JP Morgan Report On Iron Ore PDF

Australia Equity Research
07 February 2014
Iron ore
Reviewing production additions from the majors
In this report, we review our forecast iron ore supply additions for Vale, RIO,
BHP, FMG and Anglo (big 5). Key takeaways are: 1) the big 5 will bring on an
additional 126Mt of forecast supply in 2014, a 15% increase on 2013; 2) the
largest increase in supply is in 2Q14 & 3Q14 following 1Q14 interruptions, and
3) assuming 5% steel production growth in China, a recovery in consumption exChina and depletion, we believe the market can absorb the new supply without a
detrimental impact on prices. Although near-term price risk remains, this presents
a compelling cash flow and valuation outlook for RIO, FMG and Vale where we
have Overweight recommendations.
Annual supply growth of 126Mt in 2014. We estimate the big 5 shipped
826Mt in 2013 (62% equivalent Fe dmt), which we expect to grow 15% to
953Mt in 2014, equating to a 126Mt addition. In terms of Fe units, this equates
to ~78Mt which in isolation would require Chinese steel production to grow by
~10% (from ~775Mt in 2013) to fully absorb this new material (JPMe +5% to
814Mt). However, ongoing depletion of domestic Chinese iron ore grades,
potential restocking of finished steel inventory, and growth in the rest of world
should help ease the pressure on prices (JPMe US$125/t in 2014).
March quarter 2014 sees some relief due to seasonality. We estimate supply
will reduce by 7.3Mt QoQ (30Mtpa) in 1Q14 due to seasonal weather impacts
affecting Vale, and to a much lesser extent BHP. The supply interruption
coincides with the Chinese New Year slow down (Jan 30th Feb 14th) which in
our view is why prices have been resilient despite the recent drop in Chinese
steel production (732Mtpa in mid Jan).
Flood gates open up mid year. 2Q14 is the biggest addition with 17Mt QoQ
(70Mtpa) followed by another 13Mt in 3Q14 (54Mtpa), before easing off to an
extra 7Mt (28Mtpa) in the final quarter. The key issue in terms of price impact
remains the pace of Chinas steel production growth, and whether this supply
can be absorbed. If not, this low cost production growth is likely to displace
high cost Chinese supply, leading to lower marginal costs and lower prices.
Positive investment views on the miners despite iron ore price headwinds.
We remain bullish on RIO, Vale and FMG with OW recommendations despite
the likely near-term headwind of lower prices. All three stocks look compelling
from a valuation perspective even with lower prices factored into our models.
Australia Metals & Mining

Lyndon Fagan
AC
(61-2) 9003-8648
Lyndon.fagan@jpmorgan.com
Bloomberg JPMA LFAGAN <GO>
J.P. Morgan Securities Australia Limited
Mark Busuttil
(61-2) 9003-8619
mark.busuttil@jpmorgan.com
J.P. Morgan Securities Australia Limited
LatAm Metals & Mining

Rodolfo Angele, CFA
AC
(55-11) 4950-3888
rodolfo.r.angele@jpmorgan.com
Bloomberg JPMA ANGELE <GO>
Banco J.P. Morgan S.A.
Lucas Ferreira
(55-11) 4950-3629
lucas.x.ferreira@jpmorgan.com
Banco J.P. Morgan S.A.
Mandeep Singh Manihani, CFA

(1-212) 622-6433
mandeep.singh.x.manihani@jpmorgan.com
J.P. Morgan Securities LLC
Europe Metals & Mining

Fraser Jamieson
AC
(44- 20) 7742-5930

fraser.jamieson@jpmorgan.com
Bloomberg JPMA JAMIESON <GO>
J.P. Morgan Securities plc
Dominic O'Kane
(44-20) 7742-6729
dominic.j.okane@jpmorgan.com
J.P. Morgan Securities plc
See page 68 for analyst certification and important disclosures, including non-US analyst disclosures.
J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the
firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single factor in
making their investment decision.
www.jpmorganmarkets.com
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Table of Contents
Supply side response finally arriving but what
implications for pricing?..........................................................4
Quarterly supply additions weighted to 2Q/3Q14.....................................................4
Major producers account for majority of near-term growth.......................................5
Implications for pricing ...........................................................................................6
Declining price trend supported by China near term.................................................8
Detailed mine plans................................................................10

Rio Tinto ..............................................................................................................10
BHP Billiton .........................................................................................................11
Fortescue ..............................................................................................................11
Vale......................................................................................................................12
Anglo American....................................................................................................13
Rio Tinto iron ore division overview.....................................14

Near term production guidance..............................................................................14
Infrastructure projects on track ..............................................................................15
Revised Pilbara mine plan 330Mt in 2015, 350Mtpa by 2017 ..............................15
Mine overview ......................................................................................................16
Port operations ......................................................................................................17
Cape Lambert expansion .......................................................................................17
Rail operations ......................................................................................................18
Reserves and resources..........................................................................................19
BHP Billiton iron ore division overview................................21

Board sanctioned projects achieve 220Mtpa...........................................................21
Attacking the bottlenecks ......................................................................................22
Mobile crushers could add 20Mtpa+......................................................................23
BHPs Pilbara iron ore mines ................................................................................24
Mine asset overview..............................................................................................25
BHP Yandi (75Mtpa) ............................................................................................25
Mt Goldsworthy JV: Mining Area C (MAC) (50Mtpa)...........................................25
Mt Goldsworthy JV: Yarrie (2Mtpa)......................................................................26
Newman JV (63Mtpa)...........................................................................................26
Jimblebar (35Mtpa, likely to expand to 55Mtpa)....................................................28
Jimblebar sale of 15% interest ...............................................................................28
Moving to owner operator .....................................................................................28
Railway network ...................................................................................................31
Port Hedland facilities ...........................................................................................32
Inner Harbour port allocation.................................................................................33
BHPs inner harbour capacity may be over 300Mtpa..............................................33
Vale iron ore division overview .............................................34

Operations overview .............................................................................................34
Projects to deliver almost 50% growth in the next 5 years ......................................36
2
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Tackling the "caves" issue .....................................................................................36

Two-fold effect on margins ...................................................................................38
Recent guidance....................................................................................................39
Key projects..........................................................................................................40
Carajs Additional 40Mtpa project ........................................................................40
CLN 150 Railway and port facilities ...................................................................41
Carajs Serra Sul S11D: mine, plant and logistics ..................................................41
Serra Leste ............................................................................................................43
Conceio Itabiritos ..............................................................................................43
Vargem Grande Itabiritos ......................................................................................44
Conceio Itabiritos II...........................................................................................44
Cau Itabiritos.......................................................................................................44
Teluk Rubiah ........................................................................................................45
Tubaro VIII.........................................................................................................45
Anglo American iron ore division overview .........................48

Operations overview .............................................................................................48
Minas Rio the key project ..................................................................................50
with further growth projects still at an early stage...............................................52
Fortescue iron ore operations overview ..............................55

Port allocation and capacity...................................................................................55
Rail capacity .........................................................................................................56
Mine capacity........................................................................................................56
What is a wet front end?........................................................................................56
Revised LoM strip ratio worked example...............................................................57
Investment views....................................................................60
Rio Tinto investment view (Overweight) ...............................................................60
BHP Billiton investment view (Neutral).................................................................60
Fortescue investment view (Overweight) ...............................................................60
Vale investment view (Overweight).......................................................................60
Anglo investment view (Underweight)...................................................................61

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Supply side response finally arriving but

what implications for pricing?
Debate over the likely path of iron ore prices in 2014 is intense. The debate is being
driven by significant supply additions finally looking set to come into the market
during the middle part of the year coupled with uncertainty over the outlook for
Chinese steel production following a year of remarkable (and largely unexpected)
growth in 2013. In this note we draw on J.P. Morgan's global iron ore equity analysts to
provide a picture of the expansions being delivered by the big five producers - Vale,
Rio Tinto, BHP Billiton, Fortescue and Anglo American. We view expansions from
these producers as having a high probability of being delivered broadly on schedule.
Quarterly supply additions weighted to 2Q/3Q14

As shown below, 2QCY14 sees the largest increase in incremental tonnage, 70Mtpa
on an annualised basis (+17Mt QoQ). 3Q delivers a further 54Mtpa annualised
(+13Mt QoQ), with this growth primarily driven by the RIO (Pilbara 290) and FMG
(Kings) projects ramping up. BHP and Vale should also bounce back from weatherrelated disruptions in 1QCY14, while AAL (Sishen) continues to recover from safety
stoppages in late-2013. Interestingly, seasonal weather disruptions mean we see 1Q
production falling ~30Mtpa annualised, arguably helping to explain the relative
strength in spot iron ore prices so far this year.
Figure 2: Annualised quarterly "Big Five" supply additions (Mtpa)
54
1,000
900
200
Source: J.P. Morgan estimates, Company data.

Note 4Q13 shipments are a forecast for Vale (reports Feb 26th).
4Q15
4Q15
3Q15
2Q15
1Q15
4Q14
3Q14
2Q14
1Q14
4Q13
3Q13
700
2Q13
1Q13
180
88
740
2Q15
800
81
14 1,116
70
1Q15
22
18 -30
4Q14
-7
2Q13
71
28 -67
51
4Q15
1,100
1Q13
18
220
Forecast
20
17
240
180
Actual
3Q14
-16
274
2Q14
13
1Q14
260
13
4Q13
280
Forecast
3Q13
Actual
3Q15
1,200
300
4Q15
Figure 1: Quarterly "Big Five" supply additions (Mt)

Note 4Q13 shipments are a forecast for Vale (reports Feb 26th).
Key takeaways
1Q14: Seasonally weaker output from Vale and to a lesser extent BHP have
offset incremental supply growth from the other miners. This was timely from an
iron ore price point of view due to the slow down in Chinese steel production in
the lead up to the Chinese New Year period (Jan 30th to Feb 14th)
2/3Q14: Material new supply additions with both RIO and FMG ramping up, and
Vale volumes bouncing back. Iron ore prices could face headwinds unless
Chinese steel production ramps back up post Chinese New Year.
1Q15: Typical seasonality impacts shipments, with Vale seeing a ~15% QoQ
reduction in output, inline with historical observations.

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
2015: Our forecasts for 2015 are more modest for incremental supply. This could
suggest a relatively good year for iron ore prices if the market can absorb the
increased supply coming on in 2014 without a detrimental impact to price. As
with 2013, supply additions are weighted towards the middle of the year as RIO
and Vale ramp up growth projects.
Major producers account for majority of near-term growth

The chart below shows our production growth forecasts for the miners indexed at the
end of CY13. FMG outperforms the rest of the sector with production growing by an
additional 35% once the Kings project ramps up in 2014, although Anglo adds the
most production in percentage terms off a relatively low base.
Figure 3: Production growth expectations
180
170
160
150
140
130
120
110
100
90
80
CY13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 3Q17 4Q17 1Q18 2Q18 3Q18 4Q18
BHP Billiton
Rio Tinto
Fortescue Metals
Vale
Anglo
Across 2014 and 2015, we estimate the big five will grow more than total seaborne
supply. The difference is related to lower Chinese production due to depletion of iron
ore grades, along with marginal producers being displaced off the cost curve.
Figure 4: Big five supply additions vs global supply growth YoY (Mt)
200
159
126
150
95
100
100
88
61
50
0
-50
-39
-64
-100
2014e
2015e
Total supply growth

Depletion
Big five supply growth

Total supply growth (net of depletion)
Source: J.P. Morgan estimates.
RIO (55Mt) and FMG (42Mt) are the major contributors to 2014 supply growth, with
Vale expected to deliver a net increase of 13Mt vs. 2013 levels. This compares with
BHPs 15Mt and AALs immaterial 2Mtpa increase. The quarterly changes in Big-5
iron ore volumes are summarized in the figures below.

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Figure 5: RIO production evolution in 2014 (62% equivalent dmt)

100
Figure 6: BHP production evolution in 2014 (62% equivalent dmt)

100
80
2
80
60
60
40
40
20
20
-2
1Q14
2Q14
3Q14
4Q14
0
4Q13
1Q14
2Q14
3Q14
4Q14
4Q14
4Q13
4Q14
Figure 7: Vale production evolution in 2014 (62% equivalent dmt)
Figure 8: FMG production evolution in 2014 (62% equivalent dmt)

100
100
-12
80
10
80
60
60
40
40
20
20
2Q14
3Q14
4Q14
0
2Q14
3Q14
4Q14
4Q13
4Q14
1Q14
Figure 9: AAL production evolution in 2014 (62% equivalent dmt)
Figure 10: Total big 5 (62% equivalent dmt)
280
Actual
Forecast
260
60
13
3Q14
4Q14
4Q14
3Q14
2Q14
180
2Q14
1Q14
274
22
1Q13
180
4Q13
20
200
0
1Q14
0.7
0.3
-7
4Q13
0.2
2Q13
0.3
18
3Q13
220
20
-16
13
17
240
40
2Q15
80
1Q15
300
4Q14
100
4Q14
4Q15
1Q14
4Q15
4Q13
3Q15
Implications for pricing

The key question the market is wrestling with is the likely impact of new supply on
pricing. We believe the following observations are relevant:
Year on year supply additions: Almost 10% steel production growth is required
in China to absorb the additional 2014 supply vs 2013 for the miners above. This
relatively large amount has led to investor concerns around what has been
referred to as a "wall of supply.
6
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Depletion a potential offset? One offset could be depletion within the Chinese
domestic iron ore mine system (difficult to quantify due to lack of data). Further,
rest of world demand growth may help absorb this growth.
Next wave hits in 2017/18. If the iron ore market gets through 2014 unscathed
from a pricing point of view, it is possible iron ore prices could remain resilient
through to the end of 2016 until Vale and RIO ramp up growth projects.
Table 1: Iron ore shipment forecasts note the below numbers include destocking of inventory
Company
CY13
CY14
CY15
CY16
CY17
CY18
Vale
302
316
337
367
390
435
BHP Billiton
206
222
231
249
253
253
Rio Tinto
244
304
350
347
357
364
Fortescue
99
148
155
157
158
159
Anglo
39
41
53
67
69
69
891
1031
1128
1187
1227
1279
140
97
59
40
52
Unadjusted shipments
Total - unadjusted shipments (million wmt)

Growth YoY
Normalized to 62% equivalent Fe dry tonnes
Vale
287
300
321
351
375
419
BHP Billiton
190
205
210
226
230
230
Rio Tinto
223
278
321
317
327
333
Fortescue
86
128
135
136
137
138
Anglo
40
42
54
68
69
69
826
953
1041
1099
1138
1189
126
88
58
39
51
591
645
682
721
767
Total (62% Fe equivalent) (million dmt)

Growth YoY
Total Fe units (million dmt)
512
Growth YoY
78
55
36
39
46
Growth YoY
15%
9%
6%
6%
6%
Source: J.P. Morgan estimates, Company data. Note: excludes Samarco

Note: RIO shipments in 2015e are 16Mt higher than production due to inventory drawdown

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Declining price trend supported by China near term

We continue to see the supply and demand dynamics evolving to an inevitable
declining trend in iron ore prices. The new capacity that is being commissioned now
and in the future is coming mainly from low cost producers in Brazil and Australia.
They should push a portion of the high cost iron ore producers in China out of the
supply equation and thus lower marginal costs.
However, China, with 2013 estimated iron ore production of 369Mt, provides a nearto medium-term cushion to iron ore prices given its high costs of production should
only allow a gradual drop in marginal cost and thus iron ore prices.
Our forecasted iron ore prices are summarized below:
Figure 11: JPMorgan iron ore price forecasts
US$/t (62% Fe CFR China, Dry Basis)
140
130
125
130
125
120
120
110
110
100
100
100
2016E
2017E
2018E
100
90
80
1Q14E
2Q14E
3Q14E
4Q14E
2015E
Figure 12: China iron ore cost curve (US$/dmt) CFR China
175
US$/t
150
Marginal cost: US$127/t
125
100
75
50
25
RIO
BHP
AAL
FMG
Vale
China
0
0
100
200
300
400
500
600
700
800
900
1000
1100
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Table 2: J.P. Morgan Iron ore supply demand model

Million tonnes
Supply By Region
USA
Other North America
North America
Brazil
Other South & Central America
South & Central America
Europe (ex-CIS)
CIS
Africa
India
China
Other Asia
Asia
Oceania
World Supply
Demand By Region
USA
Other North America
North America
Brazil
Other Americas
Central & South America
France
Germany
Other Europe
Europe (ex-CIS)
CIS
Middle East
Africa
China
Japan
South Korea
India
Other Asia
Asia
Oceania
World Demand
Balance: Surplus (Deficit)
2012
43
45
88
379
45
424
32
201
84
144
361
60
565
548
1,942
2013E
43
53
96
381
52
433
33
204
97
111
369
62
542
640
2,045
2014E
43
60
103
406
61
467
34
205
105
128
307
60
495
731
2,140
2015E
43
64
107
436
66
503
35
205
114
139
268
61
467
770
2,201
2016E
40
68
108
474
71
545
36
208
120
149
219
62
430
815
2,262
2017E
40
70
110
525
71
596
38
209
128
155
179
62
396
851
2,328
2018E
40
70
110
556
71
628
39
212
139
161
170
63
394
865
2,386
50
24
74
56
28
84
15
41
96
151
142
40
25
1,101
133
61
95
25
1,415
13
1,944
-1
49
23
72
55
28
83
15
40
92
148
137
43
26
1,197
136
58
102
25
1,519
12
2,039
5
50
24
74
57
29
87
15
41
95
151
140
44
28
1,257
139
59
113
27
1,595
13
2,131
8
52
24
76
60
30
90
16
42
96
154
143
45
30
1,289
140
61
118
28
1,635
13
2,185
16
53
25
78
61
31
93
16
42
98
156
146
46
32
1,321
141
61
123
29
1,675
13
2,239
24
54
26
79
63
32
95
16
43
100
159
150
47
35
1,354
141
62
129
30
1,716
13
2,293
34
55
27
81
64
34
98
16
44
101
161
153
48
37
1,388
142
62
135
32
1,759
13
2,350
36

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Detailed mine plans

Rio Tinto
RIOs mine plan is shown below, with key production additions from brownfield
expansions at Nammuldi (+9Mtpa), West Angelas (+6Mtpa), Yandi (+8Mtpa)
Brockman 2 (+8Mtpa), Paraburdoo (+7Mtpa), Brockman 4 (+2Mtpa) and system
(+6-10Mtpa). In addition, we expect the company to pursue the development of the
greenfield Silvergrass project (+21Mtpa), which is essentially an extension of the
Nammuldi ore body.
Figure 13: RIO mine plan forecast
400
Paraburdoo
Mt Tom Price
WTS (I & II)
350
Marandoo
Yandicoogina
300
Brockman 2
BS4 (I & II)
250
Nammuldi
Channar
200
Eastern ranges
Hope Downs 1
150
Hope Downs 4
Mesa A
Mesa J
100
West Angelas
West Angelas Dep. B
50
Creep
0
2013F
Silvergrass
2014F
2015F
2016F
2017F
2018F
2019F
2020F
Koodaideri
As it stands, we do not include the greenfield Koodaideri project (30-40Mtpa) in our

base case on the basis RIO should be able to achieve 360Mtpa (port capacity)
through the above listed projects. Longer term, we believe Koodaideri could be used
as a depletion replacement mine, or to support further expansions.
10

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
BHP Billiton
Once Jimblebar (35Mtpa) ramps up, BHPs port, rail and mine capacity will be
matched at 220Mtpa. However following a strong end to CY13, it has become
apparent the first stage of Jimblebar takes BHP above 220Mtpa. The company has
highly probable expansion options that can take production to 260-270Mtpa through
the combination of Jimblebar stage 2 (+20Mtpa), mobile crushers (+20Mtpa) and
capacity creep (+10Mtpa).
Figure 14: BHP mine plan forecast
300
Creep
250
Jimblebar
Yandi
200
Mining Area C
150
Yarrie
OB 18 / Wheelarra
100
OB 24
OB 23, 24 & 25
50
Mt. Whaleback
0
FY14F
FY15F
FY16F
FY17F
FY18F
FY19F
FY20F
Fortescue
Kings is the final project FMG need to achieve a 155Mtpa. The project is in the final
stages of commissioning, with a 155Mtpa run rate likely to be achieved in 2QCY14.
Longer term, we expect FMG to pursue debottlenecking projects which could take
production to beyond 180Mtpa, although none have been sanctioned by the board.
Figure 15: FMG mine plan forecast
200
150
Nullagine JV, 3rd

party (Mt)
100
Solomon (Mt)
50
0
2013
Chichesters +
share of Nullagine
JV (Mt)
2014F
2015F
2016F
2017F
2018F
2019F
2020F
11

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Vale
Vales mine plan is more complex, with strong production growth offset by relatively
high depletion rates. Current projects add 215Mtpa of additional capacity, although
depletion of 65Mtpa takes the net addition to 150Mtpa. 2014 production growth is
supported by the Carajas +40Mtpa project, Serra Leste (+6Mtpa), Conceio
Itabiritos (+12Mtpa), and Vargem Grande Itabiritos (+10Mtpa). Longer-term growth
is reliant on the Serra Sul S11D project ramping up from 2H16 (+90Mtpa).
Figure 16: Vale mine plan forecast
SL1
500
S11D
Carajas
N5
450
N4E
N4W
400
Urucum
Corumba
Mar Azul
350
Capao Xavier
Corrego do Feijao
300
Jangada
Vargem Grande Itabiritos
Aboboras
250
Capitao do Mato
Tamandua
Sapecado / Galinheiro
200
Segredo / Joao Pereira

