Strategic framework of the development of SNIM

SOCIETE NATIONALE INDUSTRIELLE ET MINIERE
Strategic Development Framework
(CSD)
2012-2025
Mauritanides October 2012
|
1
Vision & CSD
2
Industrial strategy
3
Impacts
| 1
1.1
VISION :
TOP 5 - 2025
Become amongst global top 5 exporters of iron ore by
2025 with the following objectives :
 Capacity : 40 Millions tons p.y + JVs
 Production cost : < 40 USD $/t
| 2
1.2
Strategic Development Framework (CSD)
Axis 1 - Geological research
▪
▪
▪
To pass a sufficient budget to set up and carry out the
slippery programs ( i.e systematically carried forward on the
following year )
To Take advantage of all the new research techniques and
data processing systems /data preservation
To draw / train / develop / retain the critical skills in geology,
hydrology, and boring
Axis 4 - Promotion of skills
▪
▪
▪
Implement a dynamic and modern training system
Establish a dynamic and inspiring motivation
system
Establish a modern system of compensation and
classification
Axis 6 - Development of the
partnership
▪
▪
▪
▪
▪
▪
Axis 2 - Increasing capacity
▪
▪
▪
▪
▪
▪
Succeed in Guelb 2 start
TO14 / Rouessa facilities renovation
Extra Production of 4MT of concentrated
Prospecting for additional reserves of + 60Mt
Feasibility study of iron ore processing centre in the northern
side
Preparing the port to accompany the growth
Make of SNIM a perennial and
competitive company , and an
important “actor” in iron ore.
Set models of partnerships
Develop a code of partnership
Encourage partnership creating added value
Correct weaknesses in existing agreements
Establish a mechanism to limit the negative impacts on SNIM
business core
Formalize the opportunities / risks of partnerships
Axis 7 – Sustainable
development
▪
▪
▪
▪
valuation program / continuous improvement of
environmental performance taking into account
economically viable technological developments
Comply with the national laws and regulations relating to
the protection of the environment as well as environmental
partners
Implement good practices and strategies to prevent
pollution
Maintain certification of the system
Axis 3 – operational efficiency
▪
▪
▪
▪
▪
▪
▪
Strengthening of the productivity through continuous
improvement of exploitation conditions
Formalize purchase / maintenance policy
Equip the mine with necessary capacities to create flexibility
and ensure the accomplishment of the programs of
production
Develop planning function
Modernize ,Revitalize infrastructure dedicated to
maintenance and warehouse
Acquire useful logistics to production and maintenance
operations
Outsource some tasks
Axis 5 - positioning on the
market
▪
▪
▪
▪
▪
Quality of products as the highest priority
Offer SNIM around 3 products with possibly an
opportunity product
Target Markets in order of importance: Europe
(60%), China (40%), Japan, Asia
Alignment on the market prices
Direct contracts with privileged iron and ore
metallurgists
Axis 8 - Integration into the
national economy
▪
Exploration of all niches of growth to develop added valuegenerating activities
| 3
The CSD is reframed around 4 key pillars, with industrial strategy at the core
III
Pillar III: Partnership strategy
Accelerating development
through targeted partnerships
Development and
performance goals
I
Pillar I: Business / portfolio strategy
Orienting the long-term business development portfolio and program:
▪ Targeting of markets / products
▪ Pricing policy / contracting / client segmentation
II
Pillar II: Industrial strategy
End-to-end industrial strategy (mine  port)
▪ Developing / optimizing capacity
▪ Enhancing the competitiveness of the
industrial system
IV
Pillar IV: Financial and organizational strategy
Overhaul / adaptation of the group’s main structures
▪ Organizational structure / HR / competencies
▪ Finance and management systems
| 4
1
Vision & CSD
2
Industrial strategy
3
Impacts
| 5
Industrial strategy consolidated by SNIM, ensuring competitive growth to
~40 Mt by 2020-2025
3 major axes of SNIM’s industrial strategy
to deliver on capacity , on time, on cost, on quality
a
SNIM’s mineral deposits
▪
▪
▪
Iron ore market demand
Growth focused
on poor ores
Sufficient geological
potential for an LT
capacity of 40 Mt
▪
Demand set to grow until
2020, then level off from
2025
▪
Supply set to race for
2020-25 market position
▪
Quality (iron, silica) as
critical positioning factor
▪ Wet processing generalized for
low grades
▪ Water pipeline NDB => ZRTE
Ore with a high
concentration of iron
▪ Capacity of 40 Mt in 2020-25
▪ Cost competitive: < 40 $/t
▪ Product quality
Silica-rich products
b
(Fe > 65%, silica < 4~5)
Consolidation of the
industrial system
▪ Ore production complexes at
scale ( 10-15 Mt)
▪ Magnetites from Guelbs Nord,
as best orientation (>1 bn tons)
c
Operational
excellence
▪
▪
▪
▪
Operational standardization
Maintenance strategy
Planning/supply chain optimization
Lean Capex
Attractive option of downstream integration
in DRI, through partnerships
| 6
Sufficient geological resources for 40-Mtpa growth scenario
Inventory of SNIM’s geological resources
Millions of commercial tons
~xx Mt
~750
~200
Resources in tons of
crude ore
~40,00080,000
~3,750
~17,000-32,000
~15,000-30,000
Growth goals
40 Mtpa
(1,200 Mt of
reserves required)
~1,500
~300
~200
Proven magnetite
High-grade and
mixed hematite
Reserves
Magnetite from
other Guelbs
BHQ from the
Kedia3
Total
Potential
| 7
Global market requirements : Necessity to improve the process to
maintain competitiveness
Competitors - iron qualities in 2020 by region
SNIM – current qualities
68%
65%
Iron
65%
62%
62%
(%Fe)
(%Fe)
Global
average
66%
64%
Brazil
India
South
Africa
60%
63%
Australia
TZFC
GMAB
TZF
GMAB
(Guelbs 2)
Iron rate in line
with global
Benchmarks.
