Slide 1: CAP Group update - November 2015
CAP Group update - November 2015 Punta Totoralillo Port, Atacama region Fernando Reitich CEO - Raúl Gamonal CFO
Slide 2: Ownership structure
Ownership structure Mitsubishi Pension Invercap Other Corporation Funds 19,3% 2,5% 2,0% 31,3% 46,9% 47,4% 49,0% 47,32% 52,68% 51,0% 99,0% 75,0% 99,9% Compañía Minera Compañía Siderúrgica Cleanairtech Tecnocap Novacero del Pacífico Huachipato 50,93% 30,56% 25,0% 11,03% 57,79% Cintac Intasa Infrastruc
Slide 3: Iron ore mining
Iron ore mining 2
Slide 4: Mining sites
Mining sites El Laco Punta Totoralillo Port CAP Mining has three Cerro Negro Norte different areas of operation Desalination Plant Copiapó in the north of Chile, Magnetite Plant located around the cities of: Copiapó Valley • Copiapó • Vallenar • La Serena Los Colorados Guacolda II Port Cities Vallen
Slide 5: Cerro Negro Norte mine
Cerro Negro Norte mine 4
Slide 6: Magnetite plant
Magnetite plant 5
Slide 7: Los Colorados mine
Los Colorados mine
Slide 8: Pellets Plant
Pellets Plant
Slide 9: Iron ore El Romeral mine
Iron ore El Romeral mine 8
Slide 10: Mining property
Mining property Hectares in exploration concessions - Chile N° Company Hectares % 1 BHP Chile Inc 1.917.100 11,33 2 Compañía Contractual Minera Los Andes 841.100 4,97 3 CAP 677.700 4,01 4 Teck Exploraciones Mineras Chile Ltda 629.700 3,72 5 Antofagasta Minerals S.A. 514.500 3,04 6 Codelco 435.500 2,
Slide 11: Resources and reserves of magnetic ore
Resources and reserves of magnetic ore As a result of continued successful exploration campaigns, iron ore resources have increased progressively over the years, reaching 7,250 million tons in 2014 Mineral resources (1) Reserves (2) Mine/Deposits & Grade (% Fe) Mine/Deposits 8.000 2.500 & Grade (% F
Slide 12: Mining products
Mining products BF and DR Pellets (Fe 65% - 67%) Lumps (Fe 62%) Pellet Feed (Fe 66% - 69%) Fines (Fe 62%-63%) 11
Slide 13: Iron ore shipments and markets
Iron ore shipments and markets Shipments (Th.MT) 14.396 12.952 12.246 12.086 11.469 10.213 6.293 1H15 2010 2011 2012 2013 2014 2015 (E) Shipments by markets and products 1H15 Lumps, 1% Korea Others Sinter feed, Self - fluxing 6% 1% Bahrein 11% pellets and DR 8% Spot, 31% pellets, 28% Japan 9% Chile
Slide 14: Main customers
Main customers Deutsche Bank* Posco Glencore* Koch Cargill* JFE Steel Corporation Bahrain Steel Qingdao Iron and Steel Kobelco Xinyu Iron and Steel Nisshin Steel RGL Group* HBIS Group Wuhu Fuxin Iron & Steel Rizhao Iron and Steel Yaochang Group Fangda Iron and Steel CAP Acero Hangzhou Iron and Steel
Slide 15: Steel production
Steel production 14
Slide 16: Steel focus on long products
Steel focus on long products • Steel business reorganization to produce 700 kt/y, with one blast furnace • Strong adjustment in its industrial processes and workforce lowering costs and expenses • Sustainable growth in long products demand mainly due to the need of grinding media supply to the minin
Slide 17: Recovery of cash generation (EBITDA)
Recovery of cash generation (EBITDA) Net Income and EBITDA evolution 20 8 7 10 5 5 1 2 2 3 -10 -7 0 -3 -3 -6 -5 -9 -7 -9 -10 -17 -12 Impairment -20 -14 Net income -22 -30 EBITDA -31 -44 -40 -50 -56 -60 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 • Due to the reorganization and adjustment in in
Slide 18: Steel processing
Steel processing 17
Slide 19: Steel processing
Steel processing • Creates value-added solutions for the construction, industry and infrastructure sectors in Chile, Peru and Argentina • Chile is LATAM´s most intensive user of steel in construction • Main flat steel importer of the Pacific coast of South America Shipments and prices Sales by Secto
Slide 20: Reorganization and assets availability