Fazendao
150
Fabrica Nova
Alegria
Brucutu
100
Gongo Soco
Agua Limpa
Conceicao Itabiritos 1
50
Conceicao
Caue Itabiritos
0
2010
2011
2012
12
2013e
2014e
2015e
2016e
2017e
2018e
2019e
2020e
Caue

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Anglo American
Anglos output is set to increase from just over 42Mt in FY13 to over 75Mtpa by
FY17E. The increase is predominantly driven by the commissioning and ramp up of
Minas Rio from the tail end of 2014. Kumba's output is expected to rise from 42.4Mt
in FY'13 to 49Mtpa from FY'16 as Sishen recovers from a variety of operational
issues (outlined in more detail in the Anglo American section below).
Figure 17: Anglo American mine plan forecast
80
70
60
50
40
30
20
10
0
FY11
FY12
FY13
FY14
Sishen
FY15
Kolomela
FY16
Thabazimbi
FY17
FY18
FY19
FY20
Minas Rio
For further discussion on the iron ore operations for each producer, refer to the
respective operational overview sections later in this report.
13
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Rio Tinto iron ore division overview

RIO is well on the way to 290Mtpa, reporting annualized shipments of 275Mtpa in
4QCY13. In 2013, the Pilbara 360 project dominated investor attention, with the
company now committing to expanding to 350Mtpa at the investment seminar in
December, where the key takeaways were:
Accelerated production: Production set to ramp up by 60Mtpa (from a base of
290Mtpa) over 2014-2017 through brownfield expansions and the 21Mtpa
Silvergrass project (decision deferred until 3Q14). Majority scheduled for
delivery in the next 2yrs, with 330Mt targeted in 2015.
Lower capital intensity: US$120-130/t capital intensity to achieve 350Mtpa,
lower than official guidance of US$155/t, and below the US$140/t target
provided at the site visit in September. Headline saving of US$3bn of capex
compared to previous plans.
US$400m brownfield expansionary capex approved: as a first step towards the
near term 60Mtpa growth plan, RIO's board has approved US$400m in new
capex to be spent on plant equipment and modification, and additional heavy
machinery for use at various mine sites across the Pilbara.
Deferral of Koodaideri: The 36Mtpa project has been delayed until 2016 at the
earliest. RIO has not outlined which mines the last 10Mtpa (to reach the 360Mtpa
target) will come from, however it now looks likely the company can get there
without Koodaideri. We believe Koodaideri could form the basis of a further
expansion beyond 360Mtpa should market conditions be favourable in 2016.
Near-term production guidance

Guidance from the site visit around the ramp up schedule for the next 12 months is
shown below. RIO reaches 290Mtpa at the end of 1H14.
Figure 18: 290Mtpa port capacity ramp up profile (targeted
shipments)
Source: Company reports.
14
Figure 19: Pilbara Iron quarterly mine production forecast
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Infrastructure projects on track

RIO has reiterated guidance of port, rail and power infrastructure to get to 360Mtpa
in 1H15. The critical path for projects is as follows:
Car dumper 5: Complete and ramping up, takes train out load to 290Mtpa
Nammuldi expansion: First ore due 3Q14, project needed to sustain 290Mtpa
long term. Before the project comes online, RIO is confident of reaching
290Mtpa shipments from destocking inventory (circa 25Mtpa through the
system) and system stretch from other assets. Without the 9Mtpa Nammuldi
expansion, we estimate mine system capacity at 285Mtpa.
Car Dumper 6: Complete at the end of 2014, takes train out load to 340Mtpa
Port expansion: Project to 360Mtpa due online at the end of 2014
Car Dumper 7: Replacement of the old Robe car dumper. Project due for
completion at 1Q15, takes train unload capacity to 360Mtpa
Revised Pilbara mine plan 330Mt in 2015, 350Mtpa by 2017

RIO has outlined its strategy for brownfield expansions and productivity
improvements to lift Pilbara mine production by 40-50Mtpa, to ~330Mtpa by 2015.
Key activities include minor plant modifications (i.e. additional crushing / screening)
and additional mobile equipment.
The key initiatives are outlined below:
West Angelas (+6Mtpa): West Angelas deposit A is close to depletion, and set
to be replaced with Deposit B. Deposit B extension could see a production
increment of ~6Mtpa. This project is essential to sustain production longer term,
but could supplement by as much as 10Mtpa (as flagged at the site visit).
Yandi (+8Mtpa): 8Mtpa debottlenecking through almost no capex which
would take production to ~60Mtpa (as flagged at the site visit).
Brockman 2 (+8Mtpa): life extension of existing plant, with a production
increment.
Paraburdoo (+7Mtpa): Expansion of operations from 1Mtpa to ~8Mtpa.
Nammuldi (+9Mtpa): Project already underway, with CSI constructing a
25Mtpa wet plant.
System stretch (+6-10Mtpa): RIO has again indicated system stretch of
~10Mtpa across the Pilbara network. We believe Hope Downs 4 could flex
beyond nameplate, along with further flex at Nammuldi and Tom Price / WTS.
Silvergrass (+21Mtpa): Silvergrass is essentially an extension of the Nammuldi
hub, although its largely considered a greenfield style development.
Western Turner Syncline Stage 2: The Tom Price ore body is close to
depletion, with a mine life of just 4yrs. The plant is ~30Mtpa, with Western
Turner Syncline now accounting for ~6Mtpa of feed. An approved expansion
takes WTS feed to 15Mtpa, however further approvals are required to grow WTS
to ~30Mtpa. This project is essential to sustain production longer term.
Brockman 4 (+2Mtpa): 2Mtpa expansion from 40Mtpa to 42Mtpa (as flagged at
the site visit)
15

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Mine overview
RIOs current Pilbara operations include 14 mines, broken down as follows:
Hamersley Iron: 8 wholly owned mines, and 3 JV mines including Eastern
Range with Baosteel (RIO 54%), Channar with Sinosteel (RIO 60%) and Hope
Downs 1&4 with Hancock Prospecting (RIO 50%), as well as a railway network
and port infrastructure in Dampier.
Robe River Iron Associates: 3 mines including Mesa J, Mesa A and West
Angelas, railway, port and supporting infrastructure at Cape Lambert. The JV
partners are RIO at 53%, Mitsui 33%, Nippon 10.5% and Sumitomo 3.5%.
Figure 20: RIO Pilbara Iron Ore operations capacity circa 294Mtpa once Nammuldi expansion
comes online in 3Q14
60
50
40
54
Hammersley Iron
40
Robe River Iron Associates

31
30
30
30
25
16
20
15
15
11
11
10
7
1
RIO share
JV partner
Table 3: Mine operations overview
Brockman 4
Robe Valley Operations
(Mesa A and Mesa J)
West Angelas
Tom Price (incl. WTS)
na
703
913
1474
Capacity Mt/a
Brockman 2 9
/ Nammuldi - 16
40
Mesa A - 25 /
Mesa J - 7
29.5
30
Greater Paraburdoo
(Paraburdoo, Channar and
Eastern Range)
Marandoo
Yandicoogina
Hope Downs (incl. HD4)
1020
22.5
Ore type
Brockman / Marra
Mamba
Brockman
Channel Iron
Deposit (Pisolite)
Marra Mamba
Brockman / Marra
Mamba
Brockman
407
711
1700
15
53.7
HD1 -31 /
HD4 - 15
Marra Mamba
Channel Iron
Marra Mamba (HD1)
/ Brockman (HD4)
Brockman 2/Nammuldi
16
Staff
na
Blend
Pilbara Blend
Commenced
1992
Port
Dampier
Workforce
FIFO
Pilbara Blend
Robe Valley
2010
Robe Valley 1972 (Mesa A
2010 / Mesa J 1992)
2002
1966
Dampier
Cape Lambert
FIFO
Residential
and FIFO
FIFO
Residential
Dampier
Residential
and FIFO
Pilbara Blend
Yandi fines
Pilbara Blend
Paraburdoo 1972 /
Channar 1990 /Eastern
Range 2004
1994
1998
2007 (HD4 2013)
Dampier
Cape Lambert
Dampier
FIFO
FIFO
FIFO
Pilbara Blend
Pilbara Blend
Pilbara Blend
Dampier
Dampier
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Port operations
RIO exports all its Pilbara iron ore through three port facilities at two locations
Dampier and Cape Lambert. Key statistics are as follows:
Parker Point (Dampier): 102Mtpa capacity, 2 car dumpers, 4 shipping berths
and 2 ship loaders. 100% owned (Hamersley Iron). The Port is approximately
20km south of Karratha.
East Intercourse Island (Dampier): 50Mtpa capacity, 1 car dumper, 1 berth and
1 ship loader. 100% owned. On average, Dampier takes 24-36 hrs to load a ship.
Cape Lambert: 85Mtpa capacity. 2 car dumpers, 4 shipping berths, and 2 ship
loaders. The port sits in the Robe JV with RIO 53%, Mitsui 33%, Nippon Steel
10.5% and Sumitomo Metal Industries 3.5%. The port is approximately 60km
north of Karratha.
Cape Lambert expansion

Work is underway to increase port capacity from 80 to 210Mtpa by 2015, taking total
system capacity from 237Mtpa to 360Mtpa. Work includes the construction of a new
1.8km jetty and four berth wharf as well as replacing a car dumper with a new dual
car dumper. The Cape Lambert project consists of three main stages:
1st additional berth adds ~53Mtpa, online August 2013
2nd additional berth adds ~50Mtpa, online 4Q14
Car dumper replacements adds 20Mtpa, online 1Q15
RIO has outlined overall capex for the Pilbara port and rail expansion to 360Mtpa
(from 290Mtpa) at US$5.9bn on a 100% basis, which equates to ~US$84/t. The Cape
Lambert expansion made up of: 1) Feb 2012: US$1.2bn for early works, including the
car dumper replacement, 2) Jun 2012: US$2.9bn for the 2 berths and increased rail
capacity (includes Rail Capacity Enhancement project track duplication and rolling
stock improvements), and 3) US$570m (100%) for a new gas-fired power station.
Figure 21: Cape Lambert expansion
17
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Rail operations
RIOs rail network is the largest privately-owned and operated rail system in
Australia. There is approximately 1500km of track that services the 14 mines in
operation. The network consists of two major lines the Robe line and the
Hamersley line. Current system capacity is 290Mtpa, although this is being expanded
to 360Mtpa by 1H15 through a 70km rail-duplication between Cape Lambert and the
Junction between the Robe and Hamersley Lines.
Robe Line Connects Cape Lambert to the Robe River operations,
approximately 190km to the south-west, near Pannawonica in the West Pilbara
(Mesa A and Mesa J).
Hamersley Line Traverses ~250km south-south-east from Dampier Port,
before branching out in three direction (at the Rosella Junction) to the west for
the Brockman operations (Nammuldi, Brockman 2 and 4, WTS), to the south for
Tom Price and the Paraburdoo operations (Channar, Eastern Range and
Paraburdoo) and to the east for Marandoo, Yandigoogina and the Hope Downs
operations (Hope Downs 1 and West Angelas).
The two lines intersect ~70km south of Cape Lambert, which facilitates the
interchange of trains between networks.
Figure 22: Rail and port map
The network is served by 173 locomotives and 9,800 ore cars. RIO intends to
introduce autonomous haulage in 2015
18
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Reserves and resources

RIOs Pilbara resource base currently sits at over 18Bt at a grade of ~60% Fe. This is
smaller than BHP's Pilbara resources of 20.6Bt at 59.3% Fe (much larger than
FMGs resource base of 13Bt+ including ~3Bt of low grade magnetite).
Brockman 4 (100% owned), has the largest reserve at over 560Mt @ 62.1% Fe. The
two development projects of Silvergrass East and Turee Central remain relatively
small (99Mt and 78Mt, respectively), although we'd expect these to grow with
further resource delineation. Paraburdoo which remains a central hub for Channar
and Eastern Range is the smallest with only 13Mt.
Figure 23: Pilbara JORC Reserve base (Mt)
600
561
500
380
400
336
300
324
274
200
100
228
211
166
99
78
71
49
44
42
13
Source: Company data
The figure below shows RIOs reserves based on mine life, throughput and size.
Reserves will ideally be located towards the right hand-side, towards the top of the
vertical axis, and contain a large bubble. Again, Brockman 4 ranks well with a strong
throughput rate, relatively long mine life and large reserve base. Yandicoogina stands
out with its high throughput rate (almost 20% of current installed capacity), although
this comes at the expense of shorter mine-life of ~6 years. Paraburdoo is the least
attractive on this basis, although its importance lies as a central processing hub, as
opposed to a significant tonnage provider.
Figure 24: Pilbara Mine Life, Throughput & Size based on Reserves
Mine life (years)
80
60
Western Turner Syncline
40
20
0
0
Brockman 4
Hope Downs 1
Nammuldi
Marandoo West Angelas
Paraburdoo
Pannawonica
Mt Tom Price
Eastern Range
Brockman 2
10
20
30
40
Throughput (Mtpa)
Yandicoogina
50
60
19

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
The tables below outline RIOs current Pilbara reserves and resources. Unfortunately
RIO doesnt report resources by deposit, but rather aggregate resources by entity and
type, making it difficult to gauge the order in which potential projects are likely to be
developed.
Table 4: Pilbara Reserves (as at Dec-12)
Reserves
Operating mines
Brockman 2
Brockman 4
Marandoo
Mt Tom Price
Mt Tom Price
Nammuldi
Paraburdoo
WTS
Yandicoogina
Yandicoogina
Channar
Eastern Range
Hope Downs 1
Hope Downs 4
Pannawonica
West Angelas
Total operating
Development projects
Silvergrass East
Turee Central
Total development
Total Pilbara
Entity
Ore type
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Hamersley Iron
Channar JV
Eastern Range JV
Hope Downs JV
Hope Downs JV
Robe River JV
Robe River JV
Brockman
Brockman
Marra Mamba
Brockman
Marra Mamba
Marra Mamba
Brockman
Brockman
Pisolite
Process Product
Brockman
Brockman
Marra Mamba
Brockman
Pisolite
Marra Mamba
Marra Mamba
Brockman
Proved
Tonnes (Mt)
Grade (Fe)
Probable
Tonnes (Mt)
Grade (Fe)
18
422
188
16
10
74
6
262
209
115
24
40
9
75
175
161
1,804
62.9%
62.3%
63.5%
64.0%
61.1%
62.8%
62.9%
62.3%
58.6%
58.6%
63.1%
62.7%
61.3%
62.9%
57.3%
62.2%
61.3%
26
139
23
44
1
92
7
74
61.4%
61.3%
61.2%
63.4%
59.0%
62.4%
63.9%
61.0%
18
9
241
55
99
67
895
61
72
133
62.7%
62.0%
62.3%
1,937
38
6
44
61.4%
Total Reserves
Tonnes (Mt)
Grade (Fe)
62.7%
62.7%
61.6%
63.3%
57.0%
60.9%
61.2%
44
561
211
60
11
166
13
336
209
115
42
49
250
130
274
228
2,699
62.0%
62.1%
63.2%
63.6%
60.9%
62.6%
63.4%
62.0%
58.6%
58.6%
62.9%
62.7%
61.6%
63.1%
57.2%
61.8%
61.3%
61.3%
61.4%
61.3%
940
99
78
177
61.3%
62.2%
62.0%
62.1%
2,877
Table 5: Pilbara Resources (as at Dec-12). Resources are stated as additional to the reserves
Resources
Brockman
Brockman Process
Marra Mamba
Detrital
CID
Brockman
Brockman Process
Brockman
Brockman Process
Brockman
Brockman Process
Marra Mamba
Detrital
Brockman
Brockman Process
Marra Mamba
Detrital
Marra Mamba
Detrital
CID
Total operating
20
Entity
Hamersley
Hamersley
Hamersley
Hamersley
Hamersley
Channar JV
Channar JV
Eastern Rge
Eastern Rge
Hope Downs
Hope Downs
Hope Downs
Hope Downs
Rhodes Ridge
Rhodes Ridge
Rhodes Ridge
Rhodes Ridge
Robe River
Robe River
Robe River
Measured
Tonnes (Mt)
Grade (Fe)
208
62.6%
236
57.6%
189
62.3%
820
30
22
9
32
17
65
6
57.4%
61.9%
58.0%
61.6%
57.2%
61.6%
56.8%
61.1%
104
62.2%
147
1,885
57.5%
58.9%
Indicated
Tonnes (Mt)
Grade (Fe)
996
62.5%
238
57.4%
449
62.0%
110
61.7%
210
57.7%
9
61.7%
9
57.8%
3
61.8%
4
57.7%
33
62.3%
49
56.1%
84
61.5%
4
59.7%
204
64.6%
36
57.9%
404
62.4%
65
60.5%
192
61.4%
1
59.4%
1,483
58.2%
4,583
60.4%
Inferred
Tonnes (Mt)
Grade (Fe)
1,307
61.5%
340
57.2%
715
61.5%
475
61.1%
2,345
57.0%
2
61.6%
10
2
360
180
286
36
1,780
437
1,936
235
311
61
1,155
11,973
62.4%
57.5%
62.1%
56.7%
61.9%
58.7%
62.7%
56.5%
62.0%
60.1%
61.1%
61.0%
55.6%
59.9%
Total Resources
Tonnes (Mt)
Grade (Fe)
2,511
62.0%
814
57.4%
1,353
61.8%
585
61.2%
3,375
57.1%
41
61.8%
31
57.9%
22
62.0%
38
57.3%
410
62.1%
294
56.6%
376
61.8%
40
58.8%
1,984
62.9%
473
56.6%
2,340
62.1%
300
60.2%
607
61.4%
62
61.0%
2,785
57.1%
18,441
59.9%

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
BHP Billiton iron ore division overview

Since the shelving of the Outer Harbour project, BHP management have targeted
optimisation of the existing supply chain to extract more tonnes. Post the completion
of the Jimblebar mine (expected 4Q13) mine and port capacity will be matched at
220Mtpa. Beyond 220Mtpa, BHPs expansion options include 1) a 20Mtpa
expansion of Jimblebar to 55Mtpa, 2) deployment of additional mobile crushers, and
3) capacity creep through sweating the assets in the existing system. If successfully
delivered, these projects could see system capacity grow to 260-270Mtpa
Figure 25: BHP WAIO expansion options (100%)
300
20
10
20
250
200
150
220Mtpa
Mobile crushers Jimblebar expansion

35Mtpa to 55Mtpa
Capacity creep
(JPMe)
270Mtpa
Board sanctioned projects achieve 220Mtpa

As it stands the company has not approved growth beyond 220Mtpa, with the capex
indication of US$100-120/t to grow from 220Mtpa to 270Mtpa a broad indication
from management, and not representative of sanctioned projects.
Table 6: BHP WA IO projects
Project
Completion
Date
4QCY12
Capex US$m
100% share
2,235
Capex US$m
BHP share
1,900
Newman JV Orebody 24
mine
4QCY12
821
698
Jimblebar mine expansion
2HCY13
3,788
3,220
Port Hedland blending

and rail yard facilities
2HCY14
1,176
1,000
Port Hedland Inner

Harbour expansion
Total capex for projects under development (US$m)
Description
Further develop Port Hedland, including:
+ two additional berths and shiploaders,
+ a car dumper,
+ connecting conveyor routes and
+ associated rail works and rolling stock.
Increases total inner harbour capacity to 220 million tonnes per annum.
Debottlenecking opportunities that would add substantial, low cost capacity are
being evaluated.
Project is completed and in execution.
Includes the construction of:
+ an ore crushing plant,
+ train loadout facility,
+ rail spur and other associated support facilities.
Maintains iron ore production output from the Newman Joint Venture operations.
Project is completed and in execution.
Development of Jimblebar mine and rail links, and the procurement of mining
equipment and rolling stock that will deliver initial capacity of 35Mtpa, with
embedded options for expansion to 55Mtpa for incremental capital investment.
Port blending facilities and rail yards to enable ore blending, and the expansion of
resource life. Optimises resource and enhances efficiency across the WAIO supply
chain. Includes Mooka rail marshaling yard debottlenecking.
4,220
21
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Unapproved iron ore spend circa US$5-6bn

BHP is targeting a capital intensity of US$100-120/t to grow from 220Mtpa to
270Mtpa. This implies US$5-6bn of additional growth capex (JPMe US$3.3bn to
250Mtpa). In our view this is likely to be spread over the next 3-4yrs. As shown in
the chart below, this would still maintain growth spend at or below FY12 levels.
Figure 26: BHP major project capital expenditure outlook
10
0
FY12
FY13
Major projects
FY14e
FY15e
FY16e
Pilbara 270 unapproved
The reason BHPs targeted capital intensity is lower than RIOs is there are no
greenfield mines (vs Silvergrass within RIO's Pilbara 360 project).
Attacking the bottlenecks

Key bottleneck areas BHP will attack are the conveyor, stockyard, and stackerreclaimer systems at Port Hedland, as shown in the figure below. One of the major
growth projects includes rail yard facilities expansion, which creates flexibility and
increases direct load capability (commissioning expected in H2 CY14). However, the
interconnections between the dumpers and shiploaders will still require
debottlenecking to release the latent capacity. In our view, the shiploaders and the
dumpers on a standalone basis should be able to reach ~300Mtpa of capacity,
however the conveyors and stockyards which connect these are the constraint.
Figure 27: Port Hedland bottlenecks

22
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Conveyors & stockyard interconnections the current bottleneck

We estimate BHP could extract the following capacities on a 100% basis:
Port rail car dumpers: 275-300Mtpa
Port ship loaders: 280-320Mtpa
Rail: 300Mtpa (with further investment)
Mines: 220-225Mtpa currently (low cost 20Mtpa Jimblebar Phase 2 expansion /
further capacity with mobile crushers / Phase 3 Jimblebar expansion to 75Mtpa)
Capacity of port conveyors, stock yards & stacker reclaimers has not been identified,
which are the current bottleneck. BHP has noted there is a complex set of
interconnections which are constraining the system. We assume debottlenecking of
the stockyards and conveyors will occur as mine capacity is increased to lift overall
system capacity.
Mobile crushers could add 20Mtpa+

