Cap S.a. · BCS:CAP
Cap — Investor Presentation (March 2015)
54 slides from Cap's investor presentation, March 2015
Slide 1: CAP Group update – March 2015
CAP Group update – March 2015 Cerro Negro Norte mine Raúl Gamonal - CFO
Slide 2: Ownership structure
Ownership structure Mitsubishi Pension Invercap Other Corporation Funds 19,3% 6,8% 31,3% 42,6% 47,32% 52,68% 75,0% 99,9% 25,0% Compañía Minera Compañía Siderúrgica del Pacífico Novacero Huachipato 50,93% 30,56% 11,03% 57,79% Cintac Intasa 1 Source: CAP, March 2015
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: Iron ore El Romeral mine
Iron ore El Romeral mine 7
Slide 9: 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 10: 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 11: Mining products
Mining products BF and DR Pellets (Fe 65% - 67%) Lumps (Fe 62%) Pellet Feed (Fe 67% - 68%) Fines (Fe 62%) 10
Slide 12: Iron ore shipments and markets
Iron ore shipments and markets Shipments (Th.MT) 12.952 12.246 12.086 11.469 10.146 10.213 2009 2010 2011 2012 2013 2014 Shipments by markets and products 2014 Lumps Self - fluxing Korea Malaysia Sinter feed 4% pellets and DR 1% 1% USA 7% Bahrein 1% pellets Pellet chips 10% 14% 1% Japan Fines 7% 2%
Slide 13: Main customers
Main customers Deutsche Bank* Posco Glencore* Koch Cargill* JFE Steel Corporation Bahrain Steel Qingdao Iron and Steel Kobelco Xinyu Iron and Steel Nisshim Steel Rizhao Iron and Steel Jinan Iron and Steel Wanbao Group RGL Group* Yaochang Group Fangda Iron and Steel CAP Acero Hangzhou Iron and Steel
Slide 14: Steel production
Steel production 13
Slide 15: Steel focus on long products
Steel focus on long products • Steel business reorganization in 2H13 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 t
Slide 16: Recovery of cash generation (EBITDA)
Recovery of cash generation (EBITDA) Net Income and EBITDA evolution 20 14 10 1 2 -10 -7 0 -9 -12 US$ million -10 -17 Impairment -20 Net income -14 -22 EBITDA -30 -27 -31 -44 -40 -50 -56 -60 1Q13 2Q13 3Q13 4Q13 FY2014 • Due to the reorganization and adjustment in industrial processes, the steel comp
Slide 17: Steel processing
Steel processing 16
Slide 18: 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 • Transition to establish new and competitive supply sources of flat steel Shipments and prices Sale
Slide 19: Reorganization and assets availability
Reorganization and assets availability Steel processing reorganization towards a lighter and lower cost structure Cintac S.A. Cintac S.A. 99.99% 99.99% 99.99% 100% Steel Trading Inmobiliaria Centroacero 99.99% 89.48% Cintac SAIC Company Cintac S.A. S.A. INC. Cintac SAIC Tupemesa S.A. 99.99% 99.97% 9
Slide 20: Other consolidated assets
Other consolidated assets Desalination plant 19
Slide 21: Other consolidated assets
Other consolidated assets Power transmission line 20
Slide 22: Global industry update
Global industry update 21
Slide 23: Global economic scenario
Global economic scenario •Real GDP growth expected at 3.1% in •Real GDP growth expected at 7.0% 2015 and 2.8% in 2016 in 2015 and 6.75% in 2016 • UK real GDP growth expected at 2.6% in 2015 and 2.4% in 2016, whilst Euro Zone GDP growth is expected at 1.2% in 2015 and 1.6% in 2016 • Real GDP growth e
Slide 24: Seaborne iron ore supply/demand projection
Seaborne iron ore supply/demand projection • Global oversupply in fines products with grades lower than 62% Fe content 1800,0 1800,0 1600,0 1600,0 1400,0 1400,0 1200,0 1200,0 Million tonnes Million tonnes 1000,0 1000,0 800,0 800,0 600,0 600,0 400,0 400,0 200,0 200,0 ,0 ,0 2009 2010 2011 2012 2013 20
Slide 25: Iron ore price evolution
Iron ore price evolution Platts IODEX and 1% diff vs Platts IO fines 65% ($/dmt) 180,00 Platts IO fines 65% Fe IODEX CFR CHINA 62% Fe plus 3* Mid Range Diff 160,00 140,00 120,00 100,00 80,00 60,00 Source: Platts, March 2015 24
Slide 26: Supply additions is forcing displacement of higher-cost tonnes
Supply additions is forcing displacement of higher-cost tonnes • Displacement has occurred both in China and among non-major seaborne suppliers Source: GTIS, Macquarie Research, February 2015 25
Slide 27: Iron ore production cuts in 2014
Iron ore production cuts: 170 Mtpy in 2014 Cliffs Feb – 14, US$ 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 28: Further cuts ex-China in 2015…?