Improvement
expected on
Guelbs 2
SNIM current portfolio
8.8%
7.0%
6.0%
Silicate
!
3.8%
2.7%
4.5%
4.5%
South
Africa
Australia
4-5%
3.3%
(%SiO2)
Global
average
Brazil
India
TZFC
GMAB
TZF
GMAB
(Guelbs 2)
Silicate rate exceeds
benchmarks.
Similar Guelbs2
processing, is
necessary to
maintain
competitiveness
SNIM current portfolio
| 8
Launching of new capacities before ~ 2020-2025, big risks of over
capacity beyond.
Million tons, equivalent rich mineral
Expected bending of global demand of iron ore from 2020-2025
Annual capacity of production based on the levels of certitude
Level of certitude to achieve projects by 2020
+x%
TACM
Low to middle
High to middle
High
496
4.500
955
4.000
x2
+4%
3.000
2.677
2.870
369
221
2.281
+8%
2.000
1.500
1,214
+1%
3.500
2.500
~4,000
1,971
350
114
231
951
1.855
1.390
1,842
1.000
500
0
2000
2005
2010
2015
2020
2025
Offer Rise up depletion C1
2010 of the
current
production
C2
C3
C4
C5 Capacity
2020
| 9
Wet processing to be generalized to all lean ores
Total production cost, USD/t
Dry processing
64-66%
Semi-dry
processing
Wet processing
67-68%
-
Iron content postprocessing
68%
Magnetite TS
Magnetic separation
Magnetic separation
Magnetic separation
<65%
65%
Wet processing of
magnetite is
feasible and more
economical,
offering sinter-feed
with a higher iron
content
Magnetite TH
n/a
Magnetic separation
Spirals
~66%
Wet processing is
feasible, and
necessary to enrich
low-grade hematite
(pellet-feed product)
Hematite
(BHQ)
n/a
n/a
Flotation1
1 Flotation coupled with high-intensity magnetic separation and spiral gravity separation
| 10
Water pipeline carrying desalinated water from Nouadhibou to Zouerate
Zouerate Water Pipeline
- Distance: 650 km
- Carrying 36-55 Mm3/year
- Gradient of 400 meters
- Technical parameters in principle favorable,
compared to cross-border projects
- Capex estimated at $1.3bn for 36 Mm3/year
(incl. desalination)
| 11
Massification of production complexes can generate economies of
scale and accelerate the development
Economical dimension
Complexe size
Total cost of production
USD / ton
HR dimension
HR needs of complexe
#FTE/Mtpy
Mine Processing Supply. ch
Operational dimension
Delivery / Project
Management
Managerial complexity
▪
▪
▪
1-2 Mtpy
367
267
4-5 Mtpy
~10-12 Mtpy
207
-15%
~12 complexes to be
developped
Lead time min 15~20
years
▪
▪
~5 complexes
Lead time min 10~15
years
▪
~2-3 complexes to be
delopped
Lead time 5~10 years
▪
Extrem logistic
complexity
Heavy organisation
▪
▪
▪
Possible
Streamlining of
logistic flows
Lean organisation
-22%
| 12
2 possible competitive mining orientations for long-term development:
Kedia BHQ and Northern Guelbs magnetite
Commercial ore
resources
bn tons
Hematite
pellets
Kedia
BHQ
20
~30
Northern
Guelbs
Magnetite
Western
sinter-feed
Guelbs
Total production cost
(incl. amortization)
USD/t
1.4
Total normalized
cost
USD/t
▪
2 possible competitive
orientations
▪
Preliminary analyses show
that magnetite of Guelbs
Nord is the most
competitive orientation
▪
SNIM needs to subsequently
confirm the geological data
and refine its processing
models
0.2
0.1
Eastern
Guelbs
Competitive
ceiling
| 13
Must act simultaneously on three dimensions for sustainable
improvements
“Optimization of
production system :
working in harmony of
ressources (human,
equipement, etc.) by
minimazing losses and
wastages”
▪ Standardized work
Management
Infrastructure
▪ Kaizen : change to
enhance operating
standards, flows and
technical
▪ Integrated
programming/planning
▪ Detection of gaps from
standards (visual
management, audits, reviews)
Operating
Systems
▪ Solving problems
▪ Maintenance to ensure
availability and reliability
of tools
“Management performance to
overcome differences and
develop operational
excellence”
▪ Managerial routines
Mindsets, skills
and behaviors
▪ Organization, infrastructure of