BHP has outlined that mobile crushers can unlock 20Mtpa across its portfolio of
mines (we assume 5 x 4Mtpa units). Currently, mobile crushers are being deployed at
Whaleback, and MAC.
As at the end of CY12, the company was also evaluating deployment at Jimblebar
and Yarrie. We assume mobile crushers are currently being used at Jimblebar prior to
the project ramp up in 4QCY13, after which time there should be latent processing
capacity in the existing ore processing facility (built for 55Mtpa).
We estimate mobile crushers being used by BHP typically have 4-5Mtpa of capacity,
and are usually fixed in place on concrete footings. After which time the capacity is
no longer needed, the facility can be moved and fixed in place at another location.
Figure 28: Typical mobile secondary crusher
Source: Company reports (14 Nov 2012)
We assume BHP will engage with contractors such as Crushing Services

International (part of the Mineral Resources group) to provide mobile crushing
services. CSI was recently awarded the contract to build the new 25Mtpa plant at Rio
Tinto's Nammuldi operation.
23
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
BHPs Pilbara iron ore mines

BHPs West Australian Iron Ore (WAIO) operations are in joint venture
arrangements. BHPs interest is 85%, with ITOCHU and Mitsui owning the
remaining 15%. The companys reserves are relatively concentrated, allowing
development to be undertaken around mining hubs at Yandi, MAC, Jimblebar & the
Newman JV area.
Table 7: BHPs major iron ore mining operations
Joint Venture
Newman
Newman
Newman
Newman
Jimblebar
Yandi
Mt Goldsworthy
Mt Goldsworthy
Total
Operations
Mt. Whaleback & Ore body 29/30/35
Ore body 23/25
Ore body 24
Ore body 18 & Wheelarra
Jimblebar
Yandi
Mining Area C (MAC)
Yarrie
Capacity
26
5
17
15
35
75
50
2
225
The capacities of the mines vary in size significantly as shown below. However, with
the exception of the Newman JV, the operations are relatively large and simple.
Reserve lives vary from 14 years at Yandi to 44 years at Jimblebar.
Figure 29: BHPs major mining areas (Mtpa)
80
BHP share
60
JV share
Newman Hub
40
20
0
Yandi
MAC
Jimblebar Whaleback & Orebody 24 Orebody 18 Orebody 25

OB 29/30/35
& Wheelarra
24
Yarrie
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Mine asset overview

BHPs WA iron ore mines are concentrated around 4 larger hubs, MAC, Yandi,
Newman, and Jimblebar. Jimblebar is the furthest mine from port at around 435km,
while the smaller Yarrie operation is 215km.
Figure 30: BHP WA Iron Ore operations
BHP Yandi (75Mtpa)

Yandi commenced production in 1992. It was operated by independent contractors
until October 2011. The operation consists of 3 processing plants, primary crusher
and overland conveyor, with nominal capacity 75Mtpa. Ore is delivered to two trainloading facilities. A railway spur links Yandi mine to Newman main rail line. The
iron ore is railed to Finucane Island and Nelson Point shipping facilities at Port
Hedland. The Yandi mine has produced lump product since 1999.
Mt Goldsworthy JV: Mining Area C (MAC) (50Mtpa)

Area C opened in 2003 and consists of an ore processing plant, primary crusher and
overland conveyor, with nominal capacity of 50Mtpa. A railway spur links the Area
C mine to Newman main line to rail ore to Port Hedland.
25
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Figure 31: Broader MAC Hub & potential Jinayri & ACWS hubs (future options)
Mt Goldsworthy JV: Yarrie (2Mtpa)

Operations commenced at Mt Goldsworthy in 1966, and at Shay Gap in 1973. The
original Goldsworthy mine closed in 1982, and the associated Shay Gap mine closed
in 1993. Mining at Nimingarra mine ceased in 2007, but has continued from adjacent
Yarrie area. The operations now consist of a mobile in-pit crushing plant, with
nominal capacity of 2Mtpa. Primary crushers at Yarrie and Nimingarra are on care
and maintenance.
Newman JV (63Mtpa)
The Newman Hub is more complex than Yandi & MAC. Operations consist of the
Mt Whaleback mine along with production from a series of nearby deposits
(numbered Ore Bodies). BHP reports aggregated production under "Newman". We
have compiled the individual Newman components from site visit presentations, EIS
documents, and other company reports. Overall production is around 63Mtpa.
Mt Whaleback (~26Mtpa including OB 29, 30 & 35): Production began in
1969. The mine is now the biggest single-pit open-cut iron ore mine in the world
being more than 5km long and nearly 1.5km wide. Operations consist of primary
and secondary crushing and screening plants, heavy media beneficiation plant
(circa 8Mtpa), stockyard blending facility, single cell rotary car dumper, and
train-loading facility. Smaller deposits, OB 29, 30 and 35 supplement production.
Ore Body 29, 30 & 35: Adjacent to Mt Whaleback and complement production
to form the Newman Hub. First ore from the Newman Hub as part of RGP4
construction was delivered 2009. BHP has not disclosed the production split
between Mt Whaleback and Ore Bodies 29, 30 & 35.
Ore Body 23 & 25 (5-10Mtpa): consists of a primary and secondary crushing
and screening plant with nominal capacity 10Mtpa. Production at Ore Body 25
commenced in 1989, with lump and fines produced through the processing plant
that was refurbished as part of RGP2. Mining commenced at Ore Body 23 in
1992 and was expected to be completed in 2009 according to the EIS. As ore
from Ore Bodies 23 and 25 become depleted, they will be replaced with ore from
Ore Body 24.
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07 February 2014
Orebody 24 (17Mtpa): In November 2011, BHP approved US$822m (100%) for

the development of the Ore Body 24 mine, located approximately 10km northeast
of Newman. Ore Body 24 is a sustaining mine to maintain iron ore production
output from the Mt Newman JV operations. Orebody 24 is expected to have a
capacity of 17Mtpa and will include the construction of an ore crushing plant,
train loadout facility, rail spur and other associated support facilities.
Orebody 18 and Wheelarra (~15Mtpa): The Wheelarra and Orebody 18 mine
sites are in close proximity and are run in conjunction by a single management
team from independent contractor, Macmahon. Orebody 18 and Wheelarra
material movements are ~28Mtpa and ~29Mtpa respectively according to
Macmahon (implies an average strip ratio around 2.8:1). The open pit operations
involve all aspects of drill and blast, load and haul, crushing and screening
through to train loading of final product. The RGP6 project included the
construction of another blending hub located between Orebody 18 and Wheelara.
Figure 32: Mt Newman JV infrastructure
Figure 33: Newman Mega Hub

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07 February 2014
Jimblebar (35Mtpa, likely to expand to 55Mtpa)

The Jimblebar mine is in the process of ramping up to 35Mtpa. The initial investment
delivers capacity of 35Mtpa of mining fleet, 55Mtpa ore handling plant, and 60Mtpa
of stockpile and train load out. First production was achieved 4QCY13.
Jimblebar sale of 15% interest

In June 2013, BHP sold 15% of Jimblebar to its existing WAIO JV partners for
US$1.5bn, reducing its share to 85%, consistent with the other assets. The
transaction value is based on a mix of past capital expenditure and asset value.
Assuming the minority partners had US$150m left to spend on capex, this implies
US$11bn for 100% of the mine. Sale details are as follows:
ITOCHU and Mitsui invested ~US$0.8bn and US$0.7bn respectively in shares and
loans of BHP Iron Ore (Jimblebar) Pty Ltd, representing an 8% and 7% interest in
the Jimblebar mining hub and resource. The consideration includes a share of
capital costs associated with the Jimblebar Mine Expansion project incurred to date.
The transaction is expected to be completed in the September 2013 quarter.
At the time of sale, BHP had made the following funding commitments to Jimblebar:
Jimblebar project spend: US$3.3bn BHP share (96%), excluding precommitment funding. On a 100% basis, this equates to US$3.4bn. The US$100m
difference relates to the infrastructure contribution from the JV partners (15%
share). Grossed up, this infrastructure spend equates to ~US$666m. Therefore the
Jimblebar capex for the mine alone is ~US$2.73bn.
Pre-commitment funding: On 17 Nov 2010, BHP approved US$635m (BHP
share US$570m) for port, rail and Jimblebar mine infrastructure. The equity share
difference of US$65m is for infrastructure, which grossed up at 15% is
US$433m. Therefore Jimblebar mine spend is ~US$200m.
Pre-commitment funding: On 29 Jan 2010, BHP approved US$1.93bn (BHP
share US$1.73bn) for infrastructure to 240Mtpa. The equity share difference of
US$200m is for infrastructure, which grossed up at 15% is US$1.33bn. Therefore
Jimblebar mine spend is ~US$600m.
Therefore total spend on Jimblebar (mine only) is US$3.5bn (35Mtpa of mine /
60Mtpa train load out capacity), while total spend on infrastructure (US$666m +
US$433m + US$1.33bn) is ~US$2.4bn (we note there is additional infrastructure
spend separate to the project). We estimate BHPs capital intensity for its historical
iron ore expansions (~US$180/t) was split around 1/3rd for each of mine / port / rail.
Moving to owner operator

BHP has stated an intention to move the WAIO business from contract mining to
owner-operator mining, which could result in lower costs longer term (avoiding
contractor margins). In 2011, BHP acquired HWE Mining Subsidiaries from Leighton
Holdings for US$710m. The purchase related to assets that service the MAC, Yandi
and ore body 23/25 operations. At the time these collectively accounted for ~70% of
BHPs total material movements. Macmahon continues to provide contracting services
along with all frontline supervision, at Orebody 18 and Wheelara.
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BHP aggregates its resource and resource statements into the mining hubs. The
relative lack of disclosure within the Newman JV means we cannot work out mine
lives (and associated capex for their eventual replacement) for individual ore bodies.
Reserve lives vary from 14yrs at Yandi to 44 years at Jimblebar.
Table 8: Pilbara iron ore reserves (30 June 2012)
Reserves
Mt Newman JV
Jimblebar
Mt Goldsworthy JV Northern
Mt Goldsworthy JV Area C
Yandi JV
Total Reserves
Ore type
BKM
MM
BKM
MM
NIM
BKM
MM
CID
%P
0.10
0.06
0.11
0.08
0.06
0.13
0.06
0.04
%SiO2
4.1
3.1
3.4
3.2
9.3
3.4
3.4
5.7
%Al2O3
2.0
1.8
2.4
2.2
1.3
2.0
1.7
1.5
%LOI
3.2
6.4
4.3
6.2
2.5
5.2
5.7
10.7
Tonnes (Mt)
1,133
78
499
92
26
381
362
866
3,437
Grade (% Fe)
62.9%
61.6%
62.4%
61.3%
60.2%
62.2%
62.1%
57.1%
61.1%
Reserve life (yrs)

24
44
15
15
14
Source: Company reports. Cut-off grades used to estimate reserves are generally close to reserve grades: Mt Newman JV 5962%Fe for BKM, 50%Fe for BKM beneficiation material, 59%Fe for
MM; Jimblebar 59%Fe for BKM, 58%Fe for MM; Mt Goldsworthy JV Northern 50%Fe for NIM, Mt Goldsworthy JV Area C 57%Fe for MM, 59%Fe for BKM; Yandi JV 55.055.5%Fe for CID. WAIO
resources and reserves are divided into joint ventures and material types that reflect the various products, BKM Brockman, MM Marra Mamba, NIM Nimingarra, CID Channel Iron Deposits.
Reserve grades listed above refer to in situ mass percentage on a dry weight basis.
Tonnages represent wet tonnes based on the following moisture contents: BKM 3%,
MM 4%, CID 8%, NIM 3.5%. The table below displays the grades as wet tonnes on
a production weighted basis using the disclosed moisture contents.
Table 9: Production weighted grade and moisture content
Reserves
Mt Newman JV
Jimblebar
Mt Goldsworthy JV (MAC & Northern)
Yandi JV
Total Reserves
Production weighted average
Production weighted avg (ex Jimblebar)
Tonnes
1,211
591
769
866
3,437
Moisture
3.1%
3.2%
3.5%
3.5%
3.3%
3.3%
3.3%
Grade (dry)
62.8%
62.2%
62.1%
57.1%
61.1%
60.7%
60.4%
Grade (wet)
61.0%
60.3%
60.0%
55.2%
59.2%
58.7%
58.4%
Capacity (2013)
63
35
50
75
223
Life (yrs)
19
17
15
12
We note benchmark prices are quoted on a dry metric tonne at 62% Fe, which is
close to BHPs production weighted average of 60.7%. However, due to a relatively
low moisture content of ~3.3% (vs benchmark at 8%).
29

07 February 2014
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Figure 34: Reserve life vs throughput. Bubble size represents size of reserve
25
Mine life (years)
20
Mt Newman JV
Jimblebar
15
10
Yandi JV
Mt Goldsworthy
JV (MAC &
Northern)
5
0
30
40
50
60
70
80
90
At the 2011 site visit, BHP stated it expects a production strip ratio of 2:1 for the
next 30 years.
Table 10: Pilbara iron ore resources - inclusive of reserves (30 June 2012)
Resources
Mt Newman JV
Jimblebar
Mt Goldsworthy JV Northern
Mt Goldsworthy JV Area C
Yandi JV
BHP Billiton Iron Ore Exploration
Total Resources
Ore type
BKM
MM
BKM
MM
NIM
BKM
MM
BKM
CID
BKM
MM
%P
0.12
0.07
0.13
0.08
0.06
0.13
0.06
0.15
0.05
0.15
0.06
%SiO2
5.0
4.2
4.9
4.5
8.8
5.7
4.5
5.0
6.4
4.4
4.8
%Al2O3
2.6
2.5
3.1
2.5
1.2
2.7
2.1
2.3
2.3
2.8
2.5
%LOI
4.9
7.3
5.2
6.9
1.9
5.9
7.0
7.3
10.9
7.4
6.0
Tonnes (Mt)
3,153
1,257
2,157
486
186
2,274
3,294
2,500
2,467
2,460
370
20,604
Grade (% Fe)
60.6%
59.5%
60.3%
59.6%
61.0%
59.5%
60.0%
59.0%
55.7%
59.1%
59.6%
59.3%
Source: Company reports. WAIO resources and reserves are divided into joint ventures and material types that reflect the various products, BKM Brockman, MM Marra Mamba, NIM
Nimingarra, CID Channel Iron Deposits.
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07 February 2014
Railway network
BHPs railway network consists of ~1600km of track including the mainline, yards
and sidings. As at late 2011, the company reported there were 5458 ore cars in
service, the locomotives consisting of 40 Dash 8s, 7 AC6000s, 73 SD70s. We
assume the locomotives and ore cars have increased following recent expansions.
BHP Billiton Iron Ore operates two railway lines:
The first is 426 km long, running from Nelson Point to Newman (or Mt Whaleback
Mine). With junctions at Yandi Junction, where the mainline continues on towards
the Mining Area C iron ore mine, past the spurs to Yandi One and Yandi Two
mines, with the other at Jimblebar Junction Marshalling Yard, with branches
heading east out past Orebody 18 to Wheelarra Hill iron ore mines and to the south
west to Mt Whaleback past Ore Body 23/25 iron ore mines.
The other line of 208 km runs from Finucane Island to the Yarrie and Nimingarra
mines via Boodarie Yard and Goldsworthy Junction. Figure 48 shows BHPs two
train lines and how they service Finucane Island & Harriet Point; and Nelson
Point & Burgess Point. The under channel tunnel that connects Nelson Points
stockyard to Finucane Islands stockyard serves as an optimising factor providing
the company some flexibility to shift sales from one berthing facility to another.
Following the duplication of BHPs mainline (285km+ of double tracking), the
company believes it can deliver more than 300Mtpa of capacity with modest
investment. The dual track was completed in 1HCY11
Figure 35: Mainline duplication
Upgrades to railroad signaling, controls and communication systems were included

in the project, as well as the construction of 10 rail bridges.
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07 February 2014
Port Hedland facilities

BHP has been shipping ore through Port Hedland since the 1960s. In Feb 2012, the
company approved US$917m in pre-commitment funding for an Outer Harbour
facility. In Aug 2012, the company announced work on the Outer Harbour
development had been slowed to focus on maximising potential capacity from the
Inner Harbour. The company now outlines a Dual Harbour Strategy, although we
dont expect the Outer Harbour project to be developed within the next 5yrs. While
the company currently has total allocated capacity through the Port Hedland inner
harbour of 246Mtpa (6Mtpa is through Utah Point which is inaccessible for BHPs
rail infrastructure), management believe 260-270Mtpa is achievable mid term, with
300Mtpa longer term as other proponents do not fully utilise their capacity and the
overall port efficiency grows beyond the theoretical 495Mtpa rate.
Figure 36: BHPs Port Hedland assets
Whether or not BHP builds the Outer Harbour will depend on how its risk-weighted
NPV of new inner harbour capacity compares against its NPV for the Outer Harbour.
That is, BHP will attach a risk component to whether others will forgo allocated
inner harbour capacity based on projects not going ahead.
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07 February 2014
Inner Harbour port allocation

The PHPA advised its allocations of port capacity to the various port users early in
2008, with approved port capacity confirmed in its 2008 annual report. BHP was
allocated 240mtpa to match its Rapid Growth Expansion Projects: BHP was also
provided 6mtpa through Utah Point.
200mtpa of A Class shipping capacity (Tidally Constrained Cape Size Vessels)
through two berths at Finucane Island, two at Stanley Point, two at Nelson Point,
and two at Burgess Point
40mtpa of B Class shipping capacity through its eight berths. Tidally Constrained
B Class Capacity Vessels have lower priority sailing rights than Tidally
constrained A Class Capacity Vessels on all tides but have priority sailing
rights over all other classes of vessels.
6mtpa of capacity through the multi-user facility at Utah Point courtesy of its
contribution to the initial investment
Iron ore exporters that have been allocated annual capacity must present vessels
evenly throughout the year for each type of vessel allocation ('A', 'B' or 'C' class
capacity vessels). Each allocation is then broken down into equal monthly portions
based on one-twelfth of the annual allocation. Where an iron ore producer has used
all of its allocated capacity in a month, it may have access to further spare capacity
(for that month). This additional capacity is refered to as 'D' class and defined as
opportunistic additional capacity.
BHPs inner harbour capacity may be over 300Mtpa

There are a number of opportunities for BHP to utilise more export capacity in the
inner harbour than its 240Mtpa allocation:
Larger ships We estimate BHPs Port Hedland allocation is based on an
average ship size of 165kt. However, we believe it could use ships up to 171kt for
120Mtpa and as much as 205kt ships for the remaining 120Mtpa allocation. If
BHP were to use these larger ships, we estimate BHP could extract circa
280Mtpa through the inner harbour, or an additional 40Mtpa. Recent port
statistics indicate the average ship size using the port is over 180kt and trending
higher. Furthermore, more ships are being built with larger drafts and higher
capacities of up to 250kt.
Latent outload capacity We estimate BHP has potential outload capacity of over
300Mtpa based on the number of berths and loaders it has available, combined with
maximum ship sizes. If we assume the NWI Group do not proceed with its
proposed 50Mtpa port, this could be deemed D Class capacity which would
then be made available to other port users. Allocating this 50Mtpa capacity to BHP
and FMG on a pro-rata basis could allow BHP to gain another 30Mtpa, which
could allow BHP to export 310Mtpa+ from the inner harbour.
33

07 February 2014
Lyndon Fagan
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Vale iron ore division overview

Vale is expected to produce 306Mt in 2013, and is expected to increase it to 312Mt
in 2014 as the first wave of its new projects start ramping up. The company has
sizeable capex ahead for iron ore, focusing primarily on adding low-cost production
and at the same time improving the quality composition of the overall mix as well as
extending mine life. Once all the projects are completed, we expect Vale to reach
440Mt of own-mine production.
Operations overview
Mining operations
Vale operates its iron ore operations in Brazil mainly through three production
systems: the Southeastern, Southern and Northern Systems, all of which with their
own logistics capabilities. The smaller mining operations are the Midwestern System
and through 50% owned Samarco, with BHP being the JV partner. Please see table
overleaf for more details.
Pellet operations
In addition to mining operations, Vale is the worlds largest producer of iron ore
pellets in the world, with total production capacity of ~60Mt excluding a 50% stake
in Samarco, which is expected to reach nameplate production capacity of 30.5Mt in
2014. The pellets operations are conducted in Brazil (11 plants including Tubarao
VIII expected for 1H14 start-up) and Oman (2 plants). Of the companys 2012 pellet
production, including the production from JVs, 65.3% was blast furnace pellets and
34.7% was direct reduction pellets. 100% of the iron ore requirement for the
company's wholly-owned pellet plants is supplied from its own mines, while for
Samarco and other JVs, only a part is supplied.
Table 11: Vale's pellet operations
Company/Plant
Vale's Share
Description
Nominal Capacity (Mt)
Brazil
Tubarao (Espirito Santo)*
Fabrica (Minas Gerais)
100%
100%
Two w holly ow ned pellet plants and five leased plants. Receive iron ore from Southeastern System mines.
Part of the Southern System. Receives iron ore from the Fabrica mine.
29.2
4.5
Vargen Grande (Minas Gerais)
100%
Part of the Southern System. Receives iron ore from the Pico mine.
7.0
Sao Luis (Maranho)*
100%
Part of the Northern System. Receives iron ore from Carajas.
7.5
Samarco (Espirito Santo)
50%
Three pellet plants, and a fourth pellet plant under construction with a capacity of 8.3Mtpy .
22.3
70%
Two pellet plants producing direct reduction pellets.
9.0
Zhuhai YPM
25%
Has port facilities, which are used to receive feed from Vale's mines in Brazil.
1.2
Any ang
25%
Started production in Mar'11.
1.2
Oman
Vale Oman Pelletizing Company LLC
China
Source: company reports, J.P. Morgan

