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SYDNEY MINING CLUB PRESENTATION “The voice of the Customer” MARK CUTIFANI, Managing Director SONS OF GWALIA LTD 6 September 2001.

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Presentation on theme: "SYDNEY MINING CLUB PRESENTATION “The voice of the Customer” MARK CUTIFANI, Managing Director SONS OF GWALIA LTD 6 September 2001."— Presentation transcript:

1 SYDNEY MINING CLUB PRESENTATION “The voice of the Customer” MARK CUTIFANI, Managing Director SONS OF GWALIA LTD 6 September 2001

2 S ONS O F G WALIA L TD AGENDA Introduction Business context Tantalum - A case study Sons of Gwalia - Strategic directions Summary - Portfolio position

3 S ONS O F G WALIA L TD ADVANCED MINERALS Core business Profitable, Significant Growth GOLD Core business Profitable, Significant MINERAL SANDS Low risk opportunity SONS OF GWALIA LTD - AN AUSTRALIAN MINER

4 S ONS O F G WALIA L TD SONS OF GWALIA OPERATIONS WA Wodgina Greenbushes Leonora Region Laverton Region Southern Cross Region Murray Basin JV Gold Advanced Minerals Perth Port Hedland Kalgoorlie

5 S ONS O F G WALIA L TD FOCUS ON RESULTS EPS (cents) Profit A$ million Profit after tax & before abnormals

6 S ONS O F G WALIA L TD MAJOR GOLD COMPANIES - 2000 ROIC Sons of Gwalia - 24% Source: Merrill Lynch, May 2001

7 S ONS O F G WALIA L TD RELATIVE PERFORMANCE Sons of Gwalia

8 S ONS O F G WALIA L TD BUSINESS CONTEXT Changing the rules Implications of change Tantalum - A case study

9 S ONS O F G WALIA L TD BUSINESS CONTEXT - A CHANGING WORLD Information and Communication Faster / Higher - Focus on performance Life cycle costs Technology obsolescence Environment - Energy efficiency THE CUSTOMER IS LOOKING FOR NEW SOLUTIONS TO OLD PROBLEMS

10 S ONS O F G WALIA L TD BUSINESS CONTEXT - IMPLICATIONS A new world - Looking for new solutions Material Sciences - Identifying possibilities Light Metals - The new wave Base Metals - Future position? HOW DOES THE MINERALS INDUSTRY MEET THESE CHALLENGES?

11 S ONS O F G WALIA L TD TANTALUM - A CASE STUDY Properties - A competitive edge Applications - An emerging position Market Growth - What can we see Gwalia’s response to the customer

12 S ONS O F G WALIA L TD WHAT IS TANTALUM? Grey-blue metal Soft, ductile High melting (2,997ºC) and boiling points (5,425 ºC) Low co-efficient of thermal expansion Excellent capacity to store and release electrical charge Exceptional resistance to corrosion

13 S ONS O F G WALIA L TD TANTALUM APPLICATIONS Electronics –PCs, Palm Pilots –Video Cameras, Sony Playstations –Automotive electronics Telecommunications –Mobile Phones –Base Stations Alloys –Turbine blades in powerstations –Aerospace

14 S ONS O F G WALIA L TD ELECTRONICS 61% MILL PRODUCTS 15% METAL CUTTING 8% CHEMICALS 6% SUPER ALLOYS 10% TANTALUM USAGE - 2000 TANTALUM DEMAND - 2000 5 million lbs Tantalum 6.3 million lbs Ta 2 O 5

15 S ONS O F G WALIA L TD TANTALUM DEMAND GROWTH Forecast @ 8%pa Historical tantalum demand

16 S ONS O F G WALIA L TD CANADA - 8% BRAZIL - 5% OTHER- 12% GLOBAL TANTALUM RESERVE BASE - 2001 Sons of Gwalia - 75% Source: US Geological Survey - January 2001

17 S ONS O F G WALIA L TD SOURCES OF RAW MATERIAL - 2000

18 S ONS O F G WALIA L TD MAJOR TANTALUM MINES POST EXPANSIONS Brazil Canada Ethiopia China

19 S ONS O F G WALIA L TD TANTALUM - ORGANIC GROWTH FOCUS ON STABILISING THE MARKET AND DELIVERING VALUE TO OUR CUSTOMERS Dominant Resource position Regional positions / Established infrastructure Low cost production Take or Pay Contracts –Growth profile –Revenues protected Multiple options for growth