continuous improvement
▪ Rewards, meritocracy
“Adhesion in time”
▪ Communication
▪ Culture of result, teamwork,
behaviours, values
▪ Skills
| 14
Operational excellence – a key axis for accelerating and
consolidating the industrial strategy
Scope of operational excellence
Intervention approach
▪ Pit operations, processing plants,
logistics
▪ Maintenance from end to end of the
chain
Management
infrastructure
Operating
systems
▪ Supply chain planning
Mindsets, skills
and behaviors
Expected impacts
▪ Extra 2-3 Mtpa capacity by end 2013
▪ Capex saving of $300-400m
▪ Opex saving of 3-4 $/ton
| 15
An ambitious capacity plan, taking SNIM to 40 Mtpa by 2024
Capacity,
million tons/year
45
M2
Guelb 1
Tazadit
M1
Mine H1
MH
Guelb 2
Fderik
TO14
43 43 43 43 43 43 43 43 43 43 43
40
40 40 40 40
36
34
27
23
17 18 18
12
Magnetite
20
13 14 14
Project for additional
28 Mtpa of magnetite
in 2 lots:
 M1: 14 Mtpa
 M2: 14 Mtpa
Hematite
2012 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 2040
Entry into service
of magnetite plant
M1 (+14Mt)
Entry into service
of magnetite plant
M2 (+14Mt)
| 16
Financial sustainability
No debt requirement in the base scenario, but up to $3-4.5bn needed under extreme stress-test conditions
Operational cash flow (after tax)
Investment cash flow
Stress test level
Operational and investment cash flows (US$m)
3 000
2 500
Sufficient self-financing
2 000
Base Case
1 500
1 000
500
0
3 000
2 500
Insufficient self-financing
2 000
Integrated
Stress tests
1 500
1 000
500
0
2012 13
14
15
16
17
18
19
20
21
22
23
24
25
| 17
A major change for SNIM : revenue and EBITDA by 3 vs PLT ambition (18
Mtpy)
A major development of main economic indicators compared to the PLT ambition
Revenue, US$ millions
6.000
Revenue /
ambition 40 MT
5.000
4.000
+190%
3.000
2.000
Revenue /
ambition PLT ( 18 Mt)
1.000
0
2012
13
14
15
16
17
18
19
20
21
22
23
24
2025
EBITDA, US$ millions
6.000
5.000
4.000
EBITDA/
ambition 40 MT
3.000
+213%
2.000
EBITDA /
ambition PLT ( 18 Mt)
1.000
0
2012
13
14
15
16
17
18
19
20
21
22
23
24
2025
| 18
Attractive option of downstream integration in DRI, through partnerships
Mauritania can be positioned competitively on the DRI steel market
Positioning of the cost potentially competitive for Mauritania
A potential cost of production around
470-480 $ / t
Cost curve based on the data available of steel manufacturing through EAF ,
in $ / t slab
Breakdown of costs, $ / t slab / steel
(including costs of DRI, EAF and slab)
Combustible
(gas)
Iron ore
(pellets)
Electricity
included 1
HR and others
COST CURVE NON-EXHAUSTIVE
Production cost
$/t of slab FOB
34-103
700
245
600
61
500
98
400
Total
440-507
300
Key hypothesis
• Gas Cost : range from $ 3 to $ 9/MMBtu ($ 12/MMbtu in Saudi Arabia)
• Pellet cost: save of $ 25 / t freight vs. CFR
price @ market price
• Electricity: $ 0.07/kWh
• 0% scraps
• Electricity consumption : 700kWh / t of steel for
the EAF
200
100
0
0
25
75
100
125
Capacity of production
Millions tons slab
Gas at $3/MMBtu
* Electric Arc Furnaces (EAF) often developed near the DRI
50
Gas at $9/MMBtu
| 19
DRI Profitability
IRR of DRI steel project :
15-17%
▪
Mauritania has an interest in
developing this project with the aim of
monetizing its gas reserves at an
attractive rate and furthering the
country’s industrial development
▪
Partners could be brought in to:
– Finance the project
– Supply technical expertise
| 20
Project phase
Implementation phase
Planning
CSD axis
1 Geological
research
Dossiers
2012 2013
2014
2015
2016
Organization of the Geology function
Geological research – Magnetite
Geological research – Hematite
Long-term maintenance of hematite capacity
Capacity
2
increase
Expansion of magnetite capacity
Alignment of logistics capacity
Alignment of utilities
Productivity of industrial assets
Operational
3 efficiency