Note: (1) *Operations at the Tubar0 I and II pellet plants have been suspended since Nov. 13th , 2012 in response to changes in steel industry demand for raw materials (contraction in pellet
consumption in favor or greater use of sinter feed). Also, on Oct. 8th, 2012, the company temporarily suspended operations at the So Luis pellet plant for similar reasons. (2) Capacity shown is on
100% basis.
Since Oct2012, the Sao Luis and the Tubarao I and II pellet plants (contributing
about 18% of Vales pellet production) have halted operations in order to adjust
production in response to the changing raw materials demand from the steel industry.
As a result, Vale is producing more sinter feed and thereby reducing the availability
of pellet feed for the pelletizing process.
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07 February 2014
Table 12: Overview of Vale's iron ore operations

Mining System
Northern System
Location
Carajs, state of
Par
Descripition/History
Mineralization
Open-pit mines and ore-processing plant. Divided
High grade hematite (66.7% on
into Serra Norte, Serra Sul and Serra Leste
average)
(northern, southern and eastern ranges). Since 1985,
we have been conducting mining activities in the
northern range, which is divided into three main
mining areas (N4W, N4E and N5).
Operations
Access/Transportation
Open-pit mining operations. Beneficiation
EFC railroad transports the iron ore to
process consists simply of sizing
the Ponta da Madeira maritime terminal
operations, including screening,
in the state of Maranho.
hydrocycling, crushing and filtration. Output
from the beneficiation process consists of
sinter feed and pellet feed.
Southeastern SystemIron
Quadrangle,
state of Minas
Gerais
Three sites: Itabira (two mines, with two major

beneficiation plants), Minas Centrais (three mines,
with three major beneficiation plants) and mariana
(three mines, with four major beneficiation plants).
Ore reserves with high ratios of

itabirite ore relative to hematite ore.
Itabirite ore has iron grade of 35-60%
and requires concentration to achieve
shipping grade.
Open-pit mining operations. We generally

process the run-of-mine by means of
standard crushing, classification and
concentration steps, producing sinter
feed, lump ore and pellet feed in the
beneficiation plants at the mining sites.
EFVM railroad connects these mines to

the Tubaro port.
Southern System
Three major sites: Minas Itabirito (four mines, two

major beneficiation plants and three secondary
beneficiation plants); Vargem Grande (three mines
and one major beneficiation plant); and Pareopeba
(four mines and four beneficiation plants).
Ore reserves with high ratios of

itabirite ore relative to hematite ore.
Itabirite ore has iron grade of 35-60%
and requires concentration to achieve
shipping grade.

standard crushing, classification and
concentration steps, producing sinter
feed, lump ore and pellet feed in the
beneficiation plants at the mining sites.
MRS, an affiliate railway company,

transports our iron ore products from
the mines to our Guaba Island and
Itagua maritime terminals in the state of
Rio de Janeiro.
Midwestern System (1)State of Mato

Grosso do Sul
Comprised of the Urucum and Corumb mines.

Open-pit mining operations.
Urucum and Corumb ore reserves

comprised by hematite ore, which
generates lump ore predominantly.

standard crushing and classification steps,
producing lump and fines.
Products delivered to customers

through barges travelling along the
Paraguay and Paran rivers.
Samarco
Integrated system comprised of two mines, two

beneficiation plants, pipeline, three pellet plants and
a port.
Itabirite type.
Open-pit mining operations. The two

beneficiation plants, located at the site,
standard crushing, milling and
concentration steps, producing pellet feed
and sinter feed.
Samarco mines supply the Samarco

pellet plants using two pipelines
extending approximately 400
kilometers. These pipelines transport
the iron ore from the beneficiation
plants to the pelletizing plants to the
port in the state of Esprito Santo.
Iron
Quadrangle,
state of Minas
Gerais
Iron
Quadrangle,
state of Minas
Gerais
Source: J.P. Morgan, Company data.
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Lyndon Fagan
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07 February 2014
Projects to deliver almost 50% growth in the next 5 years

Vale is investing US$37bn capex to deliver ~50% net addition to its current iron ore
production by 2018. Of this, the company has already invested $18B, and the
remaining $19B is to be spent by 2018, with the bulk of the pending investment in
the 90Mtpy Serra Sul mine and associated logistics. The investment should add
volumes (net addition of ~150Mt, after adjusting for 65Mt of depletion) quality to the
production mix, and lower the average cost of production for the company. The table
below highlights these projects and their degree of completion.
Figure 37: Vale project summary
Tackling the "caves" issue

Environmental permitting has been a source of great challenge for the Brazilian
mining industry in the recent years, with the caves issue playing a forefront role in
that matter. It caused a delay of almost 4 years to the companys main S11D project.
However, the good news is that the S11D project has fully resolved the caves
problem and is progressing for delivery in 2H16. We discuss the S11D project in
greater detail below.
A key part of the problem was that the regulations related to Caves in Brazil were not
clear, and it took 24 years for the rules to become clear.
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07 February 2014
Figure 38: Caves legal regulation milestones: It took 24 years for the rules to become clear
Source: Vale
Classification of Caves
According to the most updated regulations, the caves are classified into 4 'relevance'
types, and the treatment of those caves is the following. As can be seen, given the
solution involves the classification of mines, negotiation to preserve alternate mines
and finally the negotiation of compensation, it could be a long process involving a lot
of to-and-fro between the miners, IBAMA and the environmental authorities.
1. Maximum relevance
These caves must be fully preserved and a radius of 250M should be preserved as
well.
2. High relevance
These caves are not to be preserved per se, and the miners can negotiate the
preservation of other two caves instead with similar characteristics.
3. Medium relevance
For these caves, miners can negotiate some compensation through negotiations with
IBAMA
4. Low relevance
No compensation is required for these kind of caves
S11D: Resolved the "Caves" issue fully
Vale completed the caves relevance study and the compensation approval in Jul2013
and subsequently received the installation permit. In the process, the company
preserved 137 caves. However, the good news is that the company still has 30-year
of mine reserves, and the FOB cash cost guidance of $15/t was maintained. The
figure below highlights the mine snapshot and the areas preserved.
37
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07 February 2014
Figure 39: S11D mine: A successful example of "Caves" issue resolution
Source: Vale
Timing for Carajas +40

The Carajas +40 is in the final stage of a resolution to the caves issue having already
completed the relevance study and the classification of caves. Management expects
an environmental license would be received in 1Q14.
Two-fold effect on margins

A. Lower costs driven by greater share of Northern system production
The iron ore in the Northern System is of the highest quality within Vale's portfolio
at 66.7%. Not only does it translate into lower haulage requirement by trucks, but it
also means that the company's beneficiation process consists simply of sizing
operations, including screening, hydrocycloning, crushing and filtration. This allows
Vales Carajas operations to be one of the lowest cost operations globally in FOB
terms, and also within the company's 3 main Systems.
With the addition of S11D, Carajas +40 and Serra Leste, Vale is expected to more
than double its Northern System's production from 2012 levels until 2019, when the
S11D project fully ramps up. As a result, Carajas production would move to 56% of
Vale's total iron ore production vs. 35% in 2012, generating huge overall cost
savings. Just as an example, the FOB cash cost of the S11D project is expected to be
$15.0/t compared to the companys 3Q13 FOB cost of $29.8/t.
Figure 40: Vale's production mix will improve significantly with higher Carajas output
Million tonnes
250
53%
200
150
100
50
34%
35%
35%
35%
37%
40%
101
110
107
104
115
133
2010
2011
2012
2013
2014
2015
44%
56%
56%
47%
156
179
2016
2017
50%
246
224
246
40%
30%
20%
Carajas Production

38
60%
2018
2019
% of Vale's Total Production
2020
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
B. Higher realized prices driven by improved grades and lower impurities

Vale expects to improve the grades of its iron ore production by adding high-grade
production at Carajas mines and through the Itabiritos projects, which would be
replacing some of the depleting mines. As a result, overall Fe grade should improve
from 64.02% in 2013 to 65% in 2018. This should allow better realized prices
through higher VIU premium.
Second positive effect on realized prices would be through lower/no penalty for
higher silica than the maximum allowed. This will be driven mainly by Itabiritos
projects, which specifically seek to improve the ore quality. Its important to note
that Vales iron ore with high silica content is current attracting a discount of as
much as $8/t, which once reversed, would allow for better realized prices.
Figure 41: Vale projected production capacity (Mt) and product specification
Source: Company reports. Note: Vale expects S11D to reach 90Mt in 2018
Recent guidance
At the December 2013 Vale Day, the company provided updated production
guidance, as shown in the chart below. Key changes were lower guidance in the near
term (2014, 2015) while roughly maintaining the own-mine production guidance for
future years. Eventually, Vale expects to reach 453Mt by 2018, including some third
party purchases.
39
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Figure 42: Guidance at 2013 Vale Day
On December 27th, 2013, Vale declared force majeure on a number of its iron ore
sales contracts as a result of the weather conditions that impacted operations and
shipments in the Southeastern System, especially in the state of Esprito Santo. The
force majeure was lifted on January 6th 2014. The impact on iron ore shipments was
2.5Mt (below the original estimate of 3Mt to 4Mt), of which up to 1.3Mt can be
potentially recovered in the first quarter of 2014.
Key projects
Vales iron ore projects could be classified into three categories: those targeting
volume growth (S11D and Carajas +40), those targeting quality improvement
(Itabiritos projects) and other projects like pellet plants and distribution centers.
Carajs Additional 40Mtpa project

This project is part of the companys Northern System and is located in Carajas, in
the state of Para in Brazil. The project involves the construction of an iron ore dry
processing plant, with an estimated capacity of 40Mtpy. Vale has concluded the plant
commissioning and has started the production on a test basis in 3Q13 - the company
expects the project to produce ~5.0Mt in 4Q13.
However there are two important considerations with this project currently:
(1) Issuance of operation license: Vale is still awaiting the receipt of an
operation license for these projects. The delay is driven by the caves
issues; however, now that management has already completed the caves
relevance study and the classification of mines, it expects the license would
be received in 1Q14.
(2) Railroad capacity limit to prevent a quick ramp-up to full capacity.
Given that the capacity of the EFC railway would be limited to 128Mt, the
pace of the Carajas +40 projects ramp-up would be limited until EFC
reached a capacity of 150Mt. Over the year, the duplication of further
sections of the railway would gradually alleviate this restriction by 2015.
40
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Table 13: Carajas +40Mtpy Project Details

Location
System
Capacity
Status
Capex (Plant)
Capex Intensity (Plant)
Capex (Total)
Capex Intensity (Total)
Carajas, Brazil
Northern
40Mtpy
Ramp-up
$3,475M
$87/t
$7,589M
$190/t
CLN 150 Railway and port facilities

The CLN 150Mtpy is the logistics project associated with the Carajas +40. This
project is to increase Northern System railway and port capacity, including the
construction of a fourth pier at the Ponta da Madeira maritime terminal, located in
Maranho, Brazil with 60Mtpy of capacity from current ~110Mtpy. The project
would also increase the nominal capacity of EFC railway to ~130Mtpy. This was
reduced from earlier 150Mtpy, and the ~20Mtpy portion has now been included in
the railroad expansion as part of the S11D projects logistics solution. The railway
part of the project is concluded, encompassing 63km of rail duplication, and offshore
and onshore port facilities. Operating license for the port, both onshore and offshore,
has been issued.
Table 14: CLN 150 Project Details
Location
System
Railroad Capacity
Status
Port Capacity
Status
Capex
Railroad connects Carajas in Para state with Ponta da Madeira terminal in So Luis,
Maranho state.
Port capacity expansion at Ponta da Madeira terminal in So Luis, Maranho state.
Northern
20Mtpy*
Completed
60Mtpy
Completed
$3,931M
Source: J.P. Morgan, Company Data. Note: *The remaining ~20Mtpy capacity (as part of the original plan) now moved as part of the
S11D logistics project.
Carajs Serra Sul S11D: mine, plant and logistics

The project is the largest in Vales organic growth pipeline, and includes
development of a mine and procession plant in the Southern range of Carajas, in
Para, Bazil. Vale received the preliminary environmental license in Jun12 and the
installation license in Jul'13.
Mine
Mine capex is budged at US$8.089bn (US$90/t), of which US$2.5B has already been
spent. The project has a nominal iron ore production capacity of 90 Mtpy, and has
proven and proved reserves of 4.240B Mt with an average Fe grade of 66.7%, and low
impurities. The project would involve truckless mining system and a dry process that
would allow 100% recovery. The progress of the mine was 47% completed by Oct12,
and once started in 2H16, the mine would ramp-up to full capacity within 2 years. Once
operational, S11D will have impressively low cash costs of $15/t (FOB Brazil,
including royalties; using 2.0 BRL per USD), partly due to its very low strip ratio of
0.27:1, high ore grade and dry processing facility that allows for 100% recovery.
41
Lyndon Fagan
(61-2) 9003-8648
Figure 43: S11D: Earthworks (Oct'13)

07 February 2014
Figure 44: S11D: Modules assembly (Oct'13)
Port and rail

The CLN S11D is the logistics project associated with Carajas Serra Sul S11D.
Capex is budgeted at $11,582M, with $963 already spent until Oct13. It involves
increasing logistics capacity of the Northern System, including the duplication of
~570km of railway, construction of a 101km rail spur, acquisition of wagons and
locomotives and onshore and offshore expansions at Ponta da Madeira maritime
terminal. Once completed, the project would increase the Northern System logistics
capacity to 230Mtpy. Finally, progress on the maritime terminal is 19%, with the
start-up date of 1H16, while for the EFC railway, the progress is 8% with the start-up
from 1H14 to 2H18, and the full ramp-up coinciding with the ramp-up of the mine.
Figure 45: S11D: Railway expansion (Oct'13)
42
Figure 46: S11D: Port facilities expansion (Oct'13)
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Table 15: Carajas Serra Sul S11D (Mine & Logistics) Project Details
Location
System
Mine Capacity
Status
Capex (Mine)
Capex Intensity (Mine)
Capex (Total)
Capex Intensity (Total)
Port Start-up
Railway Start-up
Carajas, Brazil
Northern
90Mtpy
2H16 to 2018
$8,089M
$90/t
$19,671M
$219/t
1H16
1H14 - 2H18
Serra Leste
The project involves construction of a new procession plant in Carajas, in the state of
Para in Northern Brazil. The project would have a nominal capacity of 6Mtpy. Of the
total capex of $478M, $396 had been executed until 3Q13. Production is expected to
start ramp-up from 2H14 onwards.
Table 16: Serra Leste Project Details
Location
System
Capacity
Status
Capex (plant)
Capex Intensity (plant)
Carajas, Brazil
Northern
6Mtpy
2H14 start-up
$478M
$80/t
Conceio Itabiritos
This project is part of the Southeastern System and involves contraction of a
concentrator plant, which would extend mine life, improve quality of the final
product and add 12Mtpy of extra capacity. The environmental licenses are already
secured, and the project was being commissioned and scheduled to start-up
operations in 4Q13. Once completed, the Conceico Itabiritos project would produce
100% pellet feed with 67.7% Fe content and 0.8% silica.
Table 17: Conceico Itabiritos Project Details
Location
System
Capacity
Status
Capex (Plant)
Type
Fe content
Silica
Minas Gerais, Brazil

Southeastern
12Mtpy
Ramp-up
$1,174M (4Q13 start-up)
$98/t
Pellet feed
67.7%
0.8%
43
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Vargem Grande Itabiritos

This project is part of the Southern System and involves contraction of a new ore
treatment plant, with estimated nominal capacity of 10Mtpy. The environmental
licenses are already secured, and the project capex is 61% complete with start-up of
operations expected by 2H14. Once completed, the Vargem Grande project would
produce 100% pellet feed with 67.8% Fe content and 1.2% silica.
Table 18: Vargem Grande Itabiritos Project Details
Location
System
Capacity
Status
Capex (Plant)
Type
Fe content
Silica

Southern
10Mtpy
2H14 start-up
$1,910M
$191/t
Pellet feed
67.8%
1.2%
Conceio Itabiritos II
This project is part of the Southeastern System, in the Minas Gerais state of Brazil,
and involves the adaptation of the plant to process low-grade itabirites from
Conceico. The project will have estimated nominal capacity of 19Mtpy, but with no
incremental tonnage, in other words, the project is simply replacing old processing
capacity. The environmental licenses are already secured, and 48% of the project's
budgeted capex of $1,189M is already spent with start-up expected in 2H14. Once
completed, the Conceico Itabiritos II project would produce 31.6% sinter feed with
66.5% Fe content and 3.8% silica, while 68.4% of pellet feed with 68.8% Fe content
and 0.9% silica.
Table 19: Conceico Itabiritos II Project Details
Location
System
Capacity
Status
Capex (Plant)
Pellet feed (% of total)
Fe content
Silica
Sinter feed (% of total)
Fe content
Silica

Southeastern
19Mtpy (only replacement)
2H14 start-up
$1,189M
$63/t
68.4%
68.8%
0.9%
31.6%
66.5%
3.8%
Cau Itabiritos
This project is part of the Southeastern System, in the Minas Gerais state of Brazil,
and involves the adaptation of the plant to process low-grade itabirites from Minas
do Meio. The project will have estimated nominal capacity of 24Mtpy, but with net
incremental tonnage of 4Mtpy in 2017. The preliminary and the installation
environmental licenses for new primary crusher are expected for 1H14. 18% of the
project's budgeted capex of $1,504M is already spent with start-up expected in 2H15.
Once completed, the Cau Itabiritos project would produce 29% sinter feed with
65.3% Fe content and 4.4% silica, while 71.0% of pellet feed with 67.8% Fe content
and 2.8% silica.
44
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Table 20: Cau Itabiritos Project Details

Location
System
Capacity
Status
Capex (Plant)
Pellet feed (% of total)
Fe content
Silica
Sinter feed (% of total)
Fe content
Silica

Southeastern
24Mtpy (additional 4Mtpy)
2H15 start-up, net addition from 2017
$1,504M
$63/t
71.0%
67.8%
2.8%
29.0%
65.3%
4.4%
Teluk Rubiah
Teluk Rubiah is essentially a distribution center in Malaysia for Vale to allow more
efficient access to the Asian market. The project involves the construction of a
maritime terminal capable of handling 400,000dwt vessels and a stockyard to handle
upto 30Mp of iron ore. The preliminary, construction and the installation
environmental licenses have been secured, while the operating license is expected in
1H14. Total expected capex is $1,371M of which 64% has already been spent. The
expected start-up date is 2H14.
Table 21: Teluk Rubiah Project Details
Location
Type
Maritime Terminal
Stockyard Capacity
Capex
Status
Teluk Rubiah, Malaysia

Distribution Center
for upto 400,000dwt vessels
30Mtpy
$1,371M
2H14 start-up
Tubaro VIII
This is the 8th plant at Vales existing site at the Tubaro Port, in the Brazilian state
of Esprito Santo. The expected production capacity is 7.5Mt and the expected startup date is 1H14. Total budgeted capex is $1,321M, and the plant is currently in the
commissioning process. The operating license is expected for 1H14.
Table 22: Tubaro VIII Project Details
Location
Capacity
Status
Capex
Capex Intensity
Tubaro, Espirito Santo, Brazil

7.5Mtpy
Commissioning
$1,321M
$176/t
45

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Table 23: Vale iron ore reserves
Table 24: Vale iron ore reserves Southeastern System

Proven - 2012
Tonnage
Grade
Itabira Site
Conceio
Minas do Meio
Minas Centrais site
gua Limpa (2)
Gongo Soco
Brucuru
Apolo
Mariana site
Alegria
Fbrica nov a
Fazendo
Total Southeastern System
Probable - 2012
Tonnage
Grade
Total - 2012
Tonnage
Grade
Total - 2011
Tonnage
Grade
503.5
217.9
45.9
51.7
104.1
77.8
47.7
48.3
607.5
295.7
46.3
50.8
630.5
317.4
46.4
50.9
25.0
227.8
292.4
42.1
50.7
57.4
8.0
273.6
339.7
42.3
48.5
55.1
33.0
501.4
632.1
42.2
49.5
56.1
44.2
50.8
535.7
632.1
41.9
66.6
49.8
56.1
131.7
425.5
226.4
2,050.1
48.7
45.3
49.8
49.1
26.1
345.5
93.4
1,268.1
46.3
44.0
50.1
49.0
157.8
770.9
319.8
3,318.3
48.3
44.7
49.9
49.1
166.5
800.1
330.9
3,508.3
48.7
45.0
49.9
49.4
Table 25: Vale iron ore reserves Southern System

Proven - 2012
Tonnage
Grade
Minas Itabirito site
Segredo
Joo Pereira
Sepecado
Galinheiro
Vargem Grande site
Tamandu
Capito do Mato
Abboras
Paraopeba site
Jangada
Crrego do Feijo
Capo Xav ier
Mar Azul
Total Southern System
46
Probable - 2012
Tonnage
Grade
Total - 2012
Tonnage
Grade
Total - 2011
Tonnage
Grade
150.7
670.9
342.0
563.0
51.7
41.2
46.0
45.4
98.5
340.3
208.3
410.5
44.4
40.9
42.9
43.8
249.2
1,011.2
550.0
973.6
48.8
41.1
44.8
44.7
249.3
517.4
563.0
980.9
49.8
41.8
45.0
44.7
58.8
238.1
320.2
60.3
52.0
42.1
353.5
960.0
604.4
47.5
45.4
40.2
412.3
1,198.1
924.6
49.4
46.7
40.8
489.3
747.5
440.8
52.7
51.8
44.4
29.5
66.8
13.6
66.3
43.1
66.6
67.3
65.1
6.0
64.2
73.3
65.0
2,440.6
46.1
2,994.8
43.8
5,435.4
44.8
48.1
30.7
81.2
16.8
4,210.1
66.7
66.6
65.0
58.1
47.8

