"João Ney Colagrossi, President of Minerals: We will become more agile, focused and better able to help our customers to tackle their challenges" Presentation at Metso's Capital Markets Day 2014

1. © Metso
Becoming more focused and agile
João Ney Colagrossi
President, Minerals business area

2. © Metso
Content
1.
This is Minerals
2.
Market outlook and drivers
3.
Transforming Minerals
4.
Conclusions Metso Capital Markets Day 2014:
2 Minerals by João Ney Colagrossi
© Metso

3. This is Minerals
A leading, full-scope supplier of sustainable technologies

4. © Metso
Metso Minerals business area today Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi
4
A leading, full-scope supplier of sustainable technologies for the mining, aggregates and metal recycling industries
•
Integrated products and services for metal recycling
•
#1 in metal recycling equipment
•
8% of Minerals business area’s net sales
•
Product offering and systems deliveries for efficient minerals processing
•
#1 in grinding mills and mining crushers
•
60% of Minerals business area’s net sales
•
Products and systems that cover the entire aggregates production process
•
#1 in aggregates crushing and screening
•
32% of Minerals business area’s net sales
Metal Recycling
Minerals Processing Solutions
Crushing and Screening Equipment
Net sales 2013: EUR 1,563 million Personnel ~4,000

5. © Metso
Metso Minerals serves globally mining, aggregates and recycling customers
Minerals business area net sales rolling 10/2013-9/2014 Metso Capital Markets Day 2014:
5 Minerals by João Ney Colagrossi
36%
22%
17%
23%
2%
Europe
North America
South America
Asia-Pacific
Africa and Middle East
26%
13%
26%
25%
10%
Europe
North America
South America
Asia-Pacific
Africa and Middle East
33%
22 %
20%
6%
11%
8%
Aggregates
Mining / Copper
Mining / Iron
Mining / Gold
Mining / Other
Recycling
Net sales by customer segment
Net sales by geographic area
Employees by geographic area
80%
20%
0%
Equipment
Systems
Aggregates
Other
Net sales by business type

6. © Metso
Mining, aggregates and recycling segments are somewhat different but synergistic
Mining
Aggregates
Metal Recycling
Customers
•
100’s with top 10 majors
•
Make dust from big rocks and extract minerals
•
1000’s, only a few global ones
•
Produce aggregates (shape and size)
•
1000’s, only a few global ones
•
Recover metals
Technology trends
•
Energy and water efficiency
•
In-the-pit processing / ore sorting
•
Automation / simulation / optimization
•
Continuous development to stay ahead ”pirates”
•
Products for mid-market segment
•
Smart equipment
•
Sorting and recovery of many metals
•
Smaller sized machines
•
Emission controls
Operating
model
•
Direct sales, key accounts, engineering companies
•
Engineering
•
Sourcing and Project mgmt
•
Direct sales, distribution
•
Engineering
•
Assembly
•
Direct sales, distribution
•
Engineering
•
Assembly
Synergies between the segments
•
Common assets-light supply chain for crushers, screens, shredders
•
Common crushing and screening knowledge base
•
Global footprint and global capabilities (incl. Distributors) Metso Capital Markets Day 2014:
6 Minerals by João Ney Colagrossi

7. © Metso
Our product and systems offering for Mining customers Metso Capital Markets Day 2014:
7 Minerals by João Ney Colagrossi
Grinding mills
Mining crushers
Process equipment
Bulk material handling
Pyro processing
Mining systems

8. © Metso
Our product and systems offering for Aggregates customers 8
Crushers
Screens and feeders
Lokotracks
Portable plants
Mid-market products
Aggregates systems Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

9. © Metso
Our product, systems and services offering for Recycling customers 9
Texas Shredder shredder
Lindemann shear
Lindemann baler
M&J waste pic
Metal shredders
Metal shears
Metal balers
Waste recycling
Recycling services
Recycling systems Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

10. © Metso
Decline in major mining project orders, aggregates flat
Mining and Aggregates capital orders received Metso Capital Markets Day 2014:
10 Minerals by João Ney Colagrossi
05001 0001 5002 000Q4Q1Q2Q3Q4Q1Q2Q3Q4Q1Q2Q3201220132014EUR millionCapital orders received, aggregates, rolling 12 monthsCapital orders received, mining, rolling 12 months

11. © Metso
Retaining GP-%* despite lower volumes
Mining and Aggregates capital net sales and GP-%
* Before non recurring items Metso Capital Markets Day 2014:
11 Minerals by João Ney Colagrossi
•
Improved sales mix: less systems, stable development in aggregates
•
Results through global procurement initiatives
•
Successful monitoring and management of global pricing 0
20
40
60
80
100
120
0
200
400
600
800
1 000
1 200
1 400
1 600
1 800
2 000
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3
2012 2013 2014
EUR million
Capital net sales, aggregates, rolling 12 months Capital net sales, mining, rolling 12 months GP -%, Indexed
%

