Linden Tree Partners, LLC Presentation to:

Industrial Minerals Events

Fluorspar 2013 October 30, 2013

HFOs – The New Generation of Fluorochemicals

HFOs – The New Generation of Fluorochemicals

• Linden Tree Partners – Who We Are/What We Do (quick, we promise!)

• Some HFO Basics

• It’s Not Easy Being Green

• What Happens Next?

• Discussion

Linden Tree Partners: Who We Are, What We Do

Linden Tree Partners: A New Consulting Model

The Linden Tree –

hearty across the globe,

rapid growth,

reaching great heights,

lasting for centuries

and symbolic of wealth creation,

discretion and common sense.

The Linden Tree signifies

enterprises at their best.

-

• Global network, language & cultural skills

• Natural resource value chains – from specialized end-uses backward

– Oil/natural gas

– Mined resources: metals and others (including global fluorspar value chain)

– Agriculture/Arboriculture and Other Renewables

– Water

Large firm strategy/operations analytics +

Industry consultancy content +

Operating company executive action =

Fast Results / Pragmatic Solutions

Some HFO Basics

What Are Hydrofluoroolefins = HFOs?

• Refrigerant and Blowing agent

– Foams: one component

– Aerosols: novelty, lawn & garden

• Lower vapour pressure than HFC-134a

• Short atmospheric lifetime HFO 1234ze

1,3,3,3 Tetrafluoropropene ODP=0, GWP=6

HFO 1234yf 2,3,3,3 Tetrafluoropropene

ODP=0, GWP=4

• Refrigerant

- Mobile air conditioning (MAC)

- Retail & Institutional coolers

• Short atmospheric lifetime

- 11 days vs. 13 years for R-134a

What’s At Stake

Estimated Global HFC Consumption 2012

(MMTCO2eq.)

Developed Region MAC Refrigerant Market

2012

Refrigerant (134a basis)

Fluorspar

Refrigerant (134a basis)

Fluorspar

Volume (KTA)

200

100

0

Refrigeration/AC

Foam

Aerosol

Fire Extinguisher

Solvents

Decades of Refrigerants Industry Innovation: Focus on Safety & Environment

1950s HCFCs

1970s

1980/90s HFCs

Pre-1930

1930s CFCs

Focus: effective cooling Compounds: Ammonia, Methyl Chloride, Sulfur Dioxide Issues: Toxicity and Flammability

Focus: Reduced Toxicity and Flammability Risks Introduction of CFCs

Focus: Reduced Environmental Impact/Ozone Depletion Discovery of CFC contribution to ozone depletion

Focus: Reduced Environmental Impact /GWP Montreal Protocol (1987 – CFC/HCFC) Kyoto Protocol (1997- HFC)

Focus: Reduced Environmental Impact/GWP Continued refrigerant phase outs – developed and developing countries

Focus: Reduced Toxicity Introduction of HCFCs

2000s HFOs

It’s Not Easy Being Green

HFO Innovation: Focus on Environment & Safety – Or Not?

2006 17 May: Directive 2006/40/EC issues for mobile air conditioning with objectives of controlling leakage of fluorinated greenhouse gases with >150 GWP and prohibiting from a certain date MACs using those gases 2012

22 June: HFO-1234ze US EPA VOC exempt 25 September: Daimler announces refusal to use HFO-1234yf in vehicles 26 September: DuPont responds blaming Daimler 3 October: Honeywell responds similarly to DuPont 10 October: Mercedes Benz begins recalling SL class vehicles with HFO 1234yf to rebuild with R134A 11 October: Mercedes Benz and Honeywell meet – Honeywell ask MB to review designs 23 November: EU indicates to MAC suppliers that after 31 December EU member states cannot allow registration of any subject vehicles containing R134A 13 December: Daikin announces intention to use HFC 32 in its air conditioners – “– “the next generation refrigerant is not something that can be decided upon just based on the inclinations of the refrigerant producers alone. As the only manufacturer involved in all phases from refrigerant development to development of air conditioning equipment, Daikin considers HFC32 to be the most suitable refrigerant for split air conditioners and heat pumps…” Balance of Year: VDA and ACEA debate required to estimate risks and take any countermeasures 31 December: After this date, 2006/40/EC requires MAC refrigerants with GWP<150 to be installed in subject vehicle platforms

