Silvio Porto, EVP Bauxite & Alumina Metal Bulletin Bauxite and Alumina Conference, Miami, March 14-16

Opportunities and challenges in the global B&A market

Hydro – a fully integrated aluminium companyWorld class assets, high-end products and leading market positions

Bauxite

& AluminaEnergy Primary Metal Metal Markets Rolled Products Sapa JV (50%)

Primary aluminium production,marketing and recycling

Raw materials processing and energy

Aluminium in products

2

• Market capitalization ~USD 12 billion

• Annual revenues ~USD 11 billion

• Global provider of alumina, aluminium and aluminium products

• Leading businesses along the value chain

• 13 000 employees involved in activities in more than 40 countries

CAP

Hydro in Brazil: Uniquely positioned as #1 in aluminium in South-America

No.1 inbauxite

No.1 inalumina

No.1 inaluminium

• 100% equity in Paragominas (11 mtpy), 5% equity and 45% off-take of MRN (18 mtpy)

• Total access to bauxite in Brazil: ~19.5 mtpy

• Hydro owns 92.13% of Alunorte (6.3 mtpy), Brazil’s

and the world’s largest alumina refinery

• Hydro owns 51% of Albras, Brazil’s and South-America’s largest aluminium smelter in operation

• Hydro has 50% market share in Brazilian bauxite 3rd party trading and refines more than half of Brazil’salumina

Alunorte

Paragominas

CAP

MRN

Albras

3

Our first priority – conducting business the Hydro Way

Corporate responsibilitySafety and environment

Safety performance

(TRI) at industry benchmark

2.6*

Close the rehabilitation gap

by 2020

2020 ambition of a TRI rate

below 2.0 and zero fatalities

Carbon-neutral from a

life-cycle perspective

* TRI rate for own employees YTD end-October 2016 – total recordable incidents per million hours worked

4

Opportunities and challenges

in the global bauxite and alumina landscape

5

Aluminium demand continues to outpace other base metals Driving bauxite and alumina demand

Source: CRU, Hydro analysis

Aluminium continues to be the fastest growing base metal

Index 2000=100

Global demand base metals

70

120

170

220

270

2000 2002 2004 2006 2008 2010 2012 2014 2016

Aluminium primary Copper Lead Zinc Nickel

6

Global semis

demand:

3-4 %

CAGR 2016 – 2025

Chinese primary production dependent on resource importsAround 36% of production based on imported raw material (average 2013-2016)

Source: CRU, China customs, 2016 forecast

0

10

20

30

40

50

60

70

80

90

100

Primary production Alumina Bauxite

100 %93 %

7 %

64 %

29 %

% of Primary Production

Imported

Imported

Domestic

Domestic

7

Bauxite production in China to level off, higher bauxite imports from the Atlantic increases freight exposure

Source: CM Group, China customs

Mtpy

Chinese bauxite production and imports

8

0

1

2

3

4

5

6

7

8

Australia India Brazil Guinea Malaysia Indonesia Other

Monthly Chinese bauxite importsMillion mt

0

50

100

150

200 Imports (incl. alumina as bauxiteequivalent)

Forecast domestic

Historical domestic

Alumina curtailments reduce oversupply outside ChinaCapacity curtailments in the Atlantic basin, offset by growth in Pacific

Source: China customs, CRU, Hydro analysis

* Alumina Atlantic discount is the difference between Alumina Price Index FOB Western Australia and Atlantic Basis index (ABP) FOB Brazil

0

20

40

60

2015 2016 2017e

Atlantic Pacific Demand

Curtailment

Addition

Bubble size represents capacity 1 Mt0

2

4

6

2013 2014 2015 2016 2017e

China alumina imports

Mill. tonnes

Mill. tonnes

World ex-China alumina supply/demand balance

Corpus Christi

Point Comfort

Kendawangan

Paranam

Ras Al Khair

9

Nhan Co

-5

0

5

10

15

20

25

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17

Alumina Atlantic discount*, USD per mt

Alumina prices rising amid smelter restarts and cost inflation

Source: Platts, Bloomberg

Market balances

• Smelter restarts and new projects ramping up in China

• Tight markets ex. China amid curtailments

Cost inflation

• Rising coal prices

• Higher caustic soda costs

• Higher transport costs (road & rail)

Other factors

• Transport bottlenecks

• Environmental issues

Recent alumina price drivers Platts alumina index (PAX)