12. Market outlook and drivers
Long-term outlook solid for all customer industries

13. © Metso
Short-term mining outlook somewhat challenging, long-term outlook solid for all segments 13
Aggregates
Metal recycling
Iron ore mining
Copper mining
Gold mining
Production growth
2007-14
2014-17
Equipment outlook
2014-15
2016-17
Comments
4 %
4-6 %
•
Growth driven by infrastructure spending
•
China and other emerging markets as drivers
•
USA also picking up
•
Unused capacity limiting short-term growth
3 %
3 %
•
Global steel production still growing
•
China and other emerging markets as drivers
•
Regulations key in Europe and N. America
7 %
2 %
•
Small uncompetitive miners exiting
•
Domestic Chinese production reducing
•
Large seaborne suppliers still growing
3 %
2 %
•
Demand growth expected to continue
•
Copper mine utilization at a high level
•
Copper deficit expected by 2017
5 %
-1 %
•
Small gold miners have been hit hard
•
Supply driven mainly by fast grade erosion
•
Demand driven partly by speculative needs
? Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

14. 14 © Metso
37
39
2008
2007
47
44
Latin America
50
2011
2012
38
42
63
2013
54
2016
2015
58
Europe
China
2017
2014
Africa and Middle East
Rest of APAC
2010
North America
4-6%
2009
36
2018
4%
63
Crushed stone production output value (USD bn)
-3%
7%
18%
10%
-4%
4%
1%
6%
25%
11%
5 %
7 %
Global aggregates production expected to grow ~5 % p.a. driven by emerging markets
2007-12 CAGR
2012-17 CAGR
Source: Construction Intelligence Center, Sep 2014 Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

15. 15 © Metso
3%
North America
3%
731
712
2012
660
2011
800
2016
566
2007
598
2013
Latin America
Europe
776
2015
752
2010
584
2009
461
636
China
Rest of APAC
2014
2017
2008
Metal scrap recovery by region (Mt)
1%
2%
1%
4%
1%
2%
2%
7%
6%
4%
4%
3%
Global metal scrap production expected to grow ~3 % p.a. driven by emerging markets
2007-12 CAGR
2012-17 CAGR
Metal Bulletin Research, October 2013 Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi
Africa and Middle East

16. 16 © Metso
Source: Raw Materials Group, March 2014
8,5
2010
8,0
2012
2011
8,2
7,5
2009
7,0
2008
6,6
2007
6,0
2,8
Iron
Copper
Gold
2,4
3,2
2,8
2,9
3,0
3,4
3,0
2,9
2,9
2,9
1,3
2,4
1,6
1,7
8,8
2017
2016
8,7
2015
8,6
2014
8,4
2,4
1,6
5%
1,6
2%
2013
1,2
1,7
1,6
2,5
1,2
1,7
2,7
1,4
3,6
3,7
3,8
3,9
4,0
4,1
4,2
Global ore production by commodity (000 Mt)
5%
-1%
7%
2%
3%
2%
Global mining production expected to grow ~2 % p.a. but dynamics is different by commodity
2007-14 CAGR
2014-17 CAGR
3-4%
1%
2%
Grade erosion Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

17. © Metso
Iron ore: Chinese steel production is still growing, China replacing domestic iron ore with imports 17
Chinese imports of iron ore (Mmt)
Chinese production of steel (Mmt)
626
683
717
775
815
0
100
200
300
400
500
600
700
800
900
1,000
+9%
2014e
2013
2011
2010
+5%
2012
+5%
+8%
619
687
746
820
0
100
200
300
400
500
600
700
800
900
1,000
2010
2011
+10%
2014e
2012
2013
860-970
+9%
+11%
Chinese steel production still expected to grow 5 % in 2014
How much domestic iron ore supply imports will replace still uncertain Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

18. © Metso
Iron ore: 30% of iron ore production unprofitable at USD 100/ton price level 18
Iron Ore Production Cost
~46% above USD 80/T
~30% above USD 100/T
Mmt ( Accumulated) Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

19. © Metso
Iron ore: seaborne market will balance in 2016, if Chinese demand will increase at least 5% p.a. 19
2014
2015
2016
2017
2018
1,500
1,350
1,400
1,450
1,600
1,650
1,550
1,750
1,700
Iron Ore Seaborne Supply
Iron Ore Seaborne Demand
Seaborne market for iron ore (Mmt) Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi
Source: Management estimates

