Slide 1: CAP Group Update
CAP GROUP UPDATE Fernando Reitich President & CEO Raúl Gamonal CFO Santiago - June 2014
Slide 2: Agenda
Agenda 1
Slide 3: Ownership structure
Ownership structure Source: CAP, March. 2014 2
Slide 4: Integrated operations
Integrated operations Integrated Operations Mining Steel Steel Processing • Production capacity: 15 • Production: 0.7 Mt/y • Production capacity:400 Mt/y • Nominal capacity: 1.45 kt/y • Only large-scale iron ore Mt/y • Leading steel processor producer in Chile • Focus on grinding in Chile • On track
Slide 5: Iron ore: Cerro Negro Norte Mine
Iron ore Cerro Negro Norte Mine 4
Slide 6: Mining sites
Mining Mining sites 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: • La Serena • Vallenar • Copiapó Los Colorados Guacolda II Port Cities Vallenar
Slide 7: Mining products
Mining products BF and DR Pellets (Fe 65% - 66%) Lumps (Fe 62%) Pellet Feed (Fe 67% - 68%) Fines (Fe 62%) 6
Slide 8: Mining property
Mining property Ranking 2013 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 Codel
Slide 9: Resources and reserves of magnetite ore
Resources and reserves of magnetite ore As a result of continued successful exploration campaigns, iron ore resources have increased progressively over the years, reaching 6,351 million tons in 2013 Mineral resources (1) Reserves (2) Mine/Deposits & Mine/Deposits & Grade (% Fe) Grade (% Fe) 7000 250
Slide 10: Mining shipments and markets
Mining shipments and markets Shipments 16000 15.000 14000 12.246 12.086 11.469 12000 10.145 10.213 10000 8000 6000 4000 2000 2.569 1Q14 0 2009 2010 2011 2012 2013 2014 (E) Shipments by markets and products (March 2014) Lumps, 3% Bahrein, Corea, 7% Self - fluxing 7% Sinter feed, pellets, 22% Japan, 8
Slide 11: Cash cost curve
Cash cost curve Global production cost • CAP Mining is a low cost magnetite producer of high grade concentrate • Mine depletion will lead to higher demand for high grade pellet feed • Environmental and economic constraints support the increased need for magnetite concentrate Pellet feed global produ
Slide 12: Magnetite pellet feed production 2013
Magnetite pellet feed production 2013 Country Market Production (Mt) Australia Seaborne 11 Canada Seaborne 14 Chile Seaborne 6 China Domestic 83 Kazakhstan Domestic 8 Mauritania Seaborne 3 Peru Seaborne 5 USA Domestic 1 Total 132 Magnetic pellet feed global production cost Source: CAP Minería 11
Slide 13: Steel
Steel
Slide 14: 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 • Long products demand underpinned by domestic construction and mining sectors Shipments and prices 2000,0 1000,0 CAP Acero 883 Talca
Slide 15: CAP Acero on the right track
CAP Acero on the right track • Positive EBITDA during last three consecutive quarters • Focus on cost reduction • Organizational structure: increase in productivity; complete revamping of contracted services with focus on performance • Reduction of energy consumption & optimization of raw material u
Slide 16: Steel processing
Steel processing 15
Slide 17: Steel processing
Steel processing • Main flat steel importer of the Pacific coast of South America • 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 • Transition to establish new and c
Slide 18: Agenda
Agenda 17
Slide 19: Demands of the Chinese urbanization and development process
Demands of the Chinese urbanization and development process Taller buildings… More cars… Expressway construction investment Urban rail transit construction Source: Citi, April 2014 18 18
Slide 20: Urbanization process in China will continue