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Table 26: Vale iron ore reserves Midwestern System
Urucum
Total Midwestern System
Proven - 2012
Tonnage
Grade
7.2
62.7
7.2
62.7
Probable - 2012
Tonnage
Grade
26.4
62.1
26.4
62.1
Total - 2012
Tonnage
Grade
33.6
62.2
33.6
62.2
Total - 2011
Tonnage
Grade
34.9
62.2
34.9
62.2
Table 27: Vale iron ore reserves Northern System

Proven - 2012
Tonnage
Grade
Serra Norte Site
N4W
N4E
N5
Serra Sul
S11
Serra Leste
SL1
Total Northern System
Probable - 2012
Tonnage
Grade
Total - 2012
Tonnage
Grade
Total - 2011
Tonnage
Grade
1,128.4
258.2
265.6
66.5
66.5
67.0
277.1
86.9
715.0
66.1
66.0
67.3
1,405.5
345.1
980.6
66.5
66.4
67.2
1,446.2
364.2
1,025.3
66.5
66.4
67.9
3,045.8
66.8
1,193.7
66.7
4,239.6
66.7
4,239.6
66.7
143.0
4,841.0
65.7
66.7
164.4
2,437.2
65.1
66.6
307.4
7,278.2
65.4
66.7
307.4
7,382.7
65.4
66.7
47
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Anglo American iron ore division overview

Anglo American produced 42.4Mt of iron ore in FY13 on a 100% basis (29.5Mt
attributable). We expect output to increase ~78% to >75Mt by FY17E, a CAGR of
almost 16%. Following successful commissioning and ramp-up of the Kolomela
mine in South Africa, which is now running ~20% above its official nameplate of
9Mtpa, Minas Rio in Brazil is now the key growth project in the company's pipeline.
The project has been beset by difficulties throughout Anglos ownership, including
an inflated valuation at acquisition in 2007/08, however, management recently
reiterated schedule and capex guidance for the project, suggesting there may finally
be light appearing at the end of the tunnel.
Operations overview
Anglos iron ore operations are effectively split into two distinct units:
Kumba Iron Ore (KIO SJ; Not Rated): Anglo holds a 69.7% interest in South
Africa-listed Kumba. Kumba in turn, controls the Sishen and Kolomela export
mines and Thabazimbi, which supplies into the domestic steel industry. Total
production was 42.4Mt (wet) in 2013, rising to 49Mt by FY16E as the main
Sishen mine recovers from operational issues over the past year or so;
Iron ore Brazil: Anglo holds a 99.4% interest in the Minas Rio development
project in the iron ore quadrangle area of South East Brazil acquired from
MMX for $6.6bn in 2007/08. The mine is due into production by the end of 2014,
with total capex budgeted at US$8.8bn. Nameplate capacity is 26.5Mtpa (wet),
with the option of asset optimization to expand capacity to ~30Mtpa
The chart below shows a mine-by-mine breakdown of historical and forecast group
production and total group sales volumes.
Figure 47: Anglo American group iron ore production and sales (Mtpa wet)
80
70
60
50
40
30
20
10
0
FY11
FY12
FY13
Sishen
FY14
FY15
Kolomela
FY16
Other Kumba
FY17
FY18
FY19
FY20
Minas Rio
Kumba Sishen struggling, Kolomela exceeding expectations

Sishen is the key mine in Kumbas portfolio, with a nameplate capacity of 37Mtpa
from the companys total 49Mtpa. As shown below, however, recent performance
has been poor, with production levels falling and strip ratios rising. We attribute this
to a combination of the following reasons:
48
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Strip ratios were lowered in response to the global economic downturn in 2008.
As prices rebounded, maximizing ore production was prioritised over waste
stripping, creating a backlog of stripping requirements;
Subsequent weather events (H111), strikes (late-12/early-13) and safety stoppages
(H213) prevented the shortfall being addressed and, in fact, increased it.
As a result, the strip ratio is expected to peak at ~6x, ~35% above the LoM average.
With total material movements being a key driver of iron ore mining costs, it is
unsurprising to see higher strip ratios being reflected in unit costs. We anticipate cash
costs per tonne of product in H216 at R416/t, more than quadruple the level
recorded as recently as H209 and reflecting a 130% increase in total material mined
plus the impact of high levels of underlying cost inflation in South Africa.
Figure 48: Sishen annualised production vs strip ratio
Figure 49: Kolomela annualised production vs nameplate capacity

450
400
350
300
250
200
150
100
50
0
Cash cost (ZAR/t product, LHS)
Strip ratio (x, RHS)
Cost inflation (%, RHS)
In contrast, the performance of the (relatively) new Kolomela mine has exceeded
expectations. The mine was commissioned in H211 and was operating comfortably
and consistently above the 9Mtpa design capacity at ~11Mtpa within a year. That
level has been maintained since and appears to be driven by genuinely superior
operating performance rather than favourable ore characteristics. We therefore
anticipate production stabilising around the 11Mtpa run-rate going forward.
Figure 50: Kolomela annualised production vs nameplate capacity
12
10
8
6
4
2
Production (Mtpa)
H2 18
H1 18
H2 17
H1 17
H2 16
H1 16
H2 15
H1 15
H2 14
H1 14
H2 13
H1 13
H2 12
H1 12
H1 11
H2 10
H1 10
H2 09
H1 09
0
H2 11
Production (Mtpa, LHS)
60%
50%
40%
30%
20%
10%
0%
-10%
-20%
H1 09
H2 09
H1 10
H2 10
H1 11
H2 11
H1 12
H2 12
H1 13
H2 13
H1 14
H2 14
H1 15
H2 15
H1 16
H2 16
H1 17
H2 17
H1 18
H2 18
7.0
6.0
5.0
4.0
3.0
2.0
1.0
0.0
H1 09
H2 09
H1 10
H2 10
H1 11
H2 11
H1 12
H2 12
H1 13
H2 13
H1 14
H2 14
H1 15
H2 15
H1 16
H2 16
H1 17
H2 17
H1 18
H2 18
45
40
35
30
25
20
15
10
5
0
Nameplate capacity (Mtpa)
49

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Thabazimbi is a small mine, producing ~1Mtpa that goes exclusively to ArcelorMittal

South Africa (AMSA) on a cost plus pricing basis with AMSA bearing operating
costs. The operation was slated to close toward the end of 2014 due to resource
depletion and rising unit costs. In a deal announced in early November, however,
Kumba has agreed to assume operational and financial risks at the mine in return for a
renegotiated pricing agreement applying to all domestic ore supplied by Kumba to
AMSA (contractually up to 6.25Mtpa and currently ~4.7Mtpa).
Rail capacity a bottleneck
Kumba has 44Mtpa of capacity allocation on the Saldanha rail line (from a total of
~60Mtpa). Of this total, 1.5-2.0Mtpa (from Sishen) goes to AMSAs Saldanha Steel
works, leaving ~42Mtpa export potential, nominally split 33Mtpa for Sishen and
9Mtpa for Kolomela. Once Sishen returns to full capacity of 37Mtpa and assuming
Kolomela continues to produce at 11Mtpa, we anticipate sales into the domestic
market will need to exceed the currently contracted rate or at least one of the mines
will have to run below capacity.
Production guidance
At the December 2013 investor day, management provided updated production
guidance across all of the key divisions. Following downgrades to expectations
through 2013, particularly with respect to Sishen, guidance for Kumba was broadly
in-line with our latest forecasts. Minas Rio guidance came in above our previous
expectations and, while we believe caution is still warranted around the development
timeline, we increased our forecasts to reflect the new guidance.
Figure 51: Kumba JPMe vs guidance
Figure 52: Minas Rio JPMe vs guidance
50
30
48
25
20
46
15
44
10
42
40
0
FY12
FY13
FY14
Guidance range
FY15
FY16
FY12
JPMe
FY13
FY14
Guidance range
FY15
FY16
JPMe
Minas Rio the key project

Following successful commissioning and ramp-up of the Kolomela mine, Minas Rio
is now the only major growth project in the company's near-term pipeline. Anglo
originally acquired the project in 2007/08 for ~$6.6bn from Eike Batistas MMX. At
that time capex was budgeted at $3.6bn and project commissioning was expected in
early-2011. The current parameters are $8.8bn capex and end-14 first ore on ship
(FOOS). Encouragingly, at the December strategy day, management reiterated these
targets.
50
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
As at the end of November the overall project was 82% complete, with the following
key milestones having been achieved:
Mine pre-stripping completed;
Beneficiation plant 80% complete, tailings dam completed and all transmission
line towers erected;
Pipeline 90% complete, with land access (a key area of challenges in the past)
virtually concluded" (we understand 523km of the total 525km has been
secured) and 85% (440km) of pipe laid;
Port 73% complete. Two breakwater caissons built, with a further 16 built and
ready for installation;
Four key permits are still outstanding: 1) mine & beneficiation plant operating
permit application filed; 2) power line temporary operating permit granted
Dec-13; 3) pipeline operating permit application to be submitted Feb-14; and
4) port operating permit application filed end-13.
Although the project remains on schedule, we continue to believe the timeline is
tight, with piping and electrical cabling in the beneficiation plant and construction of
the breakwater at the port the key critical path items.
Figure 53: Minas Rio project schedule
Guidance on operating costs for the project was, however, increased by 10-17%,
predominantly reflecting increases in labour (+$1.00/t), electricity (+$0.30/t),
environmental agreements (+$0.90/t) and consumables (+$1.20/t).
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07 February 2014
Figure 54: Minas Rio cash cost breakdown
with further growth projects still at an early stage

Anglo originally envisaged Minas Rio as a three-stage project with eventual output
of ~80Mtpa feeding into dedicated pelletising capacity at the port. The development
challenges outlined above have led to those ambitions being scaled back
considerably. Management has now identified asset optimization opportunities that
could take capacity to ~30Mtpa, although this is yet to be approved. We do not
include this expansion in our base case forecasts.
Kumba has a range of earlier stage development projects, as outlined in the tables
below from the FY12 results presentation. These options are, however, all longdated and as yet unapproved so therefore excluded from our existing base case
forecasts. Kumba is also undertaking exploration in a number of African countries
(an agreement with Anglo prevents the two companies competing for the same
deposits), including Liberia.
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07 February 2014
Figure 55: Anglo American South Africa (Kumba) project portfolio from FY12 results presentation
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07 February 2014

Anglo's South African operations have very high-quality reserves, particularly at the
Kolomela and Sishen mines, as shown below. In fact, Kolomela enjoys the highest
reserve grades of any of the large global producers we analyse in this report. Current
reserves imply mine lives of ~20 years for both Kolomela and Sishen, with additional
resources offering scope for life extensions and/or expansion projects.
Table 28: Anglo American - Kumba ore reserves
In-situ grades at the Brazilian operations are significantly lower, more akin to those
found in Australian/West African magnetite deposits. The mineralogy is, however,
itabirite (essentially haematite) which is amenable to low-cost dense media
separation producing a high ex-mine product grade (~68% for Minas Rio). The mine
life extends beyond 2040 on the basis of the current reserve base (685Mt saleable
product), with additional resources of >2,900Mt implying a total LoM in excess of
75 years at the nameplate 26.5Mtpa output rate.
Table 29: Anglo American - Brazil ore reserves
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07 February 2014
Fortescue iron ore operations overview

FMGs iron ore network is slated to reach 155Mtpa in December 2013, with a steady
state reached post the 1QCY14 wet season. From 2QCY14, we believe
managements focus will move from delivering on projects, to debottlenecking the
network in order to sweat the assets to achieve more than 155Mtpa.
Port allocation and capacity

FMGs 5th berth construction is set to start in CY13 with targeted completion in
early CY15. Typical ship size loaded at Port Hedland is now 200kt, 20% higher than
the 167kt implied in the Port Hedland Port Authority allocated capacity for A&B
class ships, suggesting the 495Mtpa port capacity is now looking conservative.
Port capacity likely to be above 160Mtpa
FMG has 2 ship loaders over berths 1,2 & 3, with another ship loader to service
berths 4 & 5. The 3 ship loaders have a load rate of 13,500tph each. In June 2013,
FMG loaded 10Mt off berths 1,2 & 3 using 2 ship loaders. This implied a 120Mtpa
rate, or 40Mtpa per berth. We assuming berths 4 & 5 can run at or above this
capacity as there will be a surge bin (allows the reclaimer to keep running during
ship hatch changes). This implies at least 160Mtpa should be achieved once all 5
berths are operational. It is important to note that berth 5 will be a lay-by berth. If
FMG can gain approval to install another ship loader, this could take capacity higher,
with the key limitation likely to be available port allocation.
Port allocation 120Mtpa
FMG has official port allocation of 120Mtpa at Port Hedland. However, the port will
not be fully utilized for the foreseeable future. Capacity that is not taken up by other
proponents is called Class D capacity. In our view there will be 35-55Mtpa of
Class D capacity available to FMG for the foreseeable future on the basis the NWI
Group port (50Mtpa) is not currently going ahead.
Figure 56: FMG berths 1 to 4 and proposed 5th berth
55
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(61-2) 9003-8648

07 February 2014
Rail capacity
FMGs rail infrastructure consists of 620km of track and 13 bridges. It services up to
11 trains per day from the Chichesters and Solomon mines. FMG has stated the rail
capacity is 155Mtpa, however we believe through a modest capital investment this
could be lifted to 180-190Mtpa. At the port, FMG will have 3 car dumpers, each with
capacity around 60Mtpa (180Mtpa in total).
Mine capacity
FMGs mine and ore processing facility (OPF) capacity is highlighted below. We
also note which OPFs have a wet front end (WFE) to allow efficient processing of
ore below the water table.
Cloudbreak (40Mtpa): 1 x 40Mtpa OPF (WFE)
Christmas Creek (50Mtpa): 2 OPFs around the same size (WFEs)
Firetail (20Mtpa): 1 x 20Mtpa OPFs (without a WFE initially). As mining
moves below the water table (after the first 2yrs), FMG is likely to construct a
WFE (JPMe ~US$200m)
Kings (40Mtpa): 1 x 40Mtpa OPFs (WFEs)
BC Iron (Nullagine JV FMG owns 25%) (6Mtpa): Ore trucked to Christmas
Creek, stockpiled separately, then railed to Port Hedland.
This is 156Mtpa in total. In our view this is likely to be stretched to 160Mtpa+, with
an additional 4Mtpa achievable through capacity creep and debottlenecking
programs.
What is a wet front end?

A wet front end (WFE) on an ore processing facility (OPF) comprises of wet
scrubbers and screens, along with a de-sand plant to remove sticky clays and shales
from the run of mine ore. The ore goes through the facility the consistency of
concrete (wet slurry) as opposed to dry. A WFE enables the mine to process wetter
ore (below water table) with more fines than an ore processing facility could
otherwise handle. The WFE increases mine life as some ore that would otherwise
have been considered waste will be able to be processed through the WFE.
Wet scrubbers and screens
The function of the wet scrubber is to use coarse iron ore particles in the ore feed to
autogenously break up clays and shale. The process utilises the hard iron ore to grind
against the softer clays and shales to break them up into finer particles. The broken
up clays and shale material are worn down to reduce strength through friction. The
clays and shale are suspended in water allowing separation of coarse and fine particle
material by screening. The targeted slurry density is 55% w/w.
The slurry is then directed onto a vibrating screen, where further water is sprayed to
wash the fines from the oversize material. Oversize material is sent the secondary
crusher, middlings is sent to the tertiary crusher, while undersize gravitates to the wet
fines screen. The wet fines screen is used to separate material into over size (reports
to the stockpile) and undesize (reports to the desand circuit).
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07 February 2014
Desand plant
The desand circuit is used to beneficiate the low grade ore from the wet fines screens.
The undersize is pumped to a deslime cyclone feed agitated tank to allow even
distribution of the slurry. The material is separated into a coarse and clay rich
ultrafine fraction (sent to tails). The coarse fraction is then further separated into
various streams which report to either the tails or stockpile.
The WFE at Cloudbreak requires around 12.8 million litres of water per day. It
processes up to 47Mtpa to produce around 40Mtpa of product & 7Mtpa of waste that
is sent to a tailings storage facility.
Revised LoM strip ratio worked example

FMG has flagged material changes to the Chichesters life of mine (LoM) plans
which see the following:
Lower cut off grades & increased reserves (and mine life)
Lower ore processing facility yield (requires more ore to be mined)
Lower strip ratio (less waste to be mined)
This ultimately sees lower material movement costs, slightly offset by higher
processing costs, but for an overall benefit to cash costs. Revised Life of mine strip
ratios flagged by the company (studies to be completed) are: Chichesters 3.5x &
Solomon 1.4x.
Figure 57: Worked example of Chichesters strip ratio / yield change
Shipments (FMG share)
Ore shipped - Chichester's (Mt):
Pre
Post
90
90
Processing
Ore processed - Chichesters (Mt):
90
90
Yield (%):
90%
85%
-5%
Raw ore processed - Chichesters (Mt):
100
106
Ore mined (Mt):
100
106
Waste mined (Mt):
450
371
-79
Strip ratio (x ):
4.5
3.5
-1
Total material moved (Mt):
550
476
-74
Mining
Overall we believe the potential cost benefit to FMG is US$3/t at the Chichesters.
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07 February 2014

The company no longer splits reserves at Solomon (Kings & Firetail) or Chichesters
(Cloudbreak & Christmas Creek) hubs into the various deposits. The company
believes the Chichesters has a 23yr mine life, which is materially higher than the
reserve life (JPMe 14yrs based off an 85% yield on RoM product). In our view the
company is likely to invest further funds towards resource conversion (drilling) once
the debt has been reduced to a more manageable level.
Figure 58: Chichester & Solomon reserves
At the recent results, the company highlighted its product strategy at 155Mtpa, with
an average Fe grade of 58%. This is shown in the chart below.
Figure 59: FMG product mix
Note Bonnie Fines is from the Nullagine JV.
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07 February 2014
Resources are materially higher than reserves implying there is upside potential to
reserves as FMG invests further in drilling.
Figure 60: FMG resources (inclusive of reserves)
59
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(61-2) 9003-8648

07 February 2014
Investment views
Rio Tinto investment view (Overweight)
Overweight: preferred diversified miner in Australia and Europe.
RIO remains our preferred diversified miner based on: 1) inexpensive valuation
metrics, and 2) improving free cash flow profile which is likely to lead to a rebasing
of the dividend and potentially capital management in 2015. The stock is trading at
one of the largest PE discounts to BHP that we have seen in recent years (CY15 PE
of 8.9 vs BHP at 12.7), along with 28% potential upside to our NPV (BHP 12%).
Key downside risks: 1) adverse outcomes in commodities, currencies, production and
capex relative to our forecasts, and 2) unfavourable changes to tax, legislation and
other operating conditions.
BHP Billiton investment view (Neutral)

We recognize the quality of BHPs assets; the stock continues to look around fair
value to us, and we maintain our Neutral recommendation.
Key upside and downside risks relate to 1) adverse or more favourable outcomes in
commodities, currencies, production and capex relative to our forecasts, 2) changes
to tax, legislation, and other operating conditions, and 3) divergence in relative
performance of petroleum vs mineral prices.
Fortescue investment view (Overweight)

Overweight: top pick in the Australian mining sector
FMG continues to look compelling based on: 1) attractive valuation metrics under a
variety of scenarios, and 2) significant balance sheet deleveraging which is likely to
lead to PE expansion medium term, and 3) operational de-risking as Kings ramps up.
On this basis, we maintain our 12-month Overweight recommendation
The key downside risks to our target price relate to lower realized outcomes for iron
ore price, higher costs, higher capex, and disappointing ramp-up of expansion
relative to our expectations.
Vale investment view (Overweight)

Vale is our top pick in LatAm Metals and Mining
The combination of the simpler bottom up story with very attractive valuation levels
makes Vale our top pick in the sector. Management has been consistently delivering
on its strategy of discipline and simplicity. A few examples: capex budgets have been
slashed; Rio Colorado potash project was discontinued; divestitures such as VLI and
Norsk-Hydro were delivered; installation license of S11D was obtained. The final
and more important one was the settlement of the tax liabilities, taking away the
main uncertainty around Vales investment case. Vale is now a simple story of iron
ore growth and turnaround of base metals, with an attractive dividend yield of 6.1%.
We perceive risks related to weaker than expected growth in global economic
activity that would negatively impact the demand for bulk and base commodities and
thus Vales earnings and share prices. We also believe that political noise, and
material delays and/or cost run-ups in Vales expansion projects, as well as higher
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07 February 2014
operating costs due to bottlenecks, could add downside risk to our estimates and
price targets.
Anglo investment view (Underweight)