Performance management system
Training/coaching
Optimization of operational organization
Requirement planning
Skills
4 promotion
HR management policies
Organization of the HR function
Culture and communication
Social modernization
Improving knowledge of the markets
Market
5 positioning
Better customer targeting and commercial positioning
Optimizing the pricing policy
Optimizing the product portfolio
Commercial organization and processes
Partnership strategy
Finalization of existing partnerships
6 Partnership
development Organization
Deal sourcing and execution
| 21
Each CSD axis is divided into 3 planning levels:
dossiers, projects, activities
CSD axis
Dossiers
Projects
Activities (for first
6 months)
STRATEGIC PLANNING
STRUCTURE
Axis structure
CSD axis
1
Geological
research
3
10
27
2
Capacity
increase
4
13
88
Dossiers
Operational
3 efficiency
4
7
56
Skills
promotion
5
14
49
4
Market
positioning
5
10
35
Partnership
6 development
4
13
34
25
67
289
5
Total:
Each axis comprises
several dossiers
Each dossier is made up of
several projects, with
deadlines and KPIs
Each project contains
several activities, some of
which are to be launched
during the first 6 months of
implementation
Projects
- KPI 1
- KPI 2
-…
Activities
| 22
Organization and governance for the execution and monitoring of CSD
projects
Roles
• General oversight of CSD execution
• Meets every 4 weeks to track progress and make
CSD Steering
Committee
key arbitration decisions, notably on the budget
• Coordinates the strategic program, reporting on
PMO
•
•
progress to the CSD Steering Committee with the
preparation of KPI charts
Assesses the pertinence and efficiency of decisionmaking at axis/project level
Provides support to Axis Pilots (e.g. problem solving)
• Provide weekly updates on progress relative to a
Axis Pilots
detailed schedule
Pilot 1
Pilot 2
Pilot 3
Pilot 4
Pilot 5
Pilot 6
Geological
research
Capacity
increase
Operational
efficiency
Skills
promotion
Market
positioning
Partnership
development
• Inform PMO members proactively about critical
events
• Involve the PMO in all important decision processes
• Decision point every 2 weeks with unit (“pole”) and
PMO directors
Project
Manager
Project
Manager
• Encouragement/assistance with decision-making at
project level
• Close monitoring of execution and proper
implementation of decisions
• Management of critical processes (e.g. purchasing)
Project
Manager
• Supply of resources to support and assist Axis
Pilots / Project Managers with technical aspects
Pool of technical experts
• Introduction of management tools for the project
implementation phase (e.g. execution schedule,
budget tracking, etc.)
| 23
1
Vision & CSD
2
Industrial strategy
3
Impacts
| 24
3
Impacts
3.1 – Sales & Revenue
| 25
3.2 – Jobs opportunity
Need (direct and indirect) about 15 000 jobs
| 26
3.3 – Industrial & socio-environmental
Transport water from Nouadhibou to Zouerate: potentially significant impacts for region
▪ major potentially implications for industrial development in the case of a water supply
▪
"abundant" at a reasonable price :
- possible different processing (lower cost and / or better quality) (eg, full wet magnetic
processing of TS)
- possibility to process new resources (eg, poor hematite ?), today not beneficiated with
dry process
Water improve working conditions (eg, dust reducing , watering trails ) and the productivity.
▪
Securing access to water for the population brought to grow significantly in the coming years,
▪
Reducing the effects of the drought
▪
Developing a potential activity of agriculture with high value
▪
Preservation of water table in the region of Zouerate
▪
Opportunity to develop renewable energy for desalination.
▪
Attention regarding the saline water waste.
Industrial
Social
Environmental
| 27
Thank you for
your attention
| 28