Urbanization process in China will continue Population share in top three mega regions, selected countries International experience suggests that in industrialized countries, the top three mega-regions consist of above 40% of total population in these countries. In China, this ratio was only 18.2% b
Slide 21: Iron ore quality evolution
Iron Iron ore ore quality evolution evolution • Crude iron ore grade is dropping • Mine depletion will lead to higher demand for high grade concentrates Production from Magnetite key CISA Chinese iron ore producers (Mt) concentrate 70 68 Average grade of hematite fines 66 (Pilbara, Australia) 64 62
Slide 22: Preference for higher quality iron ore
Preference for higher Preference for higherquality qualityiron ironore ore • The apparent excess of supply of iron ore as of 2Q14 is affecting lower grades to a larger extent than mid-high grades Relative price performance of ores of different grades 120 Iron ore prices, Indexed ( Jan1, 2013 = 100)
Slide 23: Cash cost curve
Cash cost curve • 2/3 of world magnetite concentrate is produced by China Pellet feed global production cost Magnetic pellet feed global production cost Source: Wood Mackenzie Research 22
Slide 24: Iron ore production in China
Iron OreforProduction Preference in China higher quality iron ore • Iron Ore capacity production in China is 420 Mtpy in 2014 (62% Fe equivalent) • Average cash cost = USD 92 /dmt • Private companies have higher production costs Geographic segmentation of Chinese iron ore industry 2014 China ex-mine
Slide 25: Profitability of iron ore suppliers
Profitability Preference forfor ironquality higher ore suppliers iron ore • At today´s price : • More than 50% of iron ore mines in China are unviable; • And so are the vast majority of non-traditional suppliers (such as India, Iran, Malaysia, Indonesia, Philippines, and others), as well as supplier
Slide 26: Preference for higher quality iron ore grade
Preference forhigher Preference for higherquality iron ore irongrade ore Premium for higher grades ... but most concentrate producers are struggling … Platts’ SBB STEEL MARKETS DAILY (5/30/14): 25
Slide 27: Global steel demand growth
Global steel demand growth • Global apparent finished steel demand will grow from 1.5 bn tons in 2014 to 1.7 bn tons by 2018 (implied 3% CAGR) (1) Other Developing includes CIS, MENA, Sub-Saharan Africa, Latin America, India, and Other Asia SOURCE: WSA; McKinsey Steel Demand Model Oliver Ramsbottom,
Slide 28: Global steel capacity utilization
Globalsteel Global steel capacity capacity utilization utilization • Nevertheless, world capacity utilization has been below 80% for the last 5 years, thereby practically destroying the margins of the steel production industry • Most of the excess capacity is concentrated in China. Current efforts t
Slide 29: Agenda
Agenda 28
Slide 30: CAP – Financial evolution
CAP – Financial evolution USD Million 2008 2009 2010 2011 2012 2013 1Q14 12months Sales 1.972 1.375 1.994 2.787 2.470 2.297 488 2.298 EBITDA 534 128 740 1.184 764 708 129 699 EBITDA Margin 27,1% 9,3% 37,1% 42,5% 30,9% 30,8% 26,4% 30,4% Net Income (1) 291 25 590 442 234 184 30 169(1) Cash 379 393 981
Slide 31: EBITDA contribution by business
EBITDA contribution by business 100% 97% 98% 96% 94% 94% 93% 80% 77% 60% 40% 18% 20% 6% 6% 8% 6% 5% 4% 4% 0% 1% 0% 0% 2009 2010 2011 2012 2013 1Q14 12months -3% -2% -2% -20% Iron Steel Steel Processing (1) EBITDA: Gross Margin – S&AE + Depreciation and Amortization + Dividends received in cash, over
Slide 32: Agenda
Agenda Agenda 31
Slide 33: Mining future prospects