20. © Metso
Copper: stable demand growth expected, mine utilization already high, deficit expected by 2017 20
Copper demand: stable 4% growth expected in the coming years
Source: ICSG, Wood McKenzie, Morgan Stanley Research ,Oct 2014
Copper supply: Capacity utilization already high, deficit expected by 2017
07 2014
1,882
1,507
06 2014
1,811
1,547
05 2014
1,865
1,550
4 2014
1,798
1,506
03 2014
1,851
1,543
02 2014
1,664
1,421
01 2014
1,841
1,500
12 2013
1,841
1,621
World mine capacity
World mine production
13.4
13.2
12.8
11.0
11.9
11.9
11.6
11.7
11.9
12.5
13.1
13.5
13.5
13.7
3.6
5.0
5.2
7.1
7.4
7.9
8.8
9.5
10.0
10.6
11.1
11.7
12.0
12.4
0
5
10
15
20
25
30
18.0
2007
18.2
2006
17.0
23.1
2014
21.9
2013
21.2
2012
20.4
2011
19.8
2010
19.3
2009
18.1
2008
25.2
2017
26.1
China copper usage
2019
2018
25.2
2016
24.2
2015
Mt
4%
Rest of the world copper usage Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

21. © Metso
Gold: demand is partly hard to predict, future supply outlook flat but grade erosion high 21
Gold demand: Investment demand has been and will be hard to predict
Source: Morgan Stanley
Gold supply: Future supply outlook flat, but grade erosion requiring capex Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi
0
5,000
2,000
1,000
3,000
4,000
0%
2015
4,250
2014
4,307
2013
3,988
2012
4,139
2011
3,919
2010
4,129
2009
3,864
3%
2017
4,260
2016
4,276
Mt
Investment demand
2019
3,305
2007
3,404
2006
2008
4,304
Fabrication demand
2018
4,294
3,429
3,500
2,500
1,000
2,000
0
3,000
1,500
500
2006
2,441
2,581
2010
2009
2,648
2011
2008
2,738
2,377
2,521
2007
2,829
2,437
2013
2012
Mt
2016
3,040
3,051
2017
3,009
2018
3,090
2019
0%
Gold mine production
3%
3,035
2015
2014
3,017

22. 22 © Metso
Focus on process efficiency, energy & water
Even larger role of service capabilities
Continued cost pressure on equipment and parts
Further consolidation and centralization
Cost, cash, dividends
Projects put on hold
Rising cost pressure
New CEOs and more active shareholders
Race for growth
Surge in projects
High cost inflation
War for talent
Boom
Downturn
Recovery
Past: 2009-2012
Present: 2013-2015
Future: 2016-2020
Efficiency is the biggest challenge for miners
Metso is transforming itself to be better able to help the miners in this challenge Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

23. Transforming Minerals
For being better able to help our customers with the efficiency challenge

24. © Metso
New operating model Metso Capital Markets Day 2014:
24 Minerals by João Ney Colagrossi
Less cyclical and more robust operating model
Re-focused systems business
Right-sized to market activity
Asset-light operating model
Renewal of key product offering
Agile and simpler organization
∫
Less cyclical and more robust to market volatility

25. © Metso
Minerals strategic priorities
Transforming us to provide even better solutions to our customers Metso Capital Markets Day 2014:
25 Minerals by João Ney Colagrossi
New operating model
•
Global procurement
•
Factory footprint simplification
•
From 3 to 12 market areas
•
Performance culture
•
Job rotation
Customer focus
•
Mid-market segment
•
Key account management
•
Pricing excellence
Future solutions
•
Hydraulic rolls crusher range
•
Vertical grinding mill range
•
Next generation Lokotracks
•
In-pit crushing plants
•
Right-sized to market activity
•
Agile and simpler organization
•
Asset-light operating model
•
Re-focused systems business
•
Renewal of key product offering
•
Africa and Oceania coverage
•
Global distribution management
•
CRM and analytics
•
Next generation concentrator
•
Embedded intelligence
•
Next generation unit crushers
•
Complete in-the-pit solutions
2013 – 2014
2014 – 2017

26. © Metso
Completed
•
Headcount reduced by 940
•
Factory closure in New Zealand
•
Factory closure in Germany
•
Factory closure in India
•
Engineering resources
•
Purchased services
On-going
•Factory closure in Canada
•Further evaluation of factories
•Sales force and sales support
•Project delivery organization
Completed
•
Recycling business re-structuring
•
From 3 to 12 market areas
•
Major organization de-layering
•
65% of senior management rotated
•
Project excellence program
On-going
•Recycling business turnaround
•Technical center consolidation
•Sales office consolidation
•Systems business re-structuring
•Support function simplication
Right-sized, agile and simple
Several initiatives already completed and on-going Metso Capital Markets Day 2014:
26 Minerals by João Ney Colagrossi
Right-sized to market activity
Agile and simpler structures

