 200418P729B242Presentation to Analysts1 April 2004Blast Furnace RebuildReline OutageKey senior personnel on site – Project Team andContractorsContinual review refinement of outage schedule• 63 to 67 days• Blow out plan• Rebuild schedule• Blow in planWork commenced on site• PWT test rig• High voltage and process control• Site mobilisationResources being assembled for outage• People• Equipment• Fabrication and purchasing9

19Blast Furnace RebuildP729B242Presentation to Analysts1 April 200420Blast Furnace RebuildNote – dotted lineshows top of newhopper & top of Skipwill be raised 6m.P729B242Presentation to Analysts1 April 200410

21Integrated Steelworks Facilities BOSEvent2 Vessels @ 130tHot Metal DesulphuriserIRUT/Sublance/Electrics/ControlsLMF/Alloy SystemNew Vessel ShellsBOC Oxygen Plant CommissionedYear19651991199219991999/20002001 CastersEventCombination Slab/Bloom Caster5 Strand Billet CasterYear19921999P729B242Presentation to Analysts1 April 2004Continuous Maintenance and Capital Investment22Integrated Steelworks Facilities Rolling MillEventCommenced Rolling IngotsRail Finishing EndRevamp for Slabs/Blooms(new rolling stands, etc)Cooling Beds/Capacity UpgradeYear1964198219921996Continuous Maintenance and Capital InvestmentP729B242Presentation to Analysts1 April 200411

23Energy & Services DataTotalBought In(over fence)MagnitudeComparatorElectricity40 – 45 megawatts(360,000 MWh pa)15 – 20 megawatts(150,000 MWh pa)Total is 3.0% of state load20,000 room air conditionersFresh Water 3,600 mega litres pa All Whyalla township(population 25,000)consumes about sameamount of waterNatural Gas- General- Co Gen Plant3.5 – 4.0 petajoules pa0.9 petajoules paAllAll(COGEN plant produces100,000 MWh paAbout 6% of state load.Excluding power stations,OneSteel is the secondlargest customer in stateBy-productsGasApprox 12 petajoules pa(50% Blast Furnace gas;50% Coke Ovens gas)AllAs CoalThese by-product gasesdisplace $40M pa of whatotherwise would bepurchased natural gasand/or electricityP729B242Presentation to Analysts1 April 2004Saltwater 180,000 mega litres pa Pumped fromSpencer GulfOxygenNitrogenArgon160,000 tonnes pa15,000 tonnes pa2,000 tonnes paAll(From on site BOCowned plant)Sydney Harbour is approx500,000 mega litres(40% of Sydney Harbour pa)Largest customer of suchgases in SA.Equivalent to 50,000standard oxygen cylindersper day24Technology / Operational Alliances Pellet Plant - Hatch- Kobe Blast Furnace - Danieli Corus- BlueScope Steel Limited- Kawasaki Steelmaking - Concast- von Moos- Trinecke- Kobe Rolling Mills - Nippon Steel CorporationP729B242Presentation to Analysts1 April 2004Whyalla is well connected12

25LabourWhyalla Employees• 1996 - 2,359• Now - 1,300P729B242Presentation to Analysts1 April 2004Significant Contractor Base ~ 40% of hours• Mining - HWE• Railways - ARG• Materials Handling - Brambles / Metserv• Oxygen - BOC• IT Support - CSC• Maintenance - UKG / others• Laboratories - Amdel• Engineering – Hatch• Sea Transport – CSL/ISMContractor focus on reducing service delivery cost262 Our MarketsP729B242Presentation to Analysts1 April 200413

27Semi Finished Products~12m600 ~ 1850mm250 – 200mmSlab~8m300 – 450mm250mmBloomP729B242Presentation to Analysts1 April 2004~12m127 &175mm127 & 175mmBillet28Finished ProductsUNIVERSALCOLUMNSPARALLEL FLANGECHANNELSRAIL100 mm to 310 mm150 mm to 380 mmEQUAL ANGLES41 Kg/m – 68 Kg/mPlain CarbonHead HardenedUNIVERSAL BEAMS125 mm to 200 mmSLEEPER SECTION150 mm to 610 mmUNEQUAL ANGLESMainline – 6.5 mm to 10 mmHeavy Haul – 9 mm to 14 mm150 x 90 & 150 x 100P729B242Presentation to Analysts1 April 200414