USD/t

10

150

200

250

300

350

400

450

Au

g 2

01

0

Ja

n 2

011

Ju

n 2

011

No

v 2

01

1

Ap

r 2

01

2

Au

g 2

01

2

Ja

n 2

013

Ju

ne

201

3

No

v 2

01

3

Ap

r 2

01

4

Au

g 2

01

4

Ja

n 2

015

Ju

ne

201

5

No

v 2

01

5

Mar

20

16

Au

g 2

01

6

Ja

n 2

017

Hydro Bauxite &

Alumina – strong operational and

commercial performance

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Paragominas: Lifting and stabilizing production

Record high 2016 production

• Successfully implemented Bauxite & Alumina Business System

• Improved equipment conditions, operating standards and process control

• Improved ore quality control in the mining process

• Long term bauxite resources

Tailing dam investments on track Reforestation ambition well on track, our license to operate

9.0

7.1

6.0

8.3

9.19.5

9.1

10.2

8.79.0

10.9

11.7

10.6 10.410.8

12.2

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Q416

Paragominas production annualized, in milion mt

• Close the rehabilitation gap by 2020

• Research partnerships creates basis for state-of-the-art approach to mining rehabilitation

• BRL 600 million investment - on time and budget

• Improved safety of disposal areas, reduced environmental footprint and cost due to higher solid concentration of

tailings

12

5.5

5.0

5.2

5.8 5.8

6.1

5.96.0

5.95.8

5.9

6.3

6.16.2

6.5 6.5

1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 Q416

Significantly improved production stability

• 6.3 million mt last 12 months production at nameplate capacity

• Improved equipment effectiveness and process stability based

on Bauxite & Alumina Business System

• Further debottlenecking needed for 6.6 million mt target

• Exploring switch from fuel oil to natural gas

Alunorte production annualized, in milion mt

Alunorte: Record 2016 production above nameplate capacity

Red mud deposit investments on track

• BRL 1 billion investment - on time and budget

• State-of-the-art dry disposal of bauxite residue using press filtration

• Reduced required storage area, environmental footprint and cost

Competitive cost position

13

Alumina BOC curve by company (2016)

USD/mt

0

100

200

300

400

0 20,000 40,000 60,000 80,000 100,000 120,000

Exposure to index pricing increasing for Hydro’s alumina sales

35% 50% 65% 75% 75% 85%

0%

20%

40%

60%

80%

100%

2015 2016 2017 2018 2019 2020

Internal index Internal LME External index External LME Index exposure

Hydro alumina sales

14

Index %

Alumina sales

• Large majority of new contracts

priced on index

• External sales 3-4 million mtpa

Bauxite sales

• Mostly 3-4 year contracts based on

% of PAX + fixed USD/mt element

• External sales 2.5-3.5 million mtpa:

• Reduced demurrage cost on optimized

scheduling

• Strategic sales and purchases to capture long-term value

• Supply chain optimization

• Utilizing China domestic entity to gain market intelligence

and increase flexibility

Strong commercial organization maximizing value of B&A assets

Improvements in NOK million Improvement categories

BetterBauxite &Alumina

BNOK 1.0

Strong progress on operational and commercial efforts

Alunorte

• Support production above nameplate

capacity • Improve energy consumption and matrix

• Reduce fixed costs

Paragominas

• Support production above nameplate

capacity

• Reduce fixed costs

Commercial

• Reduce demurrage costs

• Lift optimization margin

Further strengthening the competitiveness of Bauxite & Alumina

15

800

500

600

900

300

400

200

100

1 000

700

02016 actual 2019 Total programme20182017

Process

improvements

Volume

Commercial

Fixed

cost

Original planUpdated target

Challenges and opportunities for Hydro in Brazil

• Deforestation

• Red mud handling

• Social impact

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• Close the rehabilitation gap by 2020

− Research partnerships creates basis for state-of-the-art

approach to mining rehabilitation

• Installation of press filter at Alunorte

− Best available technology for bauxite residue filtration and

disposal implemented

− Reduced environmental footprint and improved caustic recovery

• Actively engaging with local communities and other stakeholders

Main challenges Hydro response

Hydro’s strategic priorities for the bauxite and alumina areaAiming for operational and commercial leadership

• Strive for an injury free environment

• Continue operational improvement drive, ensure world class operations

• Price bauxite and alumina on own

fundamentals

• Further improve organizational capabilities and HSE performance

• Closing the rehabilitation gap by

2020

• Secure and develop resources for future decades

• Further mature CAP alumina

project and Paragominas expansion for when time is right

• Develop production creep potential at Alunorte

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