INTRODUCTION TO ORICA

March 2015

• About Orica

• Background to the Orica-Strike partnership

• Supply Options pursued

• Orica-Strike partnership

• Learnings & industry challenges

© Orica Limited Group2

CONTENTS

Orica provides market-leading customer solutions to improve

productivity and resource efficiency in the mining, quarrying,

oil and gas and infrastructure sectors.

As the world’s largest provider of commercial explosives,

Orica is in a unique position to help sustainable growth in the

global resources sector.

Orica is global leader in the provision of ground support in

mining and tunnelling and a leading global supplier of

cyanide for gold extraction.

ABOUT ORICA

© Orica Limited Group4

AT A GLANCE

Chemical energy (explosives) is

25 more efficient than mechanical

energy for breaking rock.

Explosives grade ammonium

nitrate represents 5% of the

global ammonium nitrate market.

The remainder is agriculture grade

ammonium nitrate used in

fertiliser.

1,500Foreign Institutions 49%,

Domestic Institutions 28%, Retail

and other 23%.

ASXTOP50

and supplier of sodium cyanide

used in gold production.

GLOBAL PRODUCERTOP 3

of bulk explosives supplied

annually.

MILLION

TONNES4of commercial explosives.

SUPPLIERGLOBALLY1#

Top quartile safety performer of

companies listed on Australian

Securities Exchange

BLASTS PER DAYon our customers’ sites.

© Orica Limited Group5

GLOBAL REACH

More than

12,500EMPLOYEESrepresenting 79 nationalities

Customers in over

100COUNTRIES

Operations in over

50COUNTRIES

6

WE ARE ONE OF THE LARGEST INDUSTRIAL GAS USERS IN EASTERN AUSTRALIA

• Kooragang Island (Newcastle)

– 360k tonne Ammonia plant

– Consumes ~14PJ/a as feedstock

– Critical part of the value chain for the fertiliser, refrigeration and mining / quarrying industries

– ~400 onsite jobs

• Yarwun (Gladstone)

– Sodium cyanide plant

– Consumes ~3PJ/a as feedstock

– One of only two domestic producers

– Critical process chemical for the gold industry

– ~300 onsite jobs

7

North America

Europe/CIS

Asia

Africa

Australia

5m tpa capacity

LATAM

96 distribution centres

Orica plant

(including JV)

External Supply

Storage sites

7 Orica plants23 External plants

THE NEWCASTLE AND GLADSTONE PLANTS ARE JUST A SMALL PART OF ORICA’S GLOBAL SUPPLY NETWORK

THE MARKET WAS FORECASTING A SIGNIFICANT RAMP UP IN EAST COAST GAS CONSUMPTION

• Forecast LNG ramp up of

2-3x existing domestic

demand over 2014 to 2018

© Orica Limited Group9

…AT THE VERY TIME ORICA’S GAS SUPPLIES WERE EXPIRING

PJ/ a

Contracted Supply Supply requirements

• Orica had 3 years fully

secured with a further 2

years of partial supply.

• Nothing beyond end of

20160

2

4

6

8

10

12

14

16

18

20

2012 2013 2014 2015 2016 2017 2018 2019 2020

© Orica Limited Group10

…AND OTHER LARGE INDUSTRIAL USERS WERE ALSO LOOKING FOR GAS

• With all new supply directed to LNG

projects, a domestic supply shortfall

was forecast

• At the same time, industrial consumers

supply contracts were expiring

• Thus a “perfect storm” for large

industrial users:

− Gas pricing critical to global

competitiveness

− Price expectations of circa LNG.

− Limited supply sources.

− Multiple consumers all needing

to secure supply at the same

time.

11

…WHILST FOREIGN GAS MARKETS WERE FALLING, AND THE AUD RISING

US Henry Hub Natural Gas spot price

US

D /

MM

BT

U

$0.25

$0.35

$0.45

$0.55

$0.65

$0.75

$0.85

$0.95

$1.05

$1.15

$1.25

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

US

D /

AU

D

AUD spot rate (midpoint average)

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

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US Henry Hub Natural Gas spot price (AUD Equiv.)

AU

D /

MM

BT

U

…SO COMBINING THE TWO

Orica’s

Australian gas

suppliers’ price

expectations

AN & ammonia

competitors’

cost base

$-

$2

$4

$6

$8

$10

$12

$14

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

13

BACKGROUND - RECAP

• Orica’s Newcastle & Gladstone manufacturing operations are import exposed and heavily dependant on world competitive gas supply.

• LNG export development was forecast to consume most of the available supply.

• Competition for supply - other large industrial users were also looking to re-contract for gas supply.

• Creating a price expectation that would have made Orica’s cost base unsustainable.

• Local jobs were at stake with onsite employment of 700 (plus flow on employment) and the significant community sponsorships by these two operations.

1. Secure a firm off-take from existing industrial suppliers / or from an

existing field

Pursued both short and long term supply

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OPTIONS

2. Partner with a developer to underpin a new field and expand the

domestic gas supply

For this to be viable, we would need some form of “bridging” supply, as managing the field development time to gas flows is critical

3. Potentially switch to import rather than manufacturing.

© Orica Limited Group15

THE SOLUTION REQUIRED A MIX OF THE OPTIONS

PJ/ a

• Secured “baseload” for circa

80% of immediate needs to

allow time to evaluate gas field

development options

• A blend of smaller “niche”

volumes (~20% of

requirements) on an as needs

basis

• Long term partner arrangement

with Strike to underwrite field

development and ensure

continued manufacturing in

Australia.

0

2

4

6

8

10

12

14

16

18

20

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

Strike

Supplier D

Supplier C

Supplier B

Esso / BHP

Existing supply

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WHY STRIKE ?

Highly promising acreage

• Technical advice provided by De Golyer & MacNaughton

Well positioned

• Accessible to Kooragang Island and Yarwun

• Close to existing infrastructure (MAPS; Moomba)

• Desert location

Strong management team

17

WIN-WIN DEAL STRUCTURE FOR EACH PARTY

• 250PJs of gas

• Pre-payments aligned with development milestones

• Acquisition of Strike shares

• Mix of production cost-based, fixed/indexed and market linked pricing

Rapid development and commercialisation of the project for Strike;

20 years of affordable gas for Orica

• The future of Orica’s AN and cyanide manufacturing in Australia is tied to the global competitiveness of domestic gas (import exposed).

• LNG export potential will likely result in higher domestic prices.

• A conventional gas supply agreement would likely have rendered Orica’s KooragangIsland and Yarwun manufacturing plants uncompetitive – 700 onsite jobs were at stake.

• In this case, a win-win solution was achieved between a field developer (Strike) and large industrial user (Orica).

• However, Australia’s east coast gas prices are largely uncompetitive (and becoming more so) for energy exposed import / export industries.

© Orica Limited Group18

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