29Whyalla Steelworks Repositioned With the introduction of the billet caster, WhyallaSteelworks has repositioned itself The markets now served are fundamentally different Whyalla is inextricably linked to the OneSteel value chain 2/3 of OneSteel steelmake via integrated route“Previous” MarketCurrent MarketDomesticProduct55%Export(Structural Slabs)5%ExportProduct45%Domestic(Billets/StructuralsRails/Slabs)95%P729B242Presentation to Analysts1 April 2004Repositioned from export to domestic30P729B242Presentation to Analysts1 April 2004Major Project WorkCurrent• Regional Fast Train – Victoria• Chatswood to Epping Rail Link• Kambalda to Esperance Gas Pipeline• Telfer Mine expansion & Gas Pipeline• Enertrade pipeline• Darwin LNG• Hi-Smelt• Comalco Plant - Gladstone• M7 Western Orbital – Sydney• Sydney CBD cross-city Tunnel• Latitude 2 – Sydney• Rhodes Shopping Centre• Auburn Central Development• Exhibition Street development – Melbourne• Eureka Bld – Melbourne• Melbourne Cricket Ground• Tasmanian Wind towers• BHP Billiton Area C• RACV development – Melbourne• Herald Weekly Times Tower – Melbourne• Aurora Tower, Brisbane• Brighton on Broadwater – Gold Coast• Ephrim Island – Gold Coast• Spencer Street Station• Adelaide AirportUpcoming• Alcoa Pinjarra Upgrade – Western Australia• Trans-Territory pipeline (Blacktip to Gove)• Brighton on Broadwater (Stages 2& 3)• Comalco WEIPA Refinery• Aldoga Smelter• SAMAG• Ravensthorpe Nickel – Western Australia• Alcan Gove Expansion• Burrup Fertiliser• Falcon Bridge (New Caledonia)• RAC Track upgrade• Brisbane Water Treatment Plant• Albany Grain Terminal• Apache Gas field development• Comet Coal – Blackwater Queensland15

31Price Increases to Recover Material Cost Increases Price increases since Jan 04:• SIC - 4% (Feb 04)+ 6% (Apr 04) + 16% (rebar May 04)• Whyalla Structurals 7% - April 04• Merchant Bar – 10% March 2004• Manufacturers Wires – 4% March 04• Structural Pipe & RHS – 6.5% April 04• Rural Wire – 5% May 04• Fence Posts – 8% Apr 04P729B242Presentation to Analysts1 April 200432Whyalla’s Route to MarketProductBilletsStructuralsRailsSleepersSlabsIron Ore / CokeDolomitePelletsDistribution ChannelInter-divisional to Market MillsDomestic steel distributioncompanies, including OneSteelDistributionDirect to end userDirect to end userDirect to re-rollerDirect to end userDirect and Trading CompaniesTrading CompaniesUsed to produce rod and barStructural frames forbuildings, factories, bridgesand other infrastructureRailsSleepersUsed to produce various flatproductsSteelmaking / Process FeedSteelmaking, OthersSteelmakingEnd UseP729B242Presentation to Analysts1 April 200416

33Competitive Position Main Competitors include:Structurals – ImportsThailand, Korea, South AfricaStructurals – Domestic Steel CompetitorsStructural tube, Roll-formed sectionsStructurals – Intermaterial ProductsConcrete (in-situ, pre-stressed, tilt-up), Structural timberRails – ImportsVarious international millsRail Products – Inter-material ProductsConcrete, TimberKey AdvantagesSole domestic manufacturer of a large range of structural and rail productsShort supply lead times and reliable delivery performanceSuperior sales and technical serviceP729B242Presentation to Analysts1 April 2004343 Our Current PositionP729B242Presentation to Analysts1 April 200417

35“Licence to Operate” - SafetyOneSteel Combined Employee / ContractorSafety PerformancePrevious YearsPrevious YearsMonthly ActualMonthly Actual412MMA3012MMAFrequency Per Million Hours321Frequency Per Million Hours25201510500200120022003YTDMarAprMayJunJulAugSepOctNovDecJanFeb200120022003YTDMarAprMayJunJulAugSepOctNovDecJanFebLTIFRMTIFRP729B242Presentation to Analysts1 April 200436“Licence to Operate” - Environment Major Environmental Projects since 1993ProjectBlast Furnace Casthouse FloorBOS Secondary Fume EmissionsCoke Ovens Battery DoorsReed BedsSite Upgrade and RegreeningPellet Plant Waste Gas Cleaning ProjectPellet Plant Fugitive DustBlast Furnace Water TreatmentTOTAL$ million189541364784P729B242Presentation to Analysts1 April 2004ISO14001 Accreditation achieved – Environment Management Systems18

37DustImpacts a relatively small areaProgress so far• Step change – waste gas cleaning plant - $36M• Continuing small step ~ $6M• Operating cost ~ $4.5M• Continuing decline in dust levelsFuture actions• EPA / Community report – extensive consultation• Major commitments to 2008• Continuing small stepsP729B242Presentation to Analysts1 April 200438DustP729B242Presentation to Analysts1 April 2004Blue Area - Whyalla TownshipRed Area - Some EffectYellow Area - More Effect19

39Operational SuccessesWhyalla Operational ImpactsBF management process working wellRecord billet production in 6 monthsExport slabs instead of structurals64 days to reline6 Months Ending 6 Months Ending %December 2002 December 2003 Change(Tonnes) (Tonnes) in TonnesP729B242Presentation to Analysts1 April 2004Pelletmake 853,361 813,316 (5%)Ironmake 599,897 599,401 0%Total Steelmake 606,686 583,290 (4%)Billet make 308,010 316,678 3%Structural Mill 238,347 202,562 (15%)40Whyalla Steelworks Key Strengths Low cost iron ore Flexible production capabilities – integrated into OneSteel• Product choices – billets, slab, structurals• Continuous investment• Continuous maintenance Predominant domestic producer of medium structurals,rails, and special billet grades Established contractor partnerships Capable, can do workforce and management Broad community supportP729B242Presentation to Analysts1 April 200420