Mining future prospects El Laco Punta Totoralillo Port Project Production Est. Capex Mt MUS$ Cerro Negro Norte Desalination Plant Copiapó Magnetite Plant 1 PF 110 Magnetite Plant Expansion 6,5 PF 1,700 Tofo 13,5 PF 2,900 6 PF 1,600 Alcaparra 135 Kt Conc-Cu 300 Los Colorados Los Colorados 4 SF 500 Gu
Slide 34: El Tofo
El Tofo Geological Projection Investment (E) : 1,700 – 2,900 MUS$ • Greenfield Production: 6.5-13,5 Mt/y of pellet feed Stage: Conceptual engineering Volume Fe Resources [Mt] [%] Measured 946 25.5 Indicated 455 23.4 Inferred 190 22.5 Total 1,591 24.5 Pit Design Cross Section LEGEND Fe% ≥ 25 15≤Fe%<2
Slide 35: Alcaparra iron/copper
Alcaparra iron/copper Investment (E): 1,600 + 300 MUS$ Iron ore body Production: 6 Mt/y of pellet feed 135 kt/y of copper concentrate Simbology Topography Stage: Advanced exploration Drilling Exploratory metallurgy Fe% ≥ 45 25 ≥ Fe% < 45 Volume Fe/Cu 15 ≥ Fe% < 25 Resources [Mt] [%] 10 ≥ Fe% < 15 Nú
Slide 36: Los Colorados expansion
Los Colorados expansion Pit Design Geological Projection Investment : 500 MUS$ • Brownfield Production: 4 Mt/y of fines Stage: Basic engineering Cross Section Actual final pit Resources Volume Fe 2012 [Mt] [%] LEGEND Fe% ≥ 57 Measured 694 31.5 40≤Fe%<57 Indicated 343 31.4 17≤Fe%<40 Inferred 100 33.9
Slide 37: Sustainable mining operations
Sustainable mining operations Totoralillo Port Desalination Plant Phase 3 under discussion S/S Totoralillo with Pucobre: up to 130 l/s S/S CNN CNN Photovoltaic Plant Amanecer Solar CAP CNN Aqueduct 120 lt/s CAP transmission line Copiapó Cardones node Tierra Amarilla Aqueduct Caserones 170 lt/s Magne
Slide 38: Desalination plant
Desalination plant cAp FEE go>
Slide 39: Ports
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/y • Effective utilization: 4.5 million t/y • Effect
Slide 40: Ports – Loading services to third parties
Ports– Loading services to third parties CAP Mining Totoralillo Port • Third-party iron ore loading and storage capacity at Totoralillo port is 3 Mt/y • Loaded tonnages: 2 Mt in 2013 and 2,5 Mt in 2014(E) • 1,1 Mt in Jan-Apr 2014 • EBITDA generation: MUS$20 in 2013 and MUS$22 in 2014(E) • US$ 8,4 in
Slide 41: Solar energy
Solar energy Totoralillo Port Desalination Plant S/S Totoralillo S/S CNN CNN Photovoltaic Plant Amanecer Solar CAP CNN Aqueduct 120 lt/s CAP transmission line Copiapó Cardones node Tierra Amarilla Aqueduct Caserones 170 lt/s Magnetite Plant 80 lt/s 40
Slide 42: Solar energy
Solar energy • 100 MW Photovoltaic power plant fully committed to CAP (PPA) • Located nearby CNN Mine • CAP retains call option for up to 40% of the equity • Compliance with NCRE law • Connected to a 142 km long 220 kv transmission line owned by CAP General view of the “Amanecer Solar CAP” Plant sit
Slide 43: Agenda
Agenda Agenda 42
Slide 44: Summary
Summary • CAP Mining • On track for expansion of 50% production capacity to 18 Mt/y • Ample portfolio of future prospects based on abundant reserves; further expansion to be defined in 2014 (return optimization based on economics, market intelligence and prudent financing) • Global environmental and
Slide 45: Final remarks
Final remarks • CAP is advancing through sustainable development based on competitive advantages • Concurrently, cost reduction initiatives and productivity improvements will be at the center of management efforts • CAP Mining: operational improvements, capacity increase; … • CAP Steel: organization
Slide 46: CAP Group Update
CAP GROUP UPDATE Fernando Reitich President & CEO Raúl Gamonal CFO Santiago - June 2014