Our Dec '14E NPV of 14.82/sh implies there is long-term value in Anglos shares,
however, we believe the focus in 2014 will be on consensus earnings downgrades,
limited volume and earnings growth, lack of FCF generation and increasing levels of
debt. Near-term earnings multiples also leave AAL as the second most expensive of
the diversifieds and, with limited positive catalysts on the horizon, we remain
comfortable with our UW recommendation.
Our 12/sh Dec-14 PT for AAL is based on ~0.8x our Dec-14E NPV estimate for the
company of 14.82/sh. Our price target is driven by our NPV given our view that
P/NPV multiples more accurately reflect the drivers of long-term share price
performance. We believe this is justified due to the companys lack of near-term free
cash flow, with our estimates suggesting the AAL will remain FCF negative until
CY16E, in contrast to the other diversifieds which we forecast will generate positive
FCF in CY14E.
Specific upside risk essentially comes from any improvement in perceived South
African risks, or indeed any increase in price in commodities where Anglo has
unique exposure, such as diamonds or PGMs. A fundamental reassessment of the
company strategy or a thorough restructuring of the Platinum business could lead
shares of AAL to outperform. Besides that, the risks are essentially the same as for
the rest of the sector (commodity prices, currencies, fiscal regimes).
61
Lyndon Fagan
(61-2) 9003-8648
Table 30: Vale Summary Financials
62

07 February 2014

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Rio Tinto (RIO) Financial Summary
Relative recommendation: Overweight
Profit & Loss (US$m)
2012A
2013F
2014F
2015F
2016F
Valuation Summary
US$m
A$m
Revenue
50,942
48,429
51,464
54,063
53,452
Current mkt capitalisation
101,050
112,666
61,929
EV
113,184
126,195
69,366
A$82.00
45.05
25%
38%
Operating expenses
(34,644)
(29,131)
(28,258)
(31,294)
(31,481)
EBITDA
16,298
19,298
23,207
22,769
21,972
Depreciation and amortisation
(3,880)
(3,978)
(4,350)
(4,948)
(5,152)
12 mth price target
EBIT
12,418
15,320
18,857
17,821
16,820
Capital grow th to price target
(177)
(584)
(703)
(523)
(315)
640
244
356
550
449
Net interest
Other
NPBT
12,881
14,980
18,510
17,848
16,954
Tax expense
(3,528)
(4,805)
(5,159)
(4,956)
(4,608)
Minorities
Normalised NPAT
Extraordinary items
Reported NPAT
(84)
(337)
(1,105)
(1,002)
(1,220)
9,269
9,838
12,246
11,889
11,125
(12,297)
(2,509)
(3,028)
7,329
12,246
11,889
11,125
12 mth forecast DYld
3%
3%
12 mth forecast total return
28%
41%
WACC
10%
10%
Current DCF
US$m
A$m
A$ps
ps
Iron Ore
90,778
110,416
59.77
61,711
33.41
Aluminium
14,139
17,198
9.31
9,612
5.20
Copper
20,940
25,470
13.79
14,235
7.71
Energy
3,755
4,567
2.47
2,552
1.38
10,100
12,285
6.65
6,866
3.72
Shares outstanding (m)
1,849
1,847
1,847
1,847
1,847
Reported EPS (cents)
(164)
397
663
644
602
Diamonds, Minerals, Other
Normalised EPS (cents)
501
533
663
644
602
Total operations
139,712
169,936
91.99
94,977
51.41
Normalised EPS growth
(40%)
6%
24%
(3%)
(6%)
Net debt
(15,381)
(15,381)
(8.33)
(10,173)
(5.51)
Corporate costs
(2,597)
(3,158)
(1.71)
(1,765)
(0.96)
Franking credits
262
318
0.17
178
0.10
121,996
151,715
82.13
83,216
DPS (cents)
167
183
196
207
218
DPS grow th
15.2%
9.4%
7.0%
5.9%
5.4%
Exploration
(102%)
46%
29%
32%
36%
Total valuation
DPS/EPS payout
P/NPV
Cashflow (US$m)
2012A
2013F
2014F
2015F
9,430
13,476
16,913
16,897
0.80 x
45.05
0.73 x
2016F
16,330
Key Ratios
2012A
2013F
2014F
2015F
2016F
(17,615)
(13,362)
(10,420)
(8,066)
(6,926)
PE (Ltd)
11.7
11.1
8.9
9.1
9.8
Exploration
(1,971)
(948)
(500)
(500)
(500)
PE (Plc)
10.7
10.0
8.1
8.3
8.9
Free cashflow
(8,185)
114
6,493
8,831
9,403
EV/EBITDA (x)
8.1
6.8
5.5
5.4
5.3
(18,243)
(10,977)
(8,560)
(8,066)
(6,926)
Dividend yield (Ltd)
2.8%
3.1%
3.3%
3.5%
3.7%
(3,038)
(3,259)
(3,521)
(3,731)
(3,934)
Dividend yield (Plc)
3.1%
3.4%
3.7%
3.9%
4.1%
6,324
4,253
(1,521)
(3,731)
(3,934)
ROE (Norm NPAT/Avg. Equity)
16%
16%
18%
15%
13%
(2,473)
6,729
6,832
5,100
5,469
ROA - EBIT / (assets - cash)
11%
14%
16%
14%
13%
ROIC (EBIT/Assets)
10%
12%
14%
12%
11%
EBIT / net interest
70.2
26.2
26.8
34.1
53.4
92.1
33.0
33.0
43.5
69.8
1.2
1.0
0.7
0.5
0.2
34%
32%
21%
12%
5%
Cashflow f rom operations

Capex
Investing cashflows
Dividends
Financing cashflow
Change in cash
Balance Sheet (US$m)

Cash
Property plant & equipment
Assets
2012A
2013F
2014F
2015F
2016F
EBITDA / net interest
7,135
13,711
20,543
25,643
31,112
Net Debt / EBITDA
76,985
79,534
84,540
87,658
89,433
Gearing - net debt/equity
118,437
126,054
139,377
148,774
155,966
Debt
26,904
33,924
35,924
35,924
35,924
EBITDA margin
Liabilities
60,697
62,251
65,199
66,156
66,132
Eff ective tax rate
Equity
57,740
63,803
74,178
82,617
89,834
Net debt / (cash)
19,769
20,213
15,381
10,281
4,812
Half Yearly P&L (US$m)

Revenue
Operating expenses
EBITDA
Gearing - net debt/ (net debt + equity)
Attributable production
26%
24%
17%
11%
5%
32.0%
39.8%
45.1%
42.1%
41.1%
27%
32%
28%
28%
27%
2012A
2013F
2014F
2015F
2016F
Iron ore (Mt)
199
209
243
288
300
10.0
9.3
9.0
8.6
8.6
1H12A
2H12A
1H13E
2H13E
1H14E
Alumina (Mt)
25,324
25,618
24,511
23,918
25,099
Aluminium (Mt)
3.5
3.6
3.4
3.5
3.6
(16,711)
(17,933)
(15,937)
(13,194)
(13,710)
Copper mined (kt)
549
633
608
656
724
8,613
7,685
8,574
10,724
11,389
Copper refined (kt)
279
300
301
282
330
(1,805)
(2,075)
(1,994)
(1,984)
(2,084)
Gold mined (koz)
290
340
585
547
778
6,808
5,610
6,580
8,740
9,305
Coal - hard coking (Mt)
Net interest
(88)
(89)
(156)
(428)
(376)
Coal - semi-soft coking (Mt)
Other
359
281
142
102
161
Coal - Australian thermal (Mt)
20
22
16
16
16
Uranium (Mlb)
9.8
8.0
7.1
9.0
8.3
Diamonds (Mcts)
13
16
23
25
25
TiO2 feedstock (Mt)
1.6
1.6
1.9
2.3
2.3

EBIT
NPBT
Tax expense
7,079
5,802
6,566
8,414
9,090
(1,787)
(1,741)
(2,356)
(2,449)
(2,542)
Minorities
(140)
56
19
(356)
(502)
Normalised NPAT
5,152
4,117
4,229
5,609
6,046
Extraordinary items
Reported NPAT
Divisional NPAT (US$m)
729
(13,026)
(2,509)
2012A
2013F
2014F
2015F
2016F
5,881
(8,909)
1,720
5,609
6,046
Price assumptions
AUD/USD
1.04
0.97
0.88
0.90
0.89
278
223
229
304
327
CAD/USD
1.00
0.97
0.92
0.96
0.98
Iron ore (US$/t CFRChina)
129
135
125
110
100
Copper (US$/lb)
3.61
3.33
3.18
3.18
3.30
2012A
2013F
2014F
2015F
2016F
Iron Ore
9,242
9,950
11,366
10,186
8,425
Aluminium
(525)
(112)
223
88
49
Copper
1,092
828
979
1,304
1,792
Energy
283
21
319
57
213
(114)
593
704
1,485
1,738
Corporate items (including interest)
(709)
(1,446)
(1,355)
(1,240)
(1,100)
NPAT sensitivity (US$m)
Normalised NPAT
9,269
9,838
12,246
11,889
11,125
Copper +US$0.10/lb
Diamond and minerals

Other operations
Divisional NPAT split
2012A
2013F
2014F
2015F
2016F
Iron Ore
93%
88%
84%
78%
69%
Aluminium
(5%)
(1%)
2%
1%
0%
Copper
11%
7%
7%
10%
15%
Energy
3%
0%
2%
0%
2%
(1%)
5%
5%
11%
14%
0%
0%
0%
0%
Diamond and minerals

Other operations
Source: Company data, J.P. Morgan estimates.
Aluminium (US$/lb)
0.92
0.84
0.84
0.86
0.91
Gold (US$/oz)
1669
1413
1263
1275
1313
Thermal coal (US$/t)
95
84
84
87
91
209
162
151
165
168
2339
1136
965
1145
1280
NPV A$ps
2013F
2014F
2015F
2016F
0.79
56
94
104
117
Aluminium +US$0.10/lb
5.75
401
780
839
847
Gold +US$10/oz
0.04
Molybdenum +US$1/lb
0.12
20
21
23
Iron ore fines +US$0.10/dmtu
5.72
252
546
681
702
Hard coking coal +US$10/t
0.22
32
43
33
34
Thermal coal +US$10/t
0.71
77
114
117
120
Hard coking coal (US$/t)

Rutile (US$/t)
Semi soft +US$10/t

AUD/USD +1
0.16
12
25
26
27
(1.55)
(25)
(51)
(66)
(68)
63

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
BHP Billiton (BHP) Financial Summary
Relative recommendation:
2012A
2013A
2014F
2015F
2016F
Valuation Summary
US$m
A$m
Revenue
73,132
69,900
68,911
72,101
73,560
163,330
182,105
100,123
EV
190,840
212,778
116,987
A$40.00
22.11
Operating expenses
(39,386)
(40,751)
(37,922)
(39,411)
(41,419)
EBITDA
33,746
30,291
32,270
33,946
33,301
(6,508)
(7,361)
(8,232)
(8,773)
(9,882)
12 m th price target
EBIT
27,238
22,930
24,038
25,173
23,419
13%
26%
(730)
(1,276)
(1,306)
(1,251)
(1,216)
12 mth f orecast DYld
3.5%
3.9%
Net interest
NPBT
26,508
21,654
22,732
23,922
22,203
12 m th forecast total return
Tax expense
(9,276)
(6,906)
(7,477)
(8,161)
(7,752)
WACC
Minorities
(115)
(1,597)
(1,405)
(1,515)
(1,492)
Normalised NPAT
17,117
13,151
13,849
14,246
12,959
Extraordinary Items
(1,700)
(1,928)
Reported NPAT
15,417
11,223
13,849
14,246
12,959
16%
30%
9.6%
9.6%
Current DCF
US$m
A$m
A$ps
ps
Petroleum & Potash
48,319
59,283
11.14
33,151
6.23
Copper
32,516
39,894
7.49
22,309
4.19
Iron ore
70,889
86,975
16.34
48,637
9.14
Coal
28,056
34,422
6.47
19,249
3.62
15,763
19,340
3.63
10,815
2.03
5,337
5,324
5,324
5,324
5,324
289
211
260
268
243
Alum., Mang. & Nickel
321
247
260
268
243
Total Operations
195,542
239,913
45.06
134,161
25.20
Normalised EPS grow th
(21%)
(23%)
5%
3%
(9%)
Net cash/(debt)
(25,435)
(25,435)
(4.78)
(15,897)
(2.99)
Corporate costs
(2,047)
(2,512)
(0.47)
(1,405)
(0.26)
Franking credits
0.00
0.00
1,228
1,506
0.28
842
0.16
169,287
213,472
40.10
117,701
22.11
DPS (cents)
112
116
122
128
134
DPS grow th
10.9%
3.6%
5.2%
4.9%
4.7%
Exploration
39%
55%
47%
48%
55%
Total Valuation
2012A
2013A
2014F
2015F
2016F
DPS/EPS payout
P/NPV
Cashflow (US$m)
Cashflow f rom operations
Capex
Exploration
Free cashflow
Investing cashflow s
Dividends
Financing cashflow
Change in cash

Cash
20,864
22,342
24,498
24,194
2012A
2013A
2014F
2015F
2016F
(22,243)
(15,859)
(14,357)
(13,885)
PE (Ltd)
9.9
12.9
12.2
11.9
13.1
(2,452)
(1,350)
(1,082)
(1,406)
(1,406)
PE (Plc)
8.9
11.6
11.0
10.7
11.8
3,547
(2,729)
5,401
8,735
8,903
EV/EBITDA (x)
5.6
6.5
6.0
5.7
5.8
(32,036)
(18,726)
(14,041)
(14,753)
(14,281)
Dividend yield (Ltd)
3.5%
3.6%
3.8%
4.0%
4.2%
(5,933)
(6,222)
(6,343)
(6,655)
(6,974)
Dividend yield (Plc)
3.9%
4.0%
4.3%
4.5%
4.7%
2,509
822
(9,148)
(8,170)
(8,466)
ROE (Norm NPAT/Avg. Equity)
27%
18%
17%
16%
14%
(5,303)
896
(847)
1,576
1,447
22%
17%
17%
17%
15%
ROIC (EBIT/Assets)
21%
16%
16%
16%
15%
EBIT / net interest
37.3
18.0
18.4
2.9
2.9
46.2
23.7
24.7
27.1
27.4
2013A
2014F
2015F
2016F
4,781
5,677
4,830
6,406
7,853
95,247
100,565
108,192
113,776
117,779
Net Debt / EBITDA
139,178
146,175
153,845
159,629
Debt
28,330
33,187
31,787
31,787
31,787
Liabilities
62,188
63,887
61,627
62,292
62,699
EBITDA margin
Equity
67,085
75,291
84,548
91,552
96,930
Eff ective tax rate
Net debt / (cash)
23,549
27,510
26,957
25,381
23,934
2H12A
1H13A
2H13A
1H14E
2H14E
Iron ore (Mt)
34,012
35,888
34,250
34,660
36,268
Total petroleum (Mboe)
(20,441)
(20,310)
(19,179)
(18,743)
(19,456)
Production (BHP share)

Half Yearly CY P&L (US$m)
Revenue
Operating expenses
0.80 x
24,384
2012A
Key Ratios (Jun YE)
0.89 x
(18,385)
129,273
Assets
Copper (kt)
0.7
0.9
0.8
0.7
0.7
35%
37%
32%
28%
25%
26%
27%
24%
22%
20%
46.1%
43.3%
46.8%
47.1%
45.3%
35%
32%
33%
34%
35%
2012A
2013A
2014F
2015F
2016F
159
170
196
212
224
222
236
250
266
294
1,468
1,689
1,705
1,934
1,944
45
EBITDA
14,232
16,059
15,738
16,532
17,484
Coal - hard coking (Mt)
33
38
42
43
(3,459)
(3,902)
(4,040)
(4,192)
(4,297)
Coal - thermal (Mt)
71
72
74
82
91
EBIT
10,773
12,157
11,698
12,340
13,188
Aluminium (Mt)
1.2
1.2
1.2
1.2
1.2
5.2
Net interest
(516)
(760)
(658)
(648)
(631)
Alumina (Mt)
4.2
4.9
5.2
5.2
NPBT
10,257
11,397
11,040
11,692
12,556
Manganese ore (Mt)
7.9
8.5
8.6
8.8
8.8
Tax expense
(2,209)
(4,697)
(3,557)
(3,920)
(4,248)
Nickel (kt)
158
154
153
159
179
Minorities
(812)
(785)
(711)
(694)
(700)
Normalised NPAT
7,236
5,915
6,773
7,077
7,608
(2,803)
875
4,433
6,790
6,773
7,077
7,608
136
111
127
133
143
Extraordinary Items
Reported NPAT
Divisional EBIT (US$m)
Price assumptions
2012A
2013A
2014F
2015F
2016F
AUD/USD
1.03
1.03
0.90
0.89
0.90
Iron ore (US$/t CFR China)
153
127
129
117
105
Oil (US$/bbl)
111
110
107
103
100
Gas (US$/mcf)
3.05
3.44
3.76
3.98
4.17
2012A
2013A
2014F
2015F
2016F
Copper (US$/lb)
3.71
3.49
3.24
3.14
3.21
Petroleum & Potash
6,020
5,636
5,413
5,734
5,856
Hard coking coal (US$/t)
261
182
151
160
166
Copper
3,965
5,639
5,521
6,553
6,338
Thermal coal (US$/t)
110
88
81
86
88
Iron ore
14,201
11,109
12,461
11,160
9,431
Aluminium (US$/lb)
0.99
0.88
0.82
0.85
0.88
2,797
595
1,125
2,096
2,335
Nickel (US$/lb)
8.76
7.44
6.44
6.30
6.51
(24)
158
(92)
69
(101)
NPV A$ps
NPV ps
2014F
2015F
2016F
(0.81)
(0.45)
(106)
(94)
(111)
Iron ore fines +US$0.10/dmtu
1.55
0.86
447
446
498
Iron ore lump +US$0.10/dmtu
0.51
0.28
151
136
166
Coal
Alum., Mang., & Nickel
Group & unallocated
Total EBIT
Divisional EBIT split
279
(207)
(390)
(440)
(440)
27,238
22,930
24,038
25,173
23,419
NPAT sensitivity (US$m)

AUD/USD +1
2012A
2013A
2014F
2015F
2016F
Petroleum & Potash
22%
24%
22%
22%
25%
Oil +US$1/bbl
0.15
0.08
52
57
62
Copper
15%
24%
23%
26%
27%
Copper +US$0.10/lb
0.42
0.24
174
203
208
Iron ore
53%
48%
51%
44%
40%
Hard coking coal +US$10/t
0.58
0.33
182
198
212
Coal
10%
3%
5%
8%
10%
Thermal coal +US$10/t
0.88
0.49
280
308
342
0%
1%
0%
0%
0%
Nickel +US$1/lb
0.70
0.39
227
241
276
Aluminium +US$0.10/lb
0.55
0.31
214
214
212
Alum., Mang., & Nickel

64
Neutral

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Fortescue Metals Group (FMG): Financial Summary

Revenue
Operating Expenses
EBITDA
Relative recommendation:
OW
FY12A
FY13A
FY14E
FY15E
FY16E
Valuation Summary
A$m
6,731
8,134
12,881
14,564
13,354
16,877
(3,852)
(4,858)
(6,409)
(7,666)
(7,848)
EV
28,429
2,879
3,276
6,472
6,898
5,506
12 m th price target
A$7.05
(267)
(463)
(651)
(1,006)
(1,045)
EBIT
2,612
2,813
5,821
5,893
4,461
30%
Net Interest
(505)
(553)
(756)
(459)
(283)
12 mth forecast DYld
1.6%
MRRT
NPBT
2,107
2,260
5,065
5,434
4,179
Tax Expense
(657)
(658)
(1,519)
(1,630)
(1,254)
Normalised NPAT
1,450
1,602
3,545
3,804
2,925
109
144
103
1,559
1,746
3,648
3,804
2,925
Extraordinary Items
Reported NPAT
12 m th forecast total return
32%
WACC
10%
DCF valuation
A$m
A$ps
Chichester Ranges
13257
4.26
Solomon
15001
4.82
0.00
Western Hub
3,114
3,114
3,114
3,114
3,114
Total Operations
28258
50.1
56.1
117.2
122.2
9.08
93.9
Net (debt) / cash
-5562
-1.79
MRRT
46.6
51.4
113.9
122.2
93.9
Normalised EPS grow th
-11%
10%
121%
7%
-23%
8.0
10.0
10.0
10.0
10.0
Total Valuation
17%
19%
9%
8%
11%
P/NPV
FY12A
FY13A
FY14E
FY15E
FY16E
2,808
3,004
6,243
5,255
4,182
Capex
(6,044)
(6,355)
(2,158)
(1,201)
(1,270)
Free cash flow
(3,236)
(3,351)
4,085
4,054
2,912
Investing cashflow s
(5,990)
(6,166)
(1,516)
(1,163)
(1,195)
EV/EBITDA (x)
Financing cashflow s
2,793
2,989
(5,427)
(3,123)
(3,324)
Change in cash
(389)
(173)
(701)
970
(337)
Corporate overheads
Magnetite / exploration
DPS (Aps )
DPS/EPS payout
Cashflow (US$m)
Operating cashflow
Key Ratios
0.00
-986
-0.32
181
0.06
21891
7.03
0.77
FY12A
FY13A
FY14E
FY15E
FY16E
10.4
9.4
4.3
4.0
5.2
7.4
7.8
3.4
2.8
3.0
Dividend yield
1.6%
2.1%
2.1%
2.1%
2.1%
ROE (Norm NPAT/Equity)
39%
30%
36%
27%
17%
21%
15%
28%
28%
21%
ROIC (EBIT/Assets)
17%
13%
26%
25%
19%
EBIT / net interest
5.2
5.1
7.7
12.8
15.8
5.7
5.9
8.6
15.0
19.5
2.1
3.2
1.1
0.6
0.3
164%
199%
72%
28%
9%
PE
FY12A
FY13A
FY14E
FY15E
FY16E
Cash
2,343
2,158
1,457
2,427
2,090
2,898
17,159
18,666
18,862
19,087
Net debt / EBITDA
15,063
20,867
22,234
23,284
23,015
8,501
12,691
8,566
6,266
3,624
62%
67%
42%
22%
8%
11,301
15,578
12,337
9,389
6,288
EBIT margin
39%
35%
45%
40%
33%
EBITDA margin
43%
40%
50%
47%
41%
Eff ective tax rate
31%
29%
30%
30%
30%
-103.9
-107.6
131.2
130.2
93.5
-4.7
-4.5
3.7
3.7
5.2
n/a
n/a
27%
27%
19%
FY12A
FY13A
FY14E
FY15E
FY16E
56
78
86
90
92
60
Assets
Debt
Liabilities
Equity
3,762
5,289
9,897
13,896
16,727
Net debt / (cash)
6,158
10,533
7,109
3,839
1,534
FCFPS (US)
P/free cash flow (x)
Half Yearly P&L (US$m)