27. © Metso
Assessing asset-light model in Aggregates
Preparing to cope with the changes in the market activity Metso Capital Markets Day 2014:
27 Minerals by João Ney Colagrossi
Current model in Aggregates
Example of asset-light model
Improved asset-efficiency, flexibility and cost competitiveness
Current manufacturing model
Asset-light manufacturing model
Component fabrication
Component machining
Assembly, testing and painting
In-house
In-house
In-house
Component fabrication
Component machining
Assembly, testing and painting
In-house
Outsourced
Outsourced

28. © Metso
Asset-light model in Mining and Recycling
Preparing to cope with the changes in the market activity Metso Capital Markets Day 2014:
28 Minerals by João Ney Colagrossi
Current model in Mining
Future asset-light model
Improved asset-efficiency, flexibility and cost competitiveness
Current manufacturing model
Asset-light manufacturing model
Component fabrication
Component machining
Assembly and commissioning
In-house
Outsourced
Component fabrication
Component machining
Assembly and commissioning
In-house
Outsourced
Outsourced
In-house / outsourced

29. © Metso
Re-focused systems business
Equipment, process circuits and process islands in scope Metso Capital Markets Day 2014:
29 Minerals by João Ney Colagrossi
Go-to-Market Model
Equipment delivered
Process circuit
Process island
Complete
plant
Typical scope
•
Metso equipment
•
Process engineering
•
Other equipment
•
Detailed engineering
•
Structures and piping
•
Installation
•
Civils and mine infra
Typical order
•
Net sales
0-40 EUR Million
20-50 EUR Million
40-100
EUR Million
100-200+ EUR Million
•
Share of Metso technology
Very high
High
Medium
Low
•
Risk exposure
Low
Medium
Medium/High
Very high
•
Add on service potential
Medium
Medium/High
High
High
Business role
Strategic focus
Very limited use only

30. © Metso
Global procurement
We are raising the annual procurement savings target further
•
Savings achieved through:
-
Continued category sourcing projects
-
Product renewals and design-to-cost activities
-
Focus towards internal / external supply chain options
-
Increased use of best-cost country suppliers Metso Capital Markets Day 2014:
30 Minerals by João Ney Colagrossi
Savings target for 2014 1.7% of total spend Achieved so far: 1.9% of total spend
Savings target for 2015:
3.2% of total spend

31. © Metso
Customer focus: Mid-market
Two acquisitions made to enable us to serve mid-market customers Metso Capital Markets Day 2014:
31 Minerals by João Ney Colagrossi
•Completed in September 2013
•A leading local market position and a well-known brand in South China
•Ongoing actions to improve Sharoui’s product offering and manufacturing
•Good level of new orders in 2014
•50 / 50 joint venture in late 2013
•Metso: technological know-how
•LiuGong: extensive distribution and manufacturing capabilities
•First Chinese-made tracked jaw plant is ready for delivery in Q1/2015
Shaorui acquisition
Joint venture with LiuGong

32. © Metso
Future solutions: 2012-2014 highlights
Sustainable profit improvements for our customers every day Metso Capital Markets Day 2014:
32 Minerals by João Ney Colagrossi
Next generation Lokotracks integrating crushers and screens
In-pit crushing plants reducing the need for trucks
Hydraulic roll crushers
improving energy efficiency significantly
Vertical grinding mills limiting the need for water

33. © Metso
Future solutions: Next generation concentrator
Research program to make step-change in minerals processing Metso Capital Markets Day 2014:
33 Minerals by João Ney Colagrossi
•
Metso and JKTech to work with leading Chilean mining companies at their existing mines
•
Target to develop the next generation minerals concentrator
-
Research themes: primary grinding, ball mill grinding, classification and coarse particle flotation
-
Objectives: Developing knowledge, operational methods, new equipment and novel circuit designs in mineral processing
•
Targeting a step change in performance by reducing:
-
Capital cost
-
Operating cost
-
Embedded energy
-
Flotation plant footprint and operating costs
-
Net water usage

34. © Metso
Future solutions: Embedded intelligence
Enabling remote control and optimization of process equipment 34
Machines level Intelligence
Plant level Intelligence
Fleet or Installed base level Intelligence Metso Capital Markets Day 2014:
Minerals by João Ney Colagrossi

35. © Metso
Conclusions
Capital Markets Day 2014 Metso Capital Markets Day 2014:
35 Minerals by João Ney Colagrossi
Market outlook and drivers Short-term mining outlook somewhat challenging, long-term outlook solid for all customer industries Emerging markets growth driving aggregates demand Metal recycling offers great potential for product and services businesess
•
Efficiency is the biggest challenge for our customers.
This is Minerals
•
A leading, full-scope supplier of sustainable technologies
•
Customer industries: Mining, Aggregates, Metal recycling
•
Strong product offering
•
Able to retain GP-% despite lower volumes
Minerals Transformation:
•
Becoming more focused, asset-light and agile to cope with changes in the market activity.
•
Product focused and more selective with systems
•
Metso is transforming itself to be better able to help the miners with the efficiency challenge
© Metso