Reorganization and assets availability Steel processing reorganization towards a lighter and lower cost structure 2014 2015 Cac S.A. Cintac S.A. 99.99% 99.99% 99.99% 100% 99.99% 89.48% Steel Trading Inmobiliaria Centroacero Cintac SAIC Company Cintac SAIC Tupemesa S.A. Cintac S.A. S.A. INC. • Assets
Slide 21: Infrastructure: Desalination plant
Infrastructure Desalination plant 20
Slide 22: Infrastructure: Power transmission line
Infrastructure Power transmission line 21
Slide 23: Water desalination and power transmission
Water desalination and power transmission • Cleanairtech (desalination plant) and Tecnocap (power transmission line) started their operations during 2014. As of June 2015, the infrastructure business has contributed to the holding company as follows: US$ million 1H14 1H15 EBITDA 13 30 Net Income 2 6
Slide 24: Chile economic outlook
Chile economic outlook 23
Slide 25: Chile economic overview
Chile economic overview Investment Consumption 25% 78% 24,1% 77% 24% 23,8% 76% 76% 23% 75% 74% 22,4% 73% 22% 22,0% 72% 21% 21,0% 71% 70% 20% 19% 68% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Gross fixed capital formation (% of GDP) Final consumption expenditure, etc. (% of GDP) Inflation Une
Slide 26: Chile economic overview
Chile economic overview Imports Exports 36,0% 35,0% 35,0% 40,0% 35,0% 38,0% 38,0% 38,0% 34,0% 36,0% 33,0% 33,0% 34,0% 34,0% 34,0% 32,0% 32,0% 32,0% 32,0% 32,0% 31,0% 30,0% 30,0% 28,0% 2010 2011 2012 2013 2014 2010 2011 2012 2013 2014 Imports of goods and services (% of GDP) Exports of goods and serv
Slide 27: Political reforms underway in Chile
Political reforms underway, being implemented by the new administration which reached office in March 2014 Tax reform Educational reform • Increase in corporate tax rate from 17% to 27% • Free college/university education • New VAT applied to the real estate sector • Free pre-school, elementary and
Slide 28: Increasing economic uncertainty due to the proposed reforms package
Increasing economic uncertainty due to the proposed reforms package Investment as % of GDP forecast 22.3% 22.7% 22.8% 23.0% GDP growth forecast 2.3% 2.5% 2.9% 3.1% Unemployment rate forecast 6.6% 7.0% 7.2% 7.0% Source: IMF, October 2015 2015 2016 2017 2018 27
Slide 29: Global industry update
Global industry update 28
Slide 30: Emerging markets performance and China economic influence
Emerging markets performance and China economic influence worldwide -3.8% -0.6% 1.0% 1.5% 6.8% 6.3% 6.0% 6.1% -3.0% -1.0% 2.3% 2.4% 2.4% 2.9% 3.1% 3.0% • Shift in growth strategy in China from investment to consumption • Lower demand for commodities push prices down Source: IMF GDP growth estimates,
Slide 31: Seaborne iron ore supply/demand projection
Seaborne iron ore supply/demand projection 1.800 1.800 1.600 1.600 1.400 1.400 1.200 1.200 Million tonnes Million tonnes 1.000 1.000 800 800 600 600 400 400 200 200 0 0 2009 2010 2011 2012 2013 2014E 2015E 2016E 2017E 2018E Australia Brazil RoW Seaborne demand Source: Goldman Sachs 30
Slide 32: Iron ore price evolution
Iron ore price evolution Platts IODEX and 1% diff vs Platts IO fines 65% ($/dmt) 185,00 Platts IO fines 65% Fe IODEX CFR CHINA 62% Fe plus 3* Mid Range Diff 165,00 145,00 125,00 105,00 85,00 65,00 45,00 Dec-13 Mar-13 Dec-14 Apr-13 May-13 Mar-14 Apr-14 May-14 Mar-15 Apr-15 May-15 Jun-13 Oct-13 Jun-14
Slide 33: Iron ore production cuts in 2014
Iron ore production cuts: 170 Mtpy in 2014 Cliffs Feb – 14, US$ 121 per ton Northland Resources Canada Sweden Price/cost related mine Price related production closure Kimberley Metals cut Australia 2.0 Mtpy 1.5 Mtpy Price related production cut IRC IMX Resources Russia 1.7 Mtpy Australia Lack of fin
Slide 34: Iron ore production cuts in 2015
