Cap S.a. · BCS:CAP
Cap — Southern Cone & Andean Opportunities Conference 2017
57 slides from Cap's conference presentation, April 2017
Slide 1: Southern Cone & Andean Opportunities Conference
Southern Cone & Andean Opportunities Conference April 2017 – Santiago, Chile
Slide 2: CAP at a glance
CAP at a glance Ownership structure Holding structure 48,8% 31,3% Invercap Mitsubishi 99% 51%* Pension funds 75%* 62% Other 19,3% 0,6% As of March 31, 2017 88% 99% TECNOCAP 2 * Mitsubishi owns 25% of CAP Minería, and 49% of Aguas CAP
Slide 3: Iron ore mining
Iron ore mining Los Colorados mine Atacama region 3 Chile
Slide 4: Mining sites
Mining sites CAP Mining has three different areas of operation in the north of Chile, located around the cities of Copiapó, Vallenar and La Serena City Punta Totoralillo Port Mine Desalination Plant Cerro Negro Norte Plant Copiapó Port Magnetite Plant Las Losas Port Guacolda II Port Los Colorados Pe
Slide 5: Copiapo Valley: Punta Totoralillo port
Copiapo Valley: Punta Totoralillo port 5
Slide 6: Copiapo Valley: Desalination plant
Copiapo Valley: Desalination plant 6
Slide 7: Copiapo Valley: Magnetite plant
Copiapo Valley: Magnetite plant 7
Slide 8: Copiapo Valley: Cerro Negro Norte mine
Copiapo Valley: Cerro Negro Norte mine 8
Slide 9: Huasco Valley: Guacolda II port
Huasco Valley: Guacolda II port 9
Slide 10: Huasco Valley: Pellets plant
Huasco Valley: Pellets plant 10
Slide 11: Huasco Valley: Los Colorados mine
Huasco Valley: Los Colorados mine 11
Slide 12: CAP – Agrosuper asset: Las Losas port
CAP – Agrosuper asset: Las Losas port 12
Slide 13: Elqui Valley: El Romeral mine
Elqui Valley: El Romeral mine 13
Slide 14: Elqui Valley: Guayacán port
Elqui Valley: Guayacán port 14
Slide 15: Resources and reserves of magnetic ore
Resources and reserves of magnetic ore Mineral resources (1) 7,522 7,500 8.000 7,250 Tofo, 27.3% 6,351 7.000 Pleito Cristales, 32.8% 5,367 Los Colorados Distrito, 43.3% 6.000 4,716 El Laco, 49.2% 5.000 million tons 3,249 3,478 El Algarrobo Distrito, 30.3% 4.000 2,928 El Algarrobo, 45.5% 3.000 CNN, 2
Slide 16: Mining products
Mining products BF and DR Lumps Pellets 62% Fe content 65% to 67% Fe Subject to lump content premium Subject to pellet premium and premium per 1% Fe Pellet feed Fines 66% to 69% Fe 62% to 63% Fe content content Subject to premium Subject to premium per 1% Fe per 1% Fe 16
Slide 17: Iron ore shipments and markets
Iron ore shipments and markets Shipments (th. Tons) Spot sales vs contracts 2016 16.757 Contracts ; 14.327 58% 11.469 12.246 12.086 12.952 10.213 Spot; 42% 2010 2011 2012 2013 2014 2015 2016 Shipments by market 2016 Product mix 2016 Sinter feed; Bahrein Korea Others 17,4% Other; 1,1% 7% 5% 1% Japan
Slide 18: Main clients
Main clients Posco Glencore* Cargill* JFE Steel Corporation Bahrain Steel RGL Group* Nisshin Steel GMG* Kobelco RtM* Nippon Steel & Sumitomo Metal Corp. Noble Resources Ltd.* Qingdao Iron and Steel Xinyu Iron and Steel BaoSteel CAP Acero Wuhu Fuxin Iron & Steel Hangzhou Iron and Steel Top ten client
Slide 19: Steel production
Steel production Huachipato steel mill Talcahuano, Bio-Bio region 19 Chile
Slide 20: Focus on long steel products
Focus on long steel 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 21: Global steel prices evolution
Global steel prices evolution 600 Global Flat products Price Indicator 500 Global Long products Price Indicator Global Metallics Price Indicator Base 100 = 1994 400 300 200 100 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 350 North America Steel Price Indicator 300 Europe Steel Pric
Slide 22: Recovery of cash generation (EBITDA)
Recovery of cash generation (EBITDA) • Even though steel prices have shown a slight recovery during 2016, Compañía Siderúrgica Huachipato has not been able to show profits • The steel company has managed to generate positive cash flow over the last 14 quarters due to the reorganization and adjustmen
