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Kleber Silva, Arcelor Mittal: ArcelorMittal North and South American iron ore operations

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Kleber Silva, Executive Vice President - Head of iron ore, ArcelorMittal Global delivered this presentation at the 2013 Americas Iron Ore conference. Americas Iron Ore is one of the most respected …

Kleber Silva, Executive Vice President - Head of iron ore, ArcelorMittal Global delivered this presentation at the 2013 Americas Iron Ore conference. Americas Iron Ore is one of the most respected annual gatherings for North and South American iron ore markets. The agenda features iron ore industry and market developments; new project developments and expansions in North and South America; overview of steel demand; iron ore spot market price; infrastructure and transport challenges and investment opportunities.
After five successful editions, the Americas Iron Ore Conference consolidates as the largest meeting place for executives and professionals of the steel and iron ore industry in the region. For more information, please visit the conference website: https://www.immevents.com/mining-conference/americas-iron-ore-conference

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  • 1. ArcelorMittal Mines Americas Iron Ore Conference Kleber Silva – Head of Iron Ore 12 November 2013
  • 2. Disclaimer Forward-Looking Statements This presentation may contain forward-looking information and statements about ArcelorMittal and its subsidiaries. These statements include financial projections and estimates and their underlying assumptions, statements regarding plans, objectives and expectations with respect to future operations, products and services, and statements regarding future performance. Forward-looking statements may be identified by the words “believe,” “expect,” “anticipate,” “target” or similar expressions. Although ArcelorMittal’s management believes that the expectations reflected in such forward-looking statements are reasonable, investors and holders of ArcelorMittal’s securities are cautioned that forward-looking information and statements are subject to numerous risks and uncertainties, many of which are difficult to predict and generally beyond the control of ArcelorMittal, that could cause actual results and developments to differ materially and adversely from those expressed in, or implied or projected by, the forward-looking information and statements. These risks and uncertainties include those discussed or identified in the filings with the Luxembourg Stock Market Authority for the Financial Markets (Commission de Surveillance du Secteur Financier) and the United States Securities and Exchange Commission (the “SEC”) made or to be made by ArcelorMittal, including ArcelorMittal’s Annual Report on Form 20-F for the year ended December 31, 2012 filed with the SEC. ArcelorMittal undertakes no obligation to publicly update its forward-looking statements, whether as a result of new information, future events, or otherwise. Non-GAAP Financial Measures This presentation may contain supplemental financial measures that are or may be nonGAAP financial measures. Definitions of such supplemental financial measures and a discussion of the most directly comparable IFRS financial measures can be found on ArcelorMittal's website at http://www.arcelormittal.com/corp/investors/presentations/. 1
  • 3. HSE and sustainability ArcelorMittal Mining safety performance • 2012 LTIFR* of 0.41, a 67% improvement compared with 2011 Our focus • • • Achieve our goal of zero fatalities and serious injuries: • Complete implementation of Fatality Prevention Standards at all operations and projects • Base of the pyramid • Risk assessment Manage occupational exposures: • All operations to complete new health risk assessments and develop control plans for material risks Manage and reduce our impact on the environment ArcelorMittal Iron Ore operations segment injury frequency rate* 4.5 4.0 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 Long term safety targets trending towards best in class 4.5 3.2 1.6 1.8 1.0 1.2 0.4 2006 2007 2008 2009 2010 2011 2012 Safety remains the No1 priority for ArcelorMittal * World steel association -standard: LTIFR = Lost Time Injuries per 1.000.000 worked hours; based on own personnel and contractors 2
  • 4. Mining business portfolio Canada Baffinland Key assets and projects Ukraine Iron Ore Bosnia Iron Ore Kazakhstan Iron Ore 4 mines Canada AMMC Algeria Iron Ore USA Iron Ore Minorca Hibbing* Mexico Iron Ore Las Truchas & Volcan; Pena* Liberia Iron Ore Iron ore mine Existing mines Indian Iron Ore & Coal exploration license Brazil Iron Ore Serra Azul Andrade New projects / exploration South Africa Iron Ore** Geographically diversified mining assets * Includes share of production ** Includes purchases made under July 2010 interim agreement with Kumba (South Africa) 3