20 S ONS O F G WALIA L TD MANAGING THE MARKET Customer needs Value Chain Supply Chain Integration Product Research Promotion

21 S ONS O F G WALIA L TD STRATEGIC DEVELOPMENT Business model Core skills Core values Objectives Portfolio assessment

22 S ONS O F G WALIA L TD STRATEGIC DIRECTIONS - BUSINESS MODEL Commodity -Growth potential -Resource positions Capital Intensity-Establishment -Risk profile Margin Potential-Cost structures -Revenue risks DOES THE INDUSTRY STRUCTURE GIVE AN OPPORTUNITY TO MANAGE RETURNS?

23 S ONS O F G WALIA L TD SONS OF GWALIA - CORE SKILLS Geology -Regional exploration -Working-over ground Mining-Low Capital intensity -No frills Process-“Breakers” and “Shakers” -Infrastructure hubs UNDERSTANDING OUR SKILLS BASE KEEPS US FOCUSSED ON WHERE WE CAN ADD VALUE

24 S ONS O F G WALIA L TD STRATEGIC DEVELOPMENT OBJECTIVES GOLD -Secure production base -Improve quality of returns -Establish industry relevant position TANTALUM- Secure resource position -Establish critical mass and low cost growth platform - Increase market penetration MINERAL- Establish Resource base SANDS - Establish product quality and market potential - Promote Murray Basin brand POSITION FOR EXCEPTIONAL RETURNS AND PROFITABLE GROWTH

25 S ONS O F G WALIA L TD GOLD - A CORE BUSINESS Profitable, high cash flow business Underwrite revenue through hedging Focus on capital efficiency & total returns –Infrastructure hub –Flexible ore sources –Rationalise to reduce costs 3 strategic regions –Leonora –Southern Cross –Laverton

26 S ONS O F G WALIA L TD PACMIN BID - RATIONALE EARNINGS ACCRETIVE WHILE STRENGTHEN BASE TO MANAGE PROFITABLE GROWTH Strengthen Regional Positions Secures Production / Cost Base Enables more Effective Capital allocation Improves Industry Gold Position Strengthens Balance Sheet / Cash Flows

27 S ONS O F G WALIA L TD TANTALUM PRODUCTION & SALES ‘000LBS Forecast GROWTH SECURED BY CONTRACTED TAKE OR PAY SALES

28 S ONS O F G WALIA L TD MURRAY BASIN TITANIUM First mineral sands producer Commissioned March 01 Sales contracts in place First shipments June 01 Production: –30,000tpa rutile –10,000tpa zircon –30,000tpa ilmenite Total Resources: 15.4Mt HMC 156% increase in Resources in 12 months Excellent exploration potential

29 S ONS O F G WALIA L TD MURRAY BASIN 2002 BUSINESS OBJECTIVES Ramp production to full capacity Establish Murray Basin Titanium Brand –Rutile –Zircon Consolidate Resource base to underwrite Stage II potential Confirm ilmenite processing & market quality POSITION FOR NEXT DEVELOPMENT PHASE

30 S ONS O F G WALIA L TD SONS OF GWALIA - OPPORTUNITIES FOCUS ON CUSTOMER NEEDS WILL PLAY A SIGNIFICANT PART IN DIRECTING OUR FUTURE DEVELOPMENT TITANIUM - The third wave? LITHIUM - The fourth wave? OTHER - New technologies - New applications

31 S ONS O F G WALIA L TD SONS OF GWALIA - ASSET PORTFOLIO PORTFOLIO STRUCTURED TO DELIVER RETURNS AND PROFITABLE GROWTH GOLD - Long-term sustainable profits TANTALUM - Growth profile MINERAL SANDS - Seeding an Opportunity OPPORTUNITIES - Identifying strategic fit

32 S ONS O F G WALIA L TD SONS OF GWALIA - FOCUS ON RESULTS EPS (cents) Profit A$ million Profit after tax & before abnormals

33 S ONS O F G WALIA L TD S ONS OF G WALIA www.sog.com.au S ONS O F G WALIA L TD

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