Revenue
1H13A
2H13A
1H14E
2H14E
1H15E
Free cash flow yield (%)
4,808
5,839
7,041
7,840
6,724
(2,529)
(2,679)
(3,730)
(3,880)
(3,786)
EBITDA
2,279
3,160
3,312
3,961
2,938
Chichesters sales (Mt)
(285)
(258)
(393)
(507)
(499)
Solomon sales (Mt)
34
59
EBIT
1,994
2,902
2,919
3,454
2,439
3rd party ore sold (Mt)
Net Interest
(263)
(393)
(363)
(247)
(212)
Total ore sales (Mt)
56
81
124
154
157
FY12A
FY13A
FY14E
FY15E
FY16E
48
44
36
39
40
34
27
27
48
44
35
34
35
Royalties (US$/t)
Shipping (US$/t)
12
10
10
10
10
Operating Expenses
MRRT
NPBT
1,731
2,509
2,556
3,207
2,227
503
753
767
962
668
1,228
1,756
1,789
2,245
1,559
40
103
1,268
1,859
1,789
2,245
1,559
Tax Expense
Normalised NPAT
Extraordinary Items
Reported NPAT
Volume forecasts
Cash costs
Chichesters C1 costs (US$/t)
Solomon C1 costs (US$/t)
Average C1 cash cost (US$/t)
A dmin (US$/t)
Sensitivity
NPV
FY14E
FY15E
FY16E
NPV / NPAT
7.03
3545
3804
2925
Iron ore +10% increase
2.43
441
858
791
Iron ore +10% increase
35%
12%
23%
27%
Iron ore +US$1/t increase
0.34
42
92
96
Iron ore +US$1/t increase
5%
1%
2%
3%
AUD +10% increase
-1.50
-182
-323
-355
AUD +10% increase
-26%
-5%
-8%
-12%
AUD +1c increase
-0.19
-20
-36
-39
-3%
-1%
-1%
-1%
AUD +1c increase

Total EBITDA cost (US$/t)
69
63
54
51
51
Net interest (US$/t)
11
11
Sustaining capex (US$/t)
28
12
10
109
85
70
61
61
A ll in cost (US$/t)
Assumptions
FY12A
FY13A
FY14E
FY15E
FY16E
A UD/USD
1.03
1.03
0.90
0.89
0.90
Iron ore CFR China (US$/t)
155
127
129
117
105
Iron ore CFR China (US$/ dry t) - FMG
133
116
118
105
95
65

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Anglo American: Summary of Financials

Profit and Loss Statement
$ in millions, year end Dec
Revenues
% change Y/Y
Gross Margin (%)
EBITDA
% change Y/Y
EBITDA Margin (%)
EBIT
% change Y/Y
EBIT Margin (%)
Net Interest
Earnings before tax
% change Y/Y
Tax
as % of EBT
Net Income (Reported)
% change Y/Y
Shares Outstanding
EPS (Reported)
% change Y/Y
Balance sheet
Cash and cash equivalents
Accounts Receivable
Inventories
Others
Current assets
Net fixed assets
Other non-current assets
Total assets
Cash flow statement

EBIT
Depreciation & amortization
Change in working capital
Taxes
Cash flow from operations
FY12
6,000
2,459
(527)
(1,799)
4,848
FY13E
6,260
2,352
1,007
(1,889)
6,393
FY14E
6,257
2,782
(78)
(1,764)
6,121
FY15E
6,373
2,964
(172)
(1,704)
6,061
Capex
Disposals/(purchase)
Net Interest
Free cash flow
(5,607)
(4,716)
(496)
(371)
(6,400)
(452)
(276)
166
(8,100)
0
(572)
(1,596)
(6,500)
0
(831)
118
Equity raised/repaid
Debt Raised/repaid
Other
Dividends paid
Beginning cash
Ending cash
DPS
24
4,886
(1,161)
(970)
11,732
9,148
0.85
0
0
(1,420)
(1,067)
9,148
6,131
0.87
0
0
(1,375)
(1,127)
6,131
1,578
0.89
0
2,000
(1,381)
(1,155)
1,578
532
0.91
FY12
26.5%
18.8%
8.4%
-
FY13E
24.7%
17.9%
6.4%
-
FY14E
25.3%
17.5%
5.9%
-
FY15E
24.5%
16.7%
5.5%
-
(12.2%)
(9.0%)
(127.0%)
(126.1%)
6.6%
9.1%
(193.1%)
(190.9%)
2.6%
2.6%
28.5%
28.5%
6.5%
6.5%
0.9%
0.9%
42.1
3.6%
16.5%
19.8%
0.4
2.0
4.9
NM
0.7
7.0%
21.6%
31.2
3.7%
20.7%
26.0%
0.4
2.2
5.3
19.7
0.7
6.0%
7.1%
15.8
3.8%
26.0%
35.2%
0.4
2.2
5.7
15.4
0.7
5.7%
7.7%
11.2
3.9%
29.0%
40.8%
0.5
2.3
5.9
15.2
0.6
5.8%
7.7%
FY12
31,956
(9.0%)
8,460
(36.2%)
26.5%
6,000
(45.5%)
18.8%
(201)
(403)
(103.8%)
(375)
(93.0%)
(1,657)
(127.0%)
1,254
(1.32)
(126.1%)
FY13E
34,880
9.1%
8,612
1.8%
24.7%
6,260
4.3%
17.9%
(276)
5,051
(1353.0%)
(1,889)
37.4%
1,542
(193.1%)
1,284
1.20
(190.9%)
FY14E
35,775
2.6%
9,039
5.0%
25.3%
6,257
(0.0%)
17.5%
(573)
5,346
5.8%
(1,764)
33.0%
1,982
28.5%
1,284
1.54
28.5%
FY15E
38,096
6.5%
9,337
3.3%
24.5%
6,373
1.9%
16.7%
(833)
5,159
(3.5%)
(1,704)
33.0%
2,000
0.9%
1,284
1.56
0.9%
FY12
9,094
3,275
5,005
571
18,047
FY13E
6,131
3,672
4,776
571
15,252
FY14E
1,578
3,766
4,861
571
10,878
FY15E
532
4,010
5,229
571
10,444
45,089
16,233
79,369
49,137
16,988
81,377
54,455
17,384
82,717
Sales per share growth

57,990 Sales growth
17,827 Net profit growth
86,262 EPS growth
2,604
4,536
1,663
8,803
15,150
11,629
35,582
43,787
34.92
2,604
5,710
1,663
9,977
15,150
11,629
36,756
44,637
34.76
2,604
5,812
1,663
10,079
15,150
11,629
36,858
45,947
35.78
2,604
6,252
1,663
10,519
17,150
11,629
39,298
47,123
36.70
Ratio Analysis
EBITDA margin
EBIT margin
Net Profit margin
SG&A/Sales
a
ST loans
Payables
Others
Total current liabilities
Long term debt
Other liabilities
Total liabilities
Shareholders' equity
BVPS
Source: Company reports and J.P. Morgan estimates.
66
Interest coverage (x)

Dividend Yield
Net debt to Total Capital
Net debt to equity
Sales/assets (x)
Assets/Equity
EV/EBITDA
P/E
P/BV
ROE
ROCE

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Anglo American (AGLJ.J): Summary of Financials

Profit and Loss Statement
Revenues
% change Y/Y
Gross Margin (%)
EBITDA
% change Y/Y
EBITDA Margin (%)
EBIT
% change Y/Y
EBIT Margin (%)
Net Interest
Earnings before tax
% change Y/Y
Tax
as % of EBT
Net Income (Reported)
% change Y/Y
Shares Outstanding
EPS (Reported)
% change Y/Y
Balance sheet
Cash and cash equivalents
Accounts Receivable
Inventories
Others
Current assets
Net fixed assets
Other non-current assets
Total assets
Cash flow statement

EBIT
Depreciation & amortization
Change in working capital
Taxes
Cash flow from operations
FY12
6,000
2,459
(527)
(1,799)
4,848
FY13E
6,260
2,352
1,007
(1,889)
6,393
FY14E
6,257
2,782
(78)
(1,764)
6,121
FY15E
6,373
2,964
(172)
(1,704)
6,061
Capex
Disposals/(purchase)
Net Interest
Free cash flow
(5,607)
(4,716)
(496)
(371)
(6,400)
(452)
(276)
166
(8,100)
0
(572)
(1,596)
(6,500)
0
(831)
118
Equity raised/repaid
Debt Raised/repaid
Other
Dividends paid
Beginning cash
Ending cash
DPS
24
4,886
(1,161)
(970)
11,732
9,148
0.85
0
0
(1,420)
(1,067)
9,148
6,131
0.87
0
0
(1,375)
(1,127)
6,131
1,578
0.89
0
2,000
(1,381)
(1,155)
1,578
532
0.91
FY12
26.5%
18.8%
8.4%
-
FY13E
24.7%
17.9%
6.4%
-
FY14E
25.3%
17.5%
5.9%
-
FY15E
24.5%
16.7%
5.5%
-
(12.2%)
(9.0%)
(127.0%)
(126.1%)
6.6%
9.1%
(193.1%)
(190.9%)
2.6%
2.6%
28.5%
28.5%
6.5%
6.5%
0.9%
0.9%
42.1
3.6%
16.5%
19.8%
0.4
2.0
4.8
NM
0.7
7.0%
21.6%
31.2
3.7%
20.7%
26.0%
0.4
2.2
5.2
19.7
0.7
6.0%
7.1%
15.8
3.8%
26.0%
35.2%
0.4
2.2
5.6
15.4
0.7
5.7%
7.7%
11.2
3.9%
29.0%
40.8%
0.5
2.3
5.9
15.2
0.6
5.8%
7.7%
FY12
31,956
(9.0%)
8,460
(36.2%)
26.5%
6,000
(45.5%)
18.8%
(201)
(403)
(103.8%)
(375)
(93.0%)
(1,657)
(127.0%)
1,254
(1.32)
(126.1%)
FY13E
34,880
9.1%
8,612
1.8%
24.7%
6,260
4.3%
17.9%
(276)
5,051
(1353.0%)
(1,889)
37.4%
1,542
(193.1%)
1,284
1.20
(190.9%)
FY14E
35,775
2.6%
9,039
5.0%
25.3%
6,257
(0.0%)
17.5%
(573)
5,346
5.8%
(1,764)
33.0%
1,982
28.5%
1,284
1.54
28.5%
FY15E
38,096
6.5%
9,337
3.3%
24.5%
6,373
1.9%
16.7%
(833)
5,159
(3.5%)
(1,704)
33.0%
2,000
0.9%
1,284
1.56
0.9%
FY12
9,094
3,275
5,005
571
18,047
FY13E
6,131
3,672
4,776
571
15,252
FY14E
1,578
3,766
4,861
571
10,878
FY15E
532
4,010
5,229
571
10,444
45,089
16,233
79,369
49,137
16,988
81,377
54,455
17,384
82,717
Sales per share growth

57,990 Sales growth
17,827 Net profit growth
86,262 EPS growth
2,604
4,536
1,663
8,803
15,150
11,629
35,582
43,787
34.92
2,604
5,710
1,663
9,977
15,150
11,629
36,756
44,637
34.76
2,604
5,812
1,663
10,079
15,150
11,629
36,858
45,947
35.78
2,604
6,252
1,663
10,519
17,150
11,629
39,298
47,123
36.70
Ratio Analysis
EBITDA margin
EBIT margin
Net Profit margin
SG&A/Sales
a
ST loans
Payables
Others
Total current liabilities
Long term debt
Other liabilities
Total liabilities
Shareholders' equity
BVPS
Interest coverage (x)

Dividend Yield
Net debt to Total Capital
Net debt to equity
Sales/assets (x)
Assets/Equity
EV/EBITDA
P/E
P/BV
ROE
ROCE
Source: Company reports and J.P. Morgan estimates.
67
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
Companies Discussed in This Report (all prices in this report as of market close on 05 February 2014, unless otherwise
indicated)
Anglo American (AAL.L/1452p/Underweight), Anglo American (AGLJ.J) (AGLJ.J/26400c/Neutral), BHP Billiton
(BLT.L/1759p/Neutral), BHP Billiton Limited (BHP.AX/A$35.57[06 February 2014]/Neutral), Fortescue Metals Group Ltd
(FMG.AX/A$5.43[06 February 2014]/Overweight), Rio Tinto Limited (RIO.AX/A$65.65[06 February 2014]/Overweight),
Rio Tinto plc (RIO.L/3274p/Overweight), Vale ON (VALE/$14.02/Overweight)
Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research
analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document
individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views
expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of
any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views
expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per
KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or
intervention.
In compliance with Instruction 483 issued by Comissao de Valores Mobiliarios (the Brazilian securities commission) on July 6, 2010, the
Brazilian primary analyst signing this report declares: (1) that all the views expressed herein accurately reflect his or her personal views
about the securities and issuers; (2) that all recommendations issued by him or her were independently produced, including from the entity
in which he or she is an employee; and (3) that he or she will set forth any situation or conflict of interest believed to impact the
impartiality of the recommendations herein, as per article 17, II of Instruction 483.
Important Disclosures
Market Maker/ Liquidity Provider: J.P. Morgan Securities plc and/or an affiliate is a market maker and/or liquidity provider in BHP
Billiton, Rio Tinto plc, Anglo American, Anglo American (AGLJ.J).
Lead or Co-manager: J.P. Morgan acted as lead or co-manager in a public offering of equity and/or debt securities for BHP Billiton,
BHP Billiton Limited, Rio Tinto Limited, Rio Tinto plc, Anglo American, Vale ON, Anglo American (AGLJ.J) within the past 12
months.
Director: A senior employee, executive officer or director of JPMorgan Chase & Co. and/or J.P. Morgan is a director and/or officer of
BHP Billiton, BHP Billiton Limited.
Client: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients: BHP Billiton, BHP Billiton
Limited, Rio Tinto Limited, Rio Tinto plc, Fortescue Metals Group Ltd, Anglo American, Vale ON, Anglo American (AGLJ.J).
Client/Investment Banking: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as investment
banking clients: BHP Billiton, BHP Billiton Limited, Rio Tinto Limited, Rio Tinto plc, Fortescue Metals Group Ltd, Anglo American,
Vale ON, Anglo American (AGLJ.J).
Client/Non-Investment Banking, Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following
company(ies) as clients, and the services provided were non-investment-banking, securities-related: BHP Billiton, BHP Billiton Limited,
Rio Tinto plc, Fortescue Metals Group Ltd, Anglo American, Vale ON, Anglo American (AGLJ.J).
Client/Non-Securities-Related: J.P. Morgan currently has, or had within the past 12 months, the following company(ies) as clients,
and the services provided were non-securities-related: BHP Billiton, BHP Billiton Limited, Rio Tinto Limited, Rio Tinto plc, Anglo
American, Vale ON, Anglo American (AGLJ.J).
Investment Banking (past 12 months): J.P. Morgan received in the past 12 months compensation from investment banking BHP
Billiton, BHP Billiton Limited, Rio Tinto Limited, Rio Tinto plc, Fortescue Metals Group Ltd, Anglo American, Vale ON, Anglo
American (AGLJ.J).
Investment Banking (next 3 months): J.P. Morgan expects to receive, or intends to seek, compensation for investment banking
services in the next three months from BHP Billiton, BHP Billiton Limited, Rio Tinto Limited, Rio Tinto plc, Fortescue Metals Group
Ltd, Anglo American, Vale ON, Anglo American (AGLJ.J).
Non-Investment Banking Compensation: J.P. Morgan has received compensation in the past 12 months for products or services
other than investment banking from BHP Billiton, BHP Billiton Limited, Rio Tinto plc, Fortescue Metals Group Ltd, Anglo American,
Vale ON, Anglo American (AGLJ.J).
Broker: J.P. Morgan Securities plc acts as Corporate Broker to Rio Tinto plc.
Company-Specific Disclosures: Important disclosures, including price charts, are available for compendium reports and all J.P. Morgan
covered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406, or e-mailing
68

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
research.disclosure.inquiries@jpmorgan.com with your request. J.P. Morgans Strategy, Technical, and Quantitative Research teams may
screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-0406 or e-mail
research.disclosure.inquiries@jpmorgan.com.
Date
Rating Share Price

(p)
Price Target
(p)
09-Oct-06
OW
905
1296
24-Oct-06
OW
1014
1304
12-Dec-06 OW
931
1296
23-Apr-07
OW
1153
1419
07-Aug-07
OW
1333
1695
26-Oct-07
OW
1798
2071
01-Mar-10
2007
--
16-Jun-10
UW
1919
2000
N 2,400p N 2,225p
N 2,300p
N 2,300p
N 2,280p
N 2,150p 11-Jan-11
23-Nov-11
2474
2700
1741
2400
24-Feb-12
2088
2300
11-Sep-12
1910
2225
17-Oct-12
2014
2200
12-Dec-12 N
2054
2245
16-Jan-13
2072
2300
15-Apr-13
1892
2380
17-Apr-13
1779
2330
28-May-13 N
1938
2300
12-Jul-13
1800
2340
16-Aug-13
1976
2310
21-Aug-13
1956
2280
17-Sep-13
1906
2345
18-Oct-13
1844
2300
08-Jan-14
1828
2150
13-Jan-14
1797
2250
Date
Rating Share Price

(A$)
Price Target
(A$)
10-Jul-07
OW
38.46
40.00
18-Sep-07
OW
38.82
43.00
26-Oct-07
OW
45.76
47.00
01-Dec-08 OW
31.00
37.00
21-Jan-09
28.66
27.50
04-Feb-09
29.77
26.50
07-Apr-09
32.70
24.40
22-Apr-09
31.49
25.87
26-May-09 N
34.29
25.62
29-May-09 N
34.02
26.15
22-Jul-09
36.90
23.07
28-Jul-09
37.85
30.38
12-Aug-09
37.99
31.46
17-Sep-09
UW
39.00
30.83
12-Oct-09
UW
37.85
27.57
21-Oct-09
UW
39.91
27.71
14-Dec-09 N
40.65
38.64
20-Jan-10
43.41
40.15
10-Feb-10
39.85
42.62
24-Feb-10
40.88
42.70
08-Mar-10
42.50
43.04
12-Mar-10
43.01
45.07
13-Apr-10
44.45
47.76
BHP Billiton (BLT.L, BLT LN) Price Chart

4,494
OW 1,296p
N 2,245p
N 2,330p
NN
2,310p
2,300p
3,852
OW 1,304p OW 2,071p
N 2,300pN 2,200p
N 2,380p
N 2,340p
N 2,345p
N 2,250p
3,210
OW 1,296p
OW OW
1,419p
1,695p
UW
N 2,000p
N 2,700p
2,568
Price(p)
1,926
1,284
642
0
Sep
06
Mar
08
Sep
09
Mar
11
Sep
12
Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.
Break in coverage Mar 01, 2010 - Jun 16, 2010.
BHP Billiton Limited (BHP.AX, BHP AU) Price Chart

84
OW A$47
70
OW A$43
56
Price(A$)
N A$26.5
N A$25.62
NUW
A$30.38
A$27.568
NNA$40.15
NA$43.042
A$47.267
N A$55NNNA$53
A$43.145
A$43.302
N A$40
N A$37
N A$40 N A$41
N A$42
N A$40
N A$27.5
N A$25.87
NUW
A$23.07
A$30.827
N A$38.64
N NA$42.698
A$47.761
N A$49.195
OW A$40
N A$57N A$54.5
N
N A$42.761
A$42.968
NN
A$41
A$38
N A$39
N A$42
N A$41
N A$42
OW A$37
NNA$24.4
A$26.15
N UW
A$31.46
A$27.71
NNA$42.625
A$45.075
N A$46.91
N A$50
N A$52.5N A$51
NNA$43.188
A$43.133
NN
A$42
A$39
N A$38
N A$41
N A$42
N A$41
42
28
14
0
Oct
06
Apr
08
Oct
09
Apr
11
Initiated coverage Jul 10, 2007.
Oct
12
69

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Rio Tinto Limited (RIO.AX, RIO AU) Price Chart