  • 5. Iron ore reserve and resource estimates Strong reserve and resource basis to support sustainable growth 2012 Iron ore reserves and resources (million metric tonnes) Region Proven & probable reserves Mtonnes %Fe Measured & Inferred indicated resources resources Mtonnes %Fe Mtonnes %Fe Canada (AMMC) 1,952 28 4,931 29 1,082 29 Canada (Baffinland) 375 65 41 65 444 66 USA Central America South America West Africa Eastern Europe Central Asia TOTAL 473 395 121 526 301 188 4,331 20 26 58 48 36 40 35 421 146 321 39 866 1,455 8,219 20 26 38 44 38 40 32 92 78 131 2,061 0 123 4,010 23 27 36 41 0 34 39 2012 Geographical breakdown of iron ore reserves & resources Eastern Europe Central Asia 4% West Africa 12% 45% Canada (AMMC) South America 3% Central America 11% USA Canada (Baffinland) • Highlights of 2012: – Resource to Reserve conversion exceeded mining depletion to provide a net increase of ~500Mt in iron ore reserves – Resource to reserve conversion was largely offset by resource additions due to exploration and re-evaluation of known mineralization • Resource and reserve estimates supported by internal technical reports • Updated life of mine plans with discounted cash flows to support demonstration of economic viability for all ore reserve estimates • All resource estimates have potential for economic extraction to support future potential growth 2012 Iron ore reserves of 4.3bn metric tonnes 4
  • 6. Iron ore growing; plans on track CAPACITY AMMC • Spirals replacement project completed in 1Q’13 • Capacity expansion from 16Mt to 24Mt: • In June 2013 first concentrate from new Line 7 produced • Ramp up underway. Targeting 24mt annual equivalent by end of 2013 • Capex of $1.6bn Liberia • Phase 1 achieved new production record in 3Q’13 at 1.1Mt • Phase 2 project underway for 15Mtpa premium sinter feed to replace 4Mtpa DSO by 2015 • Product specification changed to sinter feed; engineering scope change required • Major equipment procurement complete • Civil works at the port are advancing and will be completed this year Baffinland • Early Revenue Phase underway • 3.5Mtpa of DSO trucked to Milne Inlet for export during openwater season by 2015 • $700m* project capex in 50:50 JV Iron ore growth target on track – 84MT capacity by 2015 * Includes consideration from JV partner (Nunavut Iron Ore) for additional equity stake increase from 30% to 50%. 5
  • 7. ArcelorMittal Mines Canada (AMMC) Iron ore production and capacity (million Mt) Concentrator AMMC expansion from 16Mt to 24Mt complete • Spirals Expansion of Mont Wright mine at AMMC and concentrate capacity to total 24Mt p.a. (from 16Mtpa post operational improvements) concentrate and pellets • Capex $1.6bn* for mine, concentrator plant expansion and infrastructure upgrade with cash cost of circa $38/tonne post expansion 8 15 1 Expansion capitalising on existing infrastructure, product quality, experienced workforce and advantageously located with easy access to European/US markets • 24 • Potential for future expansion given size of resource base and existing infrastructure 2012 2013F • Low cost, efficient operations with further improvement potential • Ongoing initiatives to continue improving operating equipment efficiency Strategic advantage from exclusive use of own rail and port facilities * Capex of $1.6bn excludes expansion of Pellet line which has not yet been committed to. 6
  • 8. ArcelorMittal Mines Canada (AMMC) Expansion from 16Mt to 24Mt complete Expansion • Commission of new spirals line at concentrator • New trucks operational • Additional rail sidings completed Railway • Wholly-owned 420-km railway infrastructure • Longer train with two locomotives commenced • Linking mining operations to Port-Cartier Port-Cartier • One of Canada’s largest private ports • Handling 160,000+ tonne ships • Currently running at ~350 vessels per year • Ability to handle cape-size vessels all year round Expansion supported by captive infrastructure with operating leverage 7 7
  • 9. Baffinland Early Revenue Phase: 3.5MT production rate in 2015 Product • High grade: 66%+ Fe iron – lumps and fine ore • Products expected to achieve full premium value Proposed Early Revenue Phase rationale • ERP budget approx. US$700m commenced in 1Q 2013 • Enables an early mining phase that requires less capital investment than full project, creating training, employment, business opportunities for local region • ERP will demonstrate quality of product and ability to operate ERP phase underway : Road route Proposed phase 2: Rail ERP components and difference between full rail project • ERP requires trucking of ore to Milne Inlet, loading of ore in Milne Inlet, and shipping of ore from Milne Inlet to markets • Requires upgrades of the road connecting Milne Inlet and mine site • Mining and trucking of 3.5mtpa from Deposit 1 to Milne Inlet throughout the year • Shipping of ore from Milne Inlet during “open water season” • Anticipate first ore to be shipped in 2H 2015, all product tonnage targeted for Europe Environment permitting • Existing permits allow work to commence in 3Q’13 • Planned modification to existing permit to allow further optimization: doubling of fuel capacity at Milne Inlet in 2013 • Completion of ERP amendments to “The Project Certificate” and licenses scheduled in 1H 2014 Mary River Project is now a phased project – ERP underway, Rail Phase to be considered according to market conditions 8
