Investor Day - Xstrata

Trading and logistics are integratedFarmingMarketing/freightOriginationelevators /silosPortelevators /silosMarketing/freightBreak bulkdistributionRice milling Oilseed crushing Wheat flour milling Biodiesel productionProcurement / marketing assetsProcessing assetsMarketing activities (no assets)FarmingOrigination and portelevatorsProcessing assetsMarketing• Provides supply of commodity atfarm cost price. Long term flatprice long position• Economies of scale to ensurebest practices, machinery andlogistics sharing, low costproducer• Ability to hedge single and multiyear in related futures markets• First hand source of informationon local conditions• Elevators and port facilities havetheir own earnings stream(storage and through put fees)• Supportive of the procurementbusiness enabling purchasesdirectly from farmers• Up country storage capacitycritical to the purchase ofgrain/oilseeds at harvest• Crucial to ensure timely deliveryto load ports particularly in anenvironment of high capacityutilization or export bans/quotas• Logistics delays to the last 10%of the cargo/program delay itsentirety, cannot rely on thirdparties for 100%• Processing margin provides anearnings stream• Supports raw materialprocurement, commodity maybe diverted for export• Products feed into marketingbook (oilseeds, rice)• Production margin locking andunlocking (oilseed crush,biodiesel)• Milling assets provide an outletfor wheat• Procurement margin and carrytrades• Intra/origin commodity arbitrage(wheat, corn, barley, softseed)• Inter commodity arbitrage (feedcompound raw materials, oilcomplex).• Production economics arbitrage(oilseed crush, biofuels)• Time spreads• Freight arbitrage (betweenvessel types) and optionalitytrades• Some flat price positions takenbased on real physical marketinsightRepresents earnings streams78