SYDNEY MINING CLUBPRESENTATION
“The voice of the Customer”
MARK CUTIFANI, Managing Director
SONS OF GWALIA LTD
6 September 2001
SONS OF GWALIA LTD
AGENDA
• Introduction
• Business context
• Tantalum - A case study
• Sons of Gwalia - Strategic directions
• Summary - Portfolio position
SONS OF GWALIA LTD
ADVANCED MINERALSCore business
Profitable, Significant Growth
GOLDCore business
Profitable, Significant
MINERAL SANDSLow risk
opportunity
SONS OF GWALIA LTD - AN AUSTRALIAN MINER
SONS OF GWALIA LTD
SONS OF GWALIA OPERATIONS
WA
Wodgina
Greenbushes
Leonora Region
Laverton Region
Southern Cross Region
Murray Basin JV
GoldAdvanced Minerals
Perth
Port Hedland
Kalgoorlie
SONS OF GWALIA LTD
FOCUS ON RESULTS EPS(cents)
Pro
fit
A$
mill
ion
Profit after tax & before abnormals
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1993 1994 1995 1996 1997 1998 1999 2000 2001
0
10
20
30
40
50
60
SONS OF GWALIA LTD
MAJOR GOLD COMPANIES - 2000 ROIC
-5%
0%
5%
10%
15%
20%
25%
30% Sons of Gwalia - 24%
Sons of Gwalia - 24%
Source: Merrill Lynch, May 2001Source: Merrill Lynch, May 2001
SONS OF GWALIA LTD
RELATIVE PERFORMANCE
0.9
1.1
1.3
1.5
1.7
1.9
SGW AllRes Top100
Sons of GwaliaSons of Gwalia
SONS OF GWALIA LTD
BUSINESS CONTEXT
• Changing the rules
• Implications of change
• Tantalum - A case study
SONS OF GWALIA LTD
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
THE CUSTOMER IS LOOKING FOR NEW SOLUTIONS TO OLD PROBLEMS
SONS OF GWALIA LTD
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 THESECHALLENGES?
HOW DOES THE MINERALS INDUSTRY MEET THESECHALLENGES?
SONS OF GWALIA LTD
TANTALUM - A CASE STUDY
• Properties - A competitive edge
• Applications - An emerging position
• Market Growth - What can we see
• Gwalia’s response to the customer
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
TANTALUM APPLICATIONS
• Electronics– PCs, Palm Pilots– Video Cameras, Sony Playstations– Automotive electronics
• Telecommunications– Mobile Phones– Base Stations
• Alloys– Turbine blades in powerstations– Aerospace
SONS OF GWALIA LTD
ELECTRONICS
61%
ELECTRONICS
61%
MILL PRODUCTS
15%
MILL PRODUCTS
15%
METAL CUTTING
8%
METAL CUTTING
8%
CHEMICALS
6%
CHEMICALS
6% SUPER ALLOYS
10%
SUPER ALLOYS
10%
TANTALUM USAGE - 2000
TANTALUM DEMAND - 2000TANTALUM DEMAND - 20005 million lbs Tantalum5 million lbs Tantalum6.3 million lbs Ta6.3 million lbs Ta22OO55
SONS OF GWALIA LTD
TANTALUM DEMAND GROWTH
0.01.02.03.04.05.06.07.08.09.0
'000
lbs
Ta2
O5
Forecast @ 8%paForecast @ 8%pa
Historical tantalum demand Historical tantalum demand
SONS OF GWALIA LTD
CANADA - 8% CANADA - 8%
BRAZIL - 5%BRAZIL - 5%OTHER- 12%OTHER- 12%
GLOBAL TANTALUM RESERVE BASE - 2001
Sons of Gwalia - 75%Sons of Gwalia - 75%
Source: US Geological Survey - January 2001Source: US Geological Survey - January 2001
SONS OF GWALIA LTD
SOURCES OF RAW MATERIAL - 2000
Brazil
Africa
Other
Synthetics
US DLA
Russia
Asia
China
CanadaSons of Gwalia
26%
SONS OF GWALIA LTD
MAJOR TANTALUM MINES POST EXPANSIONS
0
200
400
600
800
1000
1200
1400
'000
lbs
per
an
nu
m
Brazil
Brazil
Brazil
Brazil
Canada
Canada
Ethiopia
Ethiopia
China
China
China
China
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
MANAGING THE MARKET
• Customer needs
• Value Chain
• Supply Chain Integration
• Product Research
• Promotion
SONS OF GWALIA LTD
STRATEGIC DEVELOPMENT
• Business model
• Core skills
• Core values
• Objectives
• Portfolio assessment
SONS OF GWALIA LTD
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?
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
TANTALUM PRODUCTION & SALES
0
500
1000
1500
2000
2500
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
‘00
0L
BS
‘00
0L
BS
ForecastForecast
GROWTH SECURED BY CONTRACTED
TAKE OR PAY SALES
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
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
SONS OF GWALIA LTD
SONS OF GWALIA - FOCUS ON RESULTS EPS(cents)
Pro
fit
A$
mill
ion
Profit after tax & before abnormals
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1993 1994 1995 1996 1997 1998 1999 2000 2001
0
10
20
30
40
50
60
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