  • 10. Brazil ArcelorMittal operates two iron ore mines at Brazil – ArcelorMittal Brazil Andrade Mine and ArcelorMittal Mineracao Serra Azul Andrade Mine • Operates an open pit and a crushing facility • Supplies sinter feed to ArcelorMittal Long Carbon – João Monlevade integrated plant through an internal railway of 11 kilometers. • Companhia Siderurgica Belgo-Mineira (CSBM) initiated mining operations in 1944 to supply ore to its steel plant in Joao Monlevade. In 2000, Vale acquired the property and in 2009 Vale returned the Anadrade mine to CSBM, which, then transferred it to ArcelorMittal. • The increase of the mine’s production capacity to 3.5mt per year of sinter feed was completed in 2012 • Reserve estimates are dominated by directly shippable hematite ore ArcelorMittal Mineracao Serra Azul • Operates an open pit mine and a concentration facility • Sinter feed production is shipped to ArcelorMittal plants in Europe, local Brazilian market including the ArcelorMittal Brazil integrated plants. Reserve estimates constitute rich friable Itabrites requiring some beneficiation. • Both Andrade & Serra Azul are located in the Iron Quadrangle (Quadrilatero Ferrifero) • Project of High Intensity Magnetic Separator (“HIMS”) to improve the quality & Yields • PFS studies underway to expand from 2mt to 8mt Itabirite ore 9
  • 11. Focus on cost as well as growth Illustrative cash cost curve (marketable tonnes) post expansion Relentless focus on cost control • Operational excellence, rigour and discipline underway across assets • Share and apply best practice leveraging internal and external benchmarks • Key focal points: US$ FOB Cost per ton Positioning key assets low on the cost curve • • • Maintenance and reliability Mining plan optimization Rigorous capex investment management • Focus on on-time and budget delivery Focus on value and OEE initiatives Focus on quality Labour productivity • Central project management office 2nd ArcelorMittal Liberia 3rd AMMC 4th Quartile • Regular expert project reviews • 1st Standardised projects controls • Tracking time/cost divergence and risks Post capex FOB cash cost Relentless focus on costs and capex monitoring * Focus on AMMC and ArcelorMittal Liberia as our largest marketable tonnes assets. Illustrative for post expansion of AMMC 10
  • 12. Mexico ArcelorMittal operates three iron ore mines in Mexico, the El Volcan and Las Truchas mines and, through a joint ownership with Ternium S.A., the Peña Colorada mine El Volcan • ArcelorMittal operates a concentrating facility along with a open pit mine and a pre-concentration facility at the mine site. The Volcan concession was bought from the Sonora provincial government in 2004, followed by the exploration at the property in 2005. The development of the mine started in 2007. The Volcan operations produced 2.15mt of concentrate in 2012 Las Truchas • Fully integrated iron ore operation, It began operating in 1976 as a government enterprise (Sicartsa) and its mining activities consist of an open pit mine exploitation, crushing, dry cobbing, preconcentrate and concentration plant. The aggregate 2012 production concentrate, lumps and fines totaled 2.93mt Peña Colorada • ArcelorMittal holds 50% of Peña Colorada Ltd., and Ternium S.A. owns the other 50% of the company. Peña Colorada operates an open pit mine as well as a concentrating facility and a two line pelletizing facility. Total pellet production of 4.07mt and 0.43mt of concentrate (of which 50% is ArcelorMittal share). 7mt of Iron Ore Production in 2012 11
  • 13. USA - ArcelorMittal USA Iron Ore Mines • ArcelorMittal USA operates an iron ore mine through its whollyowned subsidiary ArcelorMittal Minorca & owns a majority stake in Hibbing Taconite Company, which is managed by Cliffs Natural Resources. ArcelorMittal Minorca production for 2012 was 3mt and 5mt for Hibbing Taconite Company* ArcelorMittal Minorca • • • • • • Located north of the town of Virginia in the northeast of Minnesota The Minorca operations control all the mineral rights and surface rights needed to the mine Concentrating and a Pelletizing facility along with two open pit iron ore mines The processing operations consists of a crushing facility, a three line concentration facility and a single line straight grate pelletizing plant Pellets are transported by rail to ports on Lake Superior. Lake vessels are then used to transport the pellets to Indiana Harbor The Minorca taconite plant was constructed and operated by Inland steel between 1977 & 1988 when it was purchased by then ISPAT International, a predecessor company of ArcelorMittal *ArcelorMittal share of production 12