2013 7 February: Daimler, Audi and BMW leave the SAE R-1234yf CRP team indicating in their view that tests performed are insufficient to fully judge vehicle safety 14 February: According to German ASP, German KBA safety authority will put pressure on Mercedes Benz to ensure vehicles sold use HFO 1234yf 5 March: BMW announces electrical i3 will be equipped with 1234yf 6 March: Daimler announces it has decided on CO2 for MAC. Honeywell describes as desperate attempt to further delay 28 March – EU VP Tajani states no legal grounds to approve an exemption and states intention to take action against any Member State who fails to enforce the directive 3 April - - Opel conducts test and no flammability 14 June: EC grants Germany 10 more weeks to demonstrate safety concerns re HFO-1234yf or comply, threatening infringement proceeding otherwise 21 June: SAE CRP group (absent German automakers) re-endorses safety of HFO 1234yf 16 July: Honeywell announces HFO1234yf has GWP less than CO2 27 August: France top administrative court issues temporary injunction lifting sales freeze on noncompliant Mercedes models until definitive ruling 27 August: Toyota Deutschland reportedly announces plans to revert to R134A for three models, joining Mercedes Benz. States “no consensus” and desire to “dispel any possible concerns our customers might have” 28 August: Daimler announces France has lifted suspension until definitive ruling has been given (estimate 12 months) 22 October: DuPont calls on German and EU authorities to bring closure to HFO 1234yf safety issue 29 October: DuPont announces separation of Performance Chemicals division in tax-free spinoff

“When Bad Things Happen to Good People”

LEADER Nonmarket

Strategy

Economics Psychology Ethics Political Science

“Born under a lucky star” “The best or nothing”

“The perfect combination of fascination and responsibility”

Market Strategy

“We are building a world that's safer and more secure … More comfortable & energy efficient …More innovative & productive.”

“The miracles of science.”

“Better things for better living”

The Mercedes Moose vs. Toyota Sudden Acceleration

Company/Event Share Price

Drop (%)

Share Price Drop

($B)

Market Cap Equivalent

Reputation Event Year

Toyota – Sudden Acceleration

24% 33 Time Warner 2004-2010 plus ongoing

lawsuits

BP – Deepwater Horizon

50% 90 P&G 2010

Used with permission of Daniel Diermeier EXPERTISE

TRANSPARENCY COMMITMENT

EMPATHY

Writing the Rest of the Story

HERO

VILLAIN VICTIM

Writing the Rest of the Story

HERO

VILLAIN

What Happens Next?

Possible Substitutes: Natural Refrigerants?

Refrigerant ODP GWP

CFC High High

HCFC Low High

HFC Zero Moderate

HFO Zero Low

HC Zero Low

CO2 Zero Negligible

Helium Zero Negligible

Ammonia Zero Zero

STATIONARY REFRIGERATION MOBILE AIR CONDITIONING

CO2?

So What Happens from Here?

Consideration Issues/Considerations

Regulatory Requirements/Stance Ever more stringent but with focus on voter needs/economics especially in developed geographies

HFO Product Development Customer desire for global solutions: refrigerant relatively small cost of finished good/service total cost of ownership

Development of HFO Substitutes Total cost of ownership/total functionality – equipment versus refrigerant trade offs

Fluorochemical Reputations Long development lead times in rapidly shifting environment for mature industry. Patent landscape more complex than in “Teflon era”

Automotive Reputations Focus on consumer purchase criteria/global vehicles – environmental important to only a small, select customer group today

Consumer Reaction “Who cares?” – unwillingness to pay more today for lesser environmental impact

Environmental Activism Murky – fight on or shift to different category?

Range of Possible Impacts on Fluorspar Demand

Scenario Description Impact on Spar Demand

Winter Solstice (It Gets Brighter from Here)

Full HFO MAC Adoption

Deutschland Uber Alles Germany Opts Out

Summer Solstice Europe Opts Out and Change Impetus Weakens Elsewhere

Bubbly World MAC Transition to CO2

Discussion / Questions

Linden Tree Partners www.lindentreepartners.com

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+ 1-847-482-1243 fax

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