Further cuts ex-China in 2015…? Country Company Asset Prod’n (Mtpy) At high risk of closure: 12.4 Mtpy Sierra Leone Timis Corporation Marampa 5.0 Australia Mineral Resources Carina 4.2 Norway Northern Iron Sydvaranger 2.2 Sweden Dannemora Mining Dannemora 1.0 At moderate risk of closure: 98.5 Mtpy A
Slide 29: 2014 iron ore price adjustment and CMP's cost reduction
2014’s 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$/t) 57,4 49,2 28
Slide 30: Further reduction in 2015's cash cost
Further reduction in 2015’s cash cost US$/t Magnetite plant 39.5 Cerro Negro Norte mine 41.8 Los Colorados mine 45.5 El Romeral mine 56.1 Average cash cost 44.4 29
Slide 31: High quality pellet feed - a market with big potential
High quality pellet feed - a market with big potential • Pellet feed imports will almost double over the next • The spread between pellet feed and sinter fines five years, reaching 110Mt by 2020, taking China’s switched from a discount to a premium. This import dependency for pellet feed from 35% to
Slide 32: China has yet to reach peak steel per capita
China has yet to reach peak steel per capita • Steel intensity stabilizes or starts to decline at around US$15,000 to US$20,000 GDP per capita • China GDP per capita as well as its comparison with peak steel per capita use, especially with the US, shows upside from current levels Source: World Steel
Slide 33: Steel price evolution
US$per ton US$ per ton 00 50 100 150 200 250 300 350 00 100 300 400 600 200 500 ene 2007 ene 2007 may 2007 may 2007 sep 2007 Source: CRUspi, March 2015 sep 2007 ene 2008 ene 2008 may 2008 may 2008 sep 2008 sep 2008 ene 2009 ene 2009 may 2009 may 2009 sep 2009 sep 2009 ene 2010 Steel price evolution
Slide 34: Freight rates to China monthly average
Freight rates to China monthly average 33 Source: SSY Consultancy & Research, Seaborne Iron Ore & the Freight Market, China Iron Ore 2015
Slide 35: Financial performance
Financial performance 34
Slide 36: CAP – Consolidated financial evolution
CAP – Consolidated financial evolution USD Million 2010 2011 2012 2013 2014 Sales 1.994 2.787 2.470 2.297 1.790 EBITDA 740 1.184 764 708 381 EBITDA Margin 37,1% 42,5% 30,9% 30,8% 21,3% Net Income 590 442 234 184 56 Cash 981 883 711 309 348 Gross Financial debt 1.001 628 719 932 1.270 Net Financial d
Slide 37: CMP – Financial evolution
CMP – Financial evolution USD Million 2010 2011 2012 2013 2014 Sales 1.271 1.770 1.406 1.431 942 EBITDA 782 1116 720 678 309 EBITDA Margin 61,5% 63,1% 51,2% 47,4% 32,8% Net Income 902 700 355 402 113 Cash 558 501 205 46 50 Gross Financial debt - - - 159 483 Net Financial debt (558) (501) (205) 113 4
Slide 38: EBITDA contribution by business
EBITDA contribution by business 100% 97% 98% 94% 94% 89% 80% 77% 60% 40% 18% 20% 6% 6% 8% 7% 5% 4% 4% 0% 0% 2009 2010 2011 2012 2013 2014 -3% -2% -2% -20% Iron Steel Steel Processing 37 (1) EBITDA: Gross Margin – S&AE + Depreciation and Amortization + Dividends received in cash, over the last twelve
Slide 39: Credit agencies last review
Credit agencies last review 2013 2014 2015 BBB/Stable BBB/Stable BBB/Negative Fitch Ratings outlook outlook outlook BBB-/Stable BBB-/Stable BB+/Negative S&P outlook outlook outlook 38
Slide 40: Business outlook
Business outlook 39
Slide 41: Seeking higher margins in CAP Mining
Seeking higher margins in CAP Mining Reorientation of product mix • Shipments for around 16 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(P) Others; 14% Others; 1
Slide 42: External factors could bring benefits to CAP Steel
External factors could bring benefits to CAP Steel Lower prices of raw materials for steel production, and a depreciated Chilean Peso would lead CSH to positive results during 2015 Metallurgical Coal Iron Ore 450 180 400 160 350 140 300 120 US$/Mt US$/Mt 250 100 200 80 150 60 100 40 50 20 0 0 Oct-14
Slide 43: Reorganization and adjustments in Steel Processing
Reorganization and adjustments in Steel Processing Reorganization of the company • The reorganization of the company to achieve a simpler organizational structure decreased SG&A expenses in 18.2% as of December 2014, YoY • It also resulted in the availability of assets for sale or rental: • Centroac
Slide 44: 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 45: Protecting CAP's cash flow and liquidity levels
Protecting CAP’s cash flow and liquidity levels Current investment plan reached its 1.200 final stage 975 1.000 • The period within 2011 and 2014 was 800 777 US$ million strong in terms of capital expenditure, due to the capacity increase in Los Colorados 600 450 mine (brownfield) and the developmen
Slide 46: Further actions to face more bearish scenarios
Further actions to face more bearish scenarios • CAPEX reduction 200 150 US$ million Potencial cut on CAPEX related 100 mainly to future development in the 50 mining business 0 2015 (E) 2016 (E) Maintenance capex Growth capex • Drilling and exploration 70 60 60 expenses reduction 50 US$ million 43 4
Slide 47: 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 48: CAP is in a long term business
CAP is in a long term business 47
Slide 49: 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 Guacolda II Port Vallenar
Slide 50: 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 51: 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
Slide 52: 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 • Ample portfolio of future prospects based on abunda
Slide 53: 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 54: CAP Group update – March 2015
CAP Group update – March 2015 Cerro Negro Norte mine