Iron ore – production cuts in 2015 2015 Iron Ore mine production/capacity cuts (price driven) Price Platts Date Country Company Asset Mt 62% CFR China Reason/Impact (US$/dmt) China Various privately owned 100 Price related closures 15-mar USA US Steel Keetac pellet plant 5.5 57.0 Price / demand rela
Slide 35: Iron ore trade balance and price forecast
Iron ore – trade balance and price forecast 34 Source: Wood Mackenzie, October 2015
Slide 36: Higher supply but lower Fe grade
Higher supply…but lower Fe grade • Even though the forecasted increase in iron ore volumes has happened, the global export volumes are showing a decline in Fe grade Source: Wood Mackenzie, July 2015 35
Slide 37: Risk of higher low grade discounts
Risk of higher low grade discounts • Under a low demand scenario, the discount for sub-60% iron ore could increase, impacting the margins of low grade producers • Producers such us Fortescue are highly sensitive to low grade discounts Source: Wood Mackenzie, July 2015 36
Slide 38: CMP produces high quality products
CMP produces high quality products Average price (US$/t) – 1H15 US$/t 85 80 75 70 65 60 55 50 Peru Australia S. Africa Iran Mauritania Brazil Ukraine Chile Russia Others Source: China Customs Statistics Pellets versus total imports – 1H15 50,0% 43,5% 45,0% 40,0% 35,0% 30,0% 25,0% 20,0% 15,0% 10,0% 5
Slide 39: International iron ore price adjustment and CMP's cost reduction
International iron ore price adjustment and CMP’s cost reduction Premium for higher grades ... but most concentrate producers are struggling … Source: Platts, December 2014 2013 2014 CMP’s cash cost (US$/t) 57,4 49,2 38
Slide 40: International iron ore price adjustment and CMP's cost reduction
International iron ore price adjustment and CMP’s cost reduction Premium for higher grades ... but most concentrate producers are struggling … Source: Platts, August 2015 1Q 2015 1H 2015 CMP’s cash cost (US$/t) 37,8 36,4 39
Slide 41: CMP's plan to improve margins has worked
CMP’s plan to improve margins has worked The difference between the realized average iron ore price and the average 130 Platts 62% Fe CFR China decreased from 1H14 to 120 1H15, as a consequence of the change in the 111,5 product mix 110 100 90 88,8 80 US$/t 70 60,4 60 52,2 57,3 4,1 50 3,7 2,3 1,5 0,
Slide 42: Further reduction during 2H15
Further reduction during 2H15 Cash Cost (US$/t) Magnetite plant 36.8 Cerro Negro Norte mine 36.1 Los Colorados mine 34.4 El Romeral mine 44.2 Average Cash Cost 35.9 41
Slide 43: Freight rates Brazil - China
US$/dmt 10 15 20 25 30 0 5 19/02/2014 12/03/2014 02/04/2014 Source: Platts, October 2015 23/04/2014 14/05/2014 04/06/2014 25/06/2014 16/07/2014 06/08/2014 27/08/2014 17/09/2014 08/10/2014 29/10/2014 Freight rates Brazil - China 19/11/2014 10/12/2014 31/12/2014 21/01/2015 11/02/2015 04/03/2015 25/03/
Slide 44: Steel price evolution
US$per ton US$ per ton 00 50 100 150 200 300 350 250 00 100 200 300 400 500 600 Jan 2007 Jan 2007 Source: CRUspi, July 2015 May 2007 May 2007 Sep 2007 Sep 2007 Jan 2008 Jan 2008 May 2008 May 2008 Sep 2008 Sep 2008 Jan 2009 Jan 2009 May 2009 May 2009 Sep 2009 Sep 2009 Jan 2010 Steel price evolution J
Slide 45: Financial performance
Financial performance 44
Slide 46: CAP's financial highlights in 1H15
CAP’s financial highlights in 1H15 USD Million 2010 2011 2012 2013 2014 1H15 Sales 1.994 2.787 2.470 2.297 1.790 723 EBITDA (L12M) 740 1.184 764 708 381 303 EBITDA Margin 37,1% 42,5% 30,9% 30,8% 21,3% 22,0% Net Income 590 442 234 184 56 13 Cash 981 883 711 309 348 398 Gross Financial debt 1.001 628
Slide 47: CMP's financial highlights in 1H15
CMP’s financial highlights in 1H15 USD Million 2010 2011 2012 2013 2014 1H15 Sales 1.271 1.770 1.406 1.431 942 309 EBITDA (L12M) 782 1116 720 678 309 206 EBITDA Margin 61,5% 63,1% 51,2% 47,4% 32,8% 32,2% Net Income 902 700 355 402 113 21 Cash 558 501 205 46 50 75 Gross Financial debt - - - 159 483 5