210
OW A$105
N A$35.53
N A$57.463
N A$56.71
OW
OW
A$82.059
A$96.023
175
OW A$115
OW A$120
NN
A$33.6
A$31.98
N A$57.82
N A$57.167
OWOW
A$75.22
OW
A$96.39
A$99.774 OWOW
A$103
A$105
OW
OWA$91
A$86.526
OW
OW
A$79
OW
A$73
A$79
OWOW
A$78
A$78
140
OW A$105
OW A$110
OW A$140
Price(A$)
OW A$113
OW A$92
OW
OWA$90.642
A$85.812
OW
OW
A$75
A$74
OW A$80
OW A$77
OW A$80
70
35
0
Apr
08
Oct
09
Apr
11
Initiated coverage Oct 18, 2006.
70
42.80
47.27
01-Jul-10
37.65
46.91
13-Jul-10
38.43
49.19
19-Nov-10
43.61
50.00
28-Apr-11
46.29
52.50
28-Jul-11
43.00
57.00
06-Oct-11
35.13
55.00
22-Nov-11
35.60
51.00
08-Feb-12
37.75
54.50
18-Apr-12
35.10
53.00
04-Jun-12
30.75
43.19
26-Jun-12
30.63
42.76
28-Jun-12
30.73
43.15
03-Jul-12
31.72
43.13
06-Jul-12
32.42
42.97
12-Jul-12
31.05
43.30
18-Jul-12
30.18
42.00
13-Aug-12
32.69
41.00
22-Aug-12
33.16
40.00
06-Sep-12
31.34
39.00
05-Oct-12
33.32
38.00
14-Nov-12
33.75
37.00
12-Dec-12 N
35.41
38.00
08-Jan-13
37.81
39.00
15-Jan-13
36.53
40.00
09-Apr-13
33.11
41.00
24-May-13 N
34.36
42.00
20-Aug-13
36.54
41.00
16-Sep-13
36.27
42.00
08-Oct-13
34.68
41.00
22-Oct-13
36.20
42.00
04-Dec-13 N
36.80
41.00
16-Dec-13 N
35.66
42.00
13-Jan-14
36.56
40.00
Date
Rating Share Price

(A$)
Price Target
(A$)
18-Oct-06
OW
58.54
105.00
08-Dec-06 OW
60.83
115.00
17-Jan-07
OW
56.24
105.00
18-Apr-07
OW
66.65
110.00
08-Jul-07
OW
80.49
120.00
26-Oct-07
OW
84.39
140.00
36.75
45.50
05-Dec-08 N
25.63
33.60
30-Jan-09
32.11
35.53
05-Feb-09
34.90
30.15
12-Feb-09
41.01
31.98
20-Jul-09
53.40
40.32
28-Jul-09
59.74
57.82
20-Aug-09
58.20
57.46
17-Sep-09
60.18
58.24
12-Oct-09
61.50
57.17
14-Oct-09
62.19
56.71
14-Dec-09 OW
70.51
75.38
14-Jan-10
OW
79.15
75.22
24-Feb-10
OW
70.40
82.06
NNA$45.5
A$30.15
N A$40.319
N OW
A$58.24
OW
A$75.376
OW
A$88.112
A$95.231
OW A$110
OW OW
A$108
A$110
OWOW
A$94
OW
A$87.462
OW
A$84
OW
A$74
OW
A$78
A$79
OW OW
A$79
A$82 01-Dec-08
105
Oct
06
21-Apr-10
Oct
12

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
OW
80.10
96.02
01-Jul-10
OW
66.66
95.23
13-Jul-10
OW
68.10
99.77
19-Nov-10
OW
84.30
110.00
28-Apr-11
OW
83.37
108.00
14-Jul-11
OW
80.95
103.00
28-Jul-11
OW
82.59
113.00
04-Aug-11
OW
77.60
110.00
06-Oct-11
OW
60.30
105.00
22-Nov-11
OW
64.50
92.00
10-Feb-12
OW
71.76
94.00
17-Apr-12
OW
65.19
91.00
04-Jun-12
OW
52.90
90.64
20-Jun-12
OW
56.77
87.46
03-Jul-12
OW
56.51
86.53
12-Jul-12
OW
55.65
85.81
17-Jul-12
OW
54.49
84.00
06-Sep-12
OW
50.16
79.00
05-Oct-12
OW
54.90
75.00
16-Oct-12
OW
55.82
74.00
14-Nov-12
OW
57.67
73.00
12-Dec-12 OW
61.77
74.00
08-Jan-13
OW
67.40
78.00
15-Jan-13
OW
65.90
79.00
09-Apr-13
OW
56.73
80.00
16-Apr-13
OW
55.09
79.00
10-Jul-13
OW
52.04
78.00
09-Aug-13
OW
59.48
77.00
09-Sep-13
OW
61.95
79.00
08-Oct-13
OW
60.00
78.00
03-Dec-13 OW
65.49
80.00
16-Dec-13 OW
64.91
82.00
2035
3414
19-Oct-06
2309
3685
OWOW
4,400p
4,400p
OW
OW4,240p
OW
4,200p
4,400p 12-Dec-06
2268
3660
17-Jan-07
2107
3327
OW 4,800p
OWOW
4,500p
4,200p
OW
OW
4,520p
4,300p
OW 4,500p 23-Apr-07
2573
3525
18-Sep-07
3081
3650
OW 4,900p
OW 6,300p OW 4,350pOW
OW
4,700p
4,320p
OWOW
4,560p
OW
4,200p
OW
4,300p
4,500p 17-Oct-07
3651
3696
01-Mar-10
OW
3364
--
16-Jun-10
OW
3332
4900
11-Jan-11
OW
4389
6300
23-Nov-11
OW
2986
4350
24-Feb-12
OW
3690
4800
21-Aug-12
OW
3062
4700
11-Sep-12
OW
3069
4500
11-Oct-12
OW
3072
4400
16-Oct-12
OW
2974
4320
12-Dec-12 OW
3309
4200
16-Jan-13
OW
3490
4400
15-Apr-13
OW
3080
4560
28-May-13 OW
2880
4520
3,168
1,584
0
Sep
09
96.39
15-Apr-10
09-Oct-06
4,752
Mar
08
88.11
80.66
Price Target
(p)
7,920 N 3,685p
N 3,525p
N 3,695.713p
Sep
06
75.55
OW
Rating Share Price

(p)
9,504 N 3,660p
Price(p)
OW
13-Apr-10
Date
Rio Tinto plc (RIO.L, RIO LN) Price Chart
6,336 N 3,414p
N 3,327p
N 3,650.073p
12-Mar-10
Mar
11
Break in coverage Mar 01, 2010 - Jun 16, 2010.
Sep
12
71

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Fortescue Metals Group Ltd (FMG.AX, FMG AU) Price Chart
N A$1.2
N A$1.707UWUW
A$4.5
A$4.78
N A$9.41
N A$4.51UWUW
A$2.438
A$1.95
UWN A$3.57
A$4.347
N A$4.03 OW
OW
A$7.3
A$9.25
OW
OWA$5.8
A$3.75
N A$4.85
OWOW
A$4.65
OW
A$4.85
OW
A$5.45
A$6.6
21
N A$1.055
N A$1.5N A$4.5
UW N
A$4.62
A$10.64
N A$5.41
N A$1.84
UWUW
A$1.03
A$2.07
UW N
A$2.57
A$4.95
N A$4.078
OW A$8.3
OW
OW
A$8.3
A$7.65
OW A$7.85
OWOW
A$5.845
A$5.3
N A$4.75
OWOW
A$4.7
OW
A$4.6
OW
A$4.95
OW
A$6.1
A$7
10-Jul-13
OW
2670
4240
16-Jul-13
OW
2806
4200
31-Jul-13
OW
2955
4300
21-Aug-13
OW
2987
4200
09-Sep-13
OW
3130
4300
03-Dec-13 OW
3200
4500
08-Jan-14
OW
3215
4400
16-Jan-14
OW
3254
4500
Date
Rating Share Price

(A$)
Price Target
(A$)
25-Oct-06
0.95
1.06
05-Jan-07
1.34
1.20
12-Feb-07
1.58
1.35
18-Apr-07
2.24
1.50
26-Apr-07
2.22
1.71
31-Jul-07
3.30
3.80
26-Oct-07
4.93
4.50
04-Jan-08
UW
7.20
4.50
19-Feb-08
UW
7.52
5.00
26-Mar-08
UW
6.50
4.62
28-Apr-08
UW
7.60
4.78
15-May-08 N
9.24
7.50
24-Jun-08
12.78
10.64
21-Jul-08
9.13
9.41
29-Aug-08
7.65
10.32
01-Oct-08
5.31
5.41
21-Oct-08
3.21
4.51
19-Nov-08
1.36
3.70
30-Jan-09
1.73
1.84
3.07
1.25
UW
2.63
1.03
28-Jul-09
UW
4.47
2.44
10-Aug-09
UW
4.41
2.04
17-Aug-09
UW
4.45
2.07
12-Oct-09
UW
3.90
1.95
14-Dec-09 UW
4.27
2.54
21-Jan-10
UW
4.99
2.57
19-Feb-10
UW
4.96
3.57
12-Mar-10
4.94
4.01
13-Apr-10
5.21
4.95
20-Apr-10
5.08
4.35
29-Apr-10
4.73
4.33
13-Jul-10
4.46
4.08
15-Jul-10
4.20
4.03
26-Aug-10
4.34
4.10
19-Nov-10
OW
6.73
8.30
07-Mar-11
OW
6.60
8.10
28-Apr-11
OW
6.46
8.30
19-May-11 OW
6.49
7.30
26-May-11 OW
6.24
7.65
15-Jul-11
OW
6.42
7.65
27-Jul-11
OW
6.53
9.25
19-Aug-11
OW
6.05
9.00
22-Nov-11
OW
4.90
7.85
21-Jun-12
OW
4.79
6.13
17-Jul-12
OW
4.64
5.84
11-May-09 UW
Price(A$)
14 A$1.055
N A$1.35
N A$3.8UWNA$5
A$7.5
N A$10.32
N A$3.7
UWUW
A$1.25
A$2.04
UWNA$2.54
A$4.009
N A$4.33
N A$4.1
OW
OW
A$8.1
A$7.65
OW A$9 OWOW
A$6.128
NA$5.9
A$4.1
N A$4.95
OWOW
A$4.55
OWOW
A$5.1
A$5.35
A$6.95 26-May-09
0
Oct
06
Apr
08
Oct
09
Apr
11
72
Oct
12

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
26-Jul-12
OW
4.00
5.80
23-Aug-12
OW
4.24
5.90
04-Sep-12
OW
3.41
5.30
06-Sep-12
OW
2.97
3.75
12-Oct-12
3.75
4.10
15-Jan-13
4.73
4.75
24-Jan-13
4.63
4.85
21-Feb-13
5.18
4.95
26-Mar-13
OW
3.81
4.70
18-Apr-13
OW
3.43
4.65
24-May-13 OW
3.54
4.55
20-Jun-13
OW
3.14
4.60
23-Jul-13
OW
3.68
4.85
16-Aug-13
OW
4.03
5.10
22-Aug-13
OW
4.26
4.95
23-Sep-13
OW
4.56
5.45
08-Oct-13
OW
4.78
5.35
17-Oct-13
OW
5.24
6.10
30-Oct-13
OW
5.30
6.60
16-Dec-13 OW
5.35
6.95
30-Jan-14
OW
5.30
7.00
Date
Rating Share Price

(p)
Price Target
(p)
24-Apr-07
2752
2880
06-Aug-07
2685
3070
26-Oct-07
3245
3284
27-Mar-08
2991
3351
05-May-08 N
3477
3570
28-Aug-08
2919
3040
06-Oct-08
1511
2540
26-Feb-09
UW
1015
850
N 3,000p
UW 1,750p
UW N
1,630p
1,930p
N 1,655p
UW 1,200p 09-Apr-09
UW
1307
1010
01-Mar-10
2450
--
23-Mar-10
OW
2684
--
16-Jun-10
OW
2682
3600
11-Jan-11
OW
3284
4500
23-Nov-11
OW
2188
3500
24-Feb-12
2693
3000
21-Aug-12
UW
1983
1900
11-Sep-12
UW
2002
1750
01-Nov-12
UW
1903
1680
12-Dec-12 UW
1882
1670
21-Jan-13
UW
1900
1630
28-Jan-13
UW
1872
1680
18-Feb-13
UW
2039
1640
15-Apr-13
1642
1930
28-May-13 N
1540
1820
24-Jul-13
1438
1675
21-Aug-13
1494
1655
12-Dec-13 N
1294
1570
08-Jan-14
1276
1200
Anglo American (AAL.L, AAL LN) Price Chart
OW 3,600p
5,550
N 3,283.965p
N 3,570p
N 2,540p
UW 1,010p
4,625
3,700
N 2,880p
N 3,070p
N 3,351.059p
N 3,040p
UW 850p
UWUW
1,680p
1,680p
N 1,820p
OW
N
OW 4,500p OW 3,500pUW 1,900p

UW
UW
1,670p
1,640p
N 1,675p
N 1,570p
Price(p)
2,775
1,850
925
0
Feb
07
Aug
08
Feb
10
Break in coverage Mar 01, 2010 - Mar 23, 2010.
Aug
11
Feb
13
UW
73

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Vale ON (VALE, VALE US) Price Chart
75
60
45
OW $23.3
N $31.5
OW $23.4
OW $19.8
OW $31.5
OW $30.68
OW $35.5
OW $39.5
OW $47.5 OW $49.5
N $24.5OW $45
OW $42
OW $17.8
OW $27.9 OW $46.1
OW $47.5
N $18.5
N $23.5OW $39.5
OW $38
OW $50.5
OW $24.5 OW $24.5
OW $29 OW $22.5
OW $25
OW $48OW $39.5
OW $32
OW $22
OW $24.5
OW $23OW $23.5
Price($)
30
15
0
Sep
06
Mar
08
Sep
09
Mar
11
Initiated coverage Sep 25, 2002.
74
Sep
12
Date
Rating Share Price

($)
Price Target
($)
25-Sep-02
OW
10.86
22-Dec-06 OW
14.59
17.80
07-Feb-07
OW
16.96
19.80
17-Apr-07
OW
20.89
23.30
09-Jul-07
OW
24.29
27.90
14-Sep-07
OW
27.25
31.50
03-Oct-07
35.45
31.50
11-Apr-08
OW
36.36
46.10
02-Sep-08
OW
26.55
47.50
16-Oct-08
OW
11.64
30.68
19-Nov-08
OW
10.02
23.40
20-Feb-09
14.72
18.50
03-Aug-09
20.77
23.50
08-Oct-09
24.97
24.50
10-Dec-09 OW
28.24
35.50
12-Mar-10
OW
30.15
39.50
12-Apr-10
OW
33.95
45.00
04-Jun-10
OW
25.54
39.50
12-Jul-10
OW
25.22
38.00
21-Sep-10
OW
28.90
42.00
22-Oct-10
OW
32.10
47.50
14-Apr-11
OW
32.65
48.00
21-Jul-11
OW
33.33
50.50
01-Aug-11
OW
32.50
49.50
21-Nov-11
OW
24.32
39.50
11-Apr-12
OW
22.41
32.00
16-Jul-12
OW
19.49
29.00
26-Jul-12
OW
17.41
24.50
05-Sep-12
OW
16.89
22.00
14-Jan-13
OW
20.27
24.50
16-Apr-13
OW
15.82
22.50
03-May-13 OW
16.47
24.50
28-May-13 OW
15.21
23.00
26-Aug-13
OW
14.95
25.00
11-Dec-13 OW
14.78
23.50

07 February 2014
Lyndon Fagan
(61-2) 9003-8648
Date
Rating Share Price

(c)
Price Target
(c)
09-Oct-06
33445
36300
15-Jan-07
35456
33700
16-Feb-07
37024
35500
25-Apr-07
38981
40600
13-Jul-07
46600
46100
05-Aug-07
39800
44900
26-Oct-07
43390
45509
04-Feb-08
42800
46300
08-Feb-08
UW
44915
46300
N 39,300c
UW UW
25,164c
24,610c
UW 26,615c
N 26,700c 27-Mar-08
UW
48225
53522
05-May-08 UW
50950
54000
01-Jul-08
UW
54800
57000
28-Aug-08
UW
41300
44000
06-Oct-08
UW
26550
37000
26-Feb-09
UW
14212
12400
09-Apr-09
UW
18500
13600
23-Mar-10
OW
29850
13600
11-Jan-11
OW
34950
45000
27-Feb-12
32450
39300
24-Aug-12
UW
25086
25164
27-Sep-12
UW
24730
23200
01-Nov-12
UW
26771
24832
13-Dec-12 UW
25899
24610
28-May-13 UW
23020
26615
24-Jul-13
UW
21400
25850
21-Aug-13
UW
23750
24670
22095
26700
Anglo American (AGLJ.J) (AGLJ.J, AGL SJ) Price Chart
N 35,500c
N 44,900c
UW 53,522.009c
UW 44,000c
UW 24,832c
UW 24,670c
83,520
N 33,700c
N 46,100c
UW 46,299.793c
UW 57,000c
UW 13,600c
UW 23,200cUW 25,850c
69,600
55,680
N 36,300c
N 40,600c
N 45,509.184c
N 46,299.793c
UW 54,000c
UW 37,000c
UW 12,400c OW 13,600c
OW 45,000c
Price(c)
41,760
27,840
13,920
0
Sep
06
Mar
08
Sep
09
Mar
11
Sep
12
12-Dec-13 N
The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire
period.
J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated
Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:
J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the
average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve
months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)
coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of
the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if
applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy
reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a
recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is
compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear
in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research
website, www.jpmorganmarkets.com.
Coverage Universe: Fagan, Lyndon: Alumina Limited (AWC.AX), BHP Billiton Limited (BHP.AX), Fortescue Metals Group Ltd
(FMG.AX), OZ Minerals Limited (OZL.AX), Rio Tinto Limited (RIO.AX)
Angele, Rodolfo R: Bradespar (BRAP4.SA), CSN (SID), Gerdau S.A. (GGBR4.SA), Grupo Mexico (GMEXICOB.MX), MMX
(MMXM3.SA), MMX Royalty Securities (MMXM11.SA), Magnesita (MAGG3.SA), Metalurgica Gerdau (GOAU4.SA), Southern
Copper Corporation (SCCO), Ternium (TX), Usiminas (USIM5.SA), Vale ON (VALE), Vale PN (VALEp)
Jamieson, Fraser R: Anglo American (AAL.L), Anglo American (AGLJ.J) (AGLJ.J), Antofagasta (ANTO.L), Asia Resource Minerals
PLC (ARMS.L), BHP Billiton (BLT.L), BHP Billiton (BILJ.J) (BILJ.J), First Quantum Minerals (FQM.L), Kazakhmys Plc (KAZ.L)
75
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
J.P. Morgan Equity Research Ratings Distribution, as of January 1, 2014

J.P. Morgan Global Equity Research Coverage
IB clients*
JPMS Equity Research Coverage
IB clients*
Overweight
(buy)
43%
57%
43%
75%
Neutral
(hold)
45%
49%
50%
66%
Underweight
(sell)
12%
36%
7%
59%
*Percentage of investment banking clients in each rating category.

For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold
rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table
above.
Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered
companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst
or your J.P. Morgan representative, or email research.disclosure.inquiries@jpmorgan.com.
Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based
upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.
Registration of non-US Analysts: Unless otherwise noted, the non-US analysts listed on the front of this report are employees of non-US
affiliates of JPMS, are not registered/qualified as research analysts under NASD/NYSE rules, may not be associated persons of JPMS,
and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public
appearances, and trading securities held by a research analyst account.
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76
Lyndon Fagan
(61-2) 9003-8648

07 February 2014
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JP Morgan Report On Iron Ore PDF

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Australia Equity Research

Australia Metals & Mining

LatAm Metals & Mining

Mandeep Singh Manihani, CFA

Europe Metals & Mining

(44- 20) 7742-5930

Australia Equity Research

Detailed mine plans................................................................10

Rio Tinto iron ore division overview.....................................14

BHP Billiton iron ore division overview................................21

Vale iron ore division overview .............................................34

Australia Equity Research

Tackling the "caves" issue .....................................................................................36

Anglo American iron ore division overview .........................48

Fortescue iron ore operations overview ..............................55

Australia Equity Research

Supply side response finally arriving but

Quarterly supply additions weighted to 2Q/3Q14

Source: J.P. Morgan estimates, Company data.

Figure 1: Quarterly "Big Five" supply additions (Mt)

Source: J.P. Morgan estimates, Company data.

Australia Equity Research

Major producers account for majority of near-term growth

Source: J.P. Morgan estimates, Company data.

Total supply growth

Big five supply growth

Source: J.P. Morgan estimates.

Australia Equity Research

Figure 5: RIO production evolution in 2014 (62% equivalent dmt)

Figure 6: BHP production evolution in 2014 (62% equivalent dmt)

Source: J.P. Morgan estimates, Company data.

Source: J.P. Morgan estimates, Company data.

Figure 7: Vale production evolution in 2014 (62% equivalent dmt)

Figure 8: FMG production evolution in 2014 (62% equivalent dmt)

Source: J.P. Morgan estimates, Company data.

Source: J.P. Morgan estimates, Company data.

Figure 9: AAL production evolution in 2014 (62% equivalent dmt)

Figure 10: Total big 5 (62% equivalent dmt)

Source: J.P. Morgan estimates, Company data.

Implications for pricing

Australia Equity Research

Total - unadjusted shipments (million wmt)

Total (62% Fe equivalent) (million dmt)

Source: J.P. Morgan estimates, Company data. Note: excludes Samarco

Australia Equity Research

Declining price trend supported by China near term

Source: J.P. Morgan estimates.

Marginal cost: US$127/t

Source: J.P. Morgan estimates.

Australia Equity Research

Table 2: J.P. Morgan Iron ore supply demand model

Source: J.P. Morgan estimates.

Australia Equity Research

Detailed mine plans

Source: J.P. Morgan estimates, Company data.

As it stands, we do not include the greenfield Koodaideri project (30-40Mtpa) in our

Australia Equity Research

Source: J.P. Morgan estimates, Company data.

Nullagine JV, 3rd

Source: J.P. Morgan estimates, Company data.

Australia Equity Research

Segredo / Joao Pereira

Source: J.P. Morgan estimates, Company data.