Slide 48: EBITDA contribution by business (L12M)
EBITDA contribution by business (L12M) 100% 97% 98% 94% 94% 89% 80% 77% 70% 60% 40% 20% 18% 15% 6% 8% 7% 8% 8% 5% 6% 4% 0% 4% 0% 2009 2010 2011 2012 2013 2014 1H15 (L12M) -3% -2% -2% -20% Iron ore Steel Steel Processing Infrastructure 47
Slide 49: Relevant financial updates
Relevant financial updates Flexibilization of financial covenants with CAP and CMP lenders* Net Financial Debt to EBITDA EBITDA to Net Financial Expenses CAP syndicated loan matures in April, 2016 6,00x 3,00x 5,50x 5,00x 2,50x 4,50x 2,00x 4,00x 1,50x 3,50x 1,00x 3,00x 2,50x 0,50x 2,00x 0,00x Old New
Slide 50: Credit agencies last review
Credit agencies last review 2013 2014 2015 BBB/Stable BBB/Stable BBB-/Stable Fitch Ratings outlook outlook outlook BBB-/Stable BBB-/Stable BB+/Stable S&P outlook outlook outlook 49
Slide 51: Business outlook
Business outlook 50
Slide 52: Seeking higher margins in CAP Mining
Seeking higher margins in CAP Mining Reorientation of product mix • Shipments for around 14.3 million MT in 2015 consider an increase in pellets, to a total of 4 million MT • The change in the mix should enhance margins, as pellets have a premium over the pellet feed 2014 2015 Others, Others, 14% 14
Slide 53: New EBITDA from CAP infrastructure in 2015
New EBITDA from CAP infrastructure in 2015 • Cleanairtech (desalination plant) and Tecnocap (electric transmission line) started their operations during 2014 and are projected to contribute to the consolidated 2015 EBITDA and net income as follows: US$ million Cleanairtech Tecnocap EBITDA (E) 43,6 7
Slide 54: Protecting CAP's cash flow and liquidity levels
Protecting CAP’s cash flow and liquidity levels 1.200 Current investment plan reached 975 its final stage 1.000 777 800 • There are no relevant investments US$ million planned for the short-term, therefore 600 pressure on cash disbursements has 450 been diminished. 400 282 207 200 142 • Investment r
Slide 55: CAPEX limitation
CAPEX limitation 140 120 115 102 100 87 95 Growth US$ million 80 68 Cost reduction 60 Sustainability Maintenance 40 20 0 2016E 2017E 2018E 2019E 2020E • Maintenance for the period 2016 – 2018 includes the replacement of machinery and equipment at Los Colorados mine, maintenance at the Pellets Plant
Slide 56: Steel safeguards
Steel safeguards • Wire rod accounts for 20% of CAP Acero’s production • Due to the openness of the Chilean economy, CAP Acero is competing with international steel prices, highly influenced by Chinese imports • Chilean authorities imposed a provisional safeguard of 37.8%, which will be in place for
Slide 57: Future maximization of EBITDA contribution from our ports
Future maximization of EBITDA contribution from our ports Total capacity CAP ports: 34.8 Mt/y Punta Totoralillo: Guayacán: • 29 km north of Caldera • Herradura bay, Coquimbo • Iron ore shipping • Iron ore shipping • 200,000 dwt • 165,000 dwt • Max capacity: 12 million t/y • Max capacity: 6 million t
Slide 58: Conclusions
Conclusions Under current market conditions, the protection of the company’s cash flow and liquidity levels are of the utmost importance Cost reduction initiatives and productivity improvements are at the center of management efforts • CAP Mining • Efficiency plans have resulted in significant cash
Slide 59: Forward-looking statements disclaimer
This information material may include certain forward-looking statements and projections provided by CAP S.A. (the “Company“) with respect to the financial condition, results of operations, cash flows, plans, objectives, future performance, and business of the Company. Any such statements and projec
Slide 60: CAP Group update - November 2015
CAP Group update - November 2015 Punta Totoralillo Port, Atacama region