Slide 23: Steel safeguards and antidumping duties
Steel safeguards and antidumping duties Due to the openness of the Chilean economy, CAP Acero is competing with international steel prices, highly influenced by Chinese imports at prices well below market benchmarks Chilean authorities imposed an antidumping duty of 38.0% for Chinese wire rod for
Slide 24: Location and logistics
Location and logistics • Strategic location and logistics at San Vicente San Vicente Bay. Bay in the VIII region of Chile Talcahuano - Chile Main entrance • Large extension of land of 400 ha where the steel mill operates and 300 ha of forest available for real estate use 24
Slide 25: Steel processing
Steel processing CINTAC’s photovoltaic structures SunEnerGreen project 25 Chile
Slide 26: Steel processing
Steel processing • Creates value-added solutions for the construction, industry and infrastructure sectors in Chile, Peru and Argentina • Transition to innovative solutions for industrial (electricity self-generation through photovoltaic warehouse roof designs) and residential construction • Chile i
Slide 27: Adding value through steel processing
Adding value through steel processing Vine stakes Steel structures Galvanized steel profiles to for solar panels lead crops growth are structures strong enough to Supplier of steel structures to resist the mechanization mount solar panels in different process of harvests photovoltaic plants in the c
Slide 28: Adding value through steel processing
Adding value through steel processing Certified highway protections 28
Slide 29: Lower volumes…higher margins
Lower volumes…higher margins 450 90 85,3 403 400 381 80 350 335 70 64,2 300 60 EBITDA per ton (US$/ton) Shipments (Th tons) 49,5 250 50 200 40 150 30 100 20 50 10 0 0 2014 2015 2016 Average price (US$/t) 1.015,5 927,3 857,5 Shipments (Th tons) EBITDA per ton (US$/ton) 29
Slide 30: Infrastructure
Infrastructure Aguas CAP desalination plant Caldera, Atacama region 30 Chile
Slide 31: Infrastructure business providing stable support to the CAP group
Infrastructure business providing stable support to the CAP group Seawater desalination plant US$ million 2015 2016 Current desalination capacity of 400 l/s can be increased to 600 l/s EBITDA 55,5 52,3 Delivers water to Cerro Negro Norte mine and the Magnetite plant (both Net Income 8,8 14,0 owned b
Slide 32: Global industry update
Global industry update 32
Slide 33: Iron ore price evolution
Iron ore price evolution ($/dmt) 180,00 Platts IO fines 65% Fe 160,00 IODEX CFR CHINA 62% Fe plus 3* Mid Range Diff 140,00 120,00 100,00 80,00 60,00 40,00 20,00 0,00 Mar-13 May-13 Jul-13 Sep-13 Mar-14 May-14 Jul-14 Sep-14 Mar-15 May-15 Jul-15 Sep-15 Mar-16 May-16 Jul-16 Sep-16 Mar-17 Jan-13 Jan-14 J
Slide 34: Iron ore long term trade balance and price forecast
Iron ore long term trade balance and price forecast 34 Source: Wood Mackenzie, November 2016
Slide 35: International iron ore price adjustment and CMP’s cost reduction (2014)
International iron ore price adjustment and CMP’s cost reduction (2014) Source: Platts, December 2014 2013 2014 CMP’s cash cost (US$/t) 57,4 49,2 35
Slide 36: International iron ore price adjustment and CMP’s cost reduction (2015)
International iron ore price adjustment and CMP’s cost reduction (2015) Source: Platts, December 2015 2015 CMP’s cash cost (US$/t) 33,2 36
Slide 37: CMP’s costs and expenses reduction efforts
CMP’s costs and expenses reduction efforts 50,00 49,20 2,12 Increase in cash cost Decrease in cash cost 45,00 5,66 US$/t 40,00 2,34 3,08 1,02 1,47 0,48 35,00 2,59 0,66 33,16 30,00 Cash cost Jan- Candelaria Outsourcing Raw materials Materials Energy Personnel and Oil Exchange rate Various (Incl. Cash
Slide 38: Cash cost per quarter
Cash cost per quarter 60,0 55 51 50 50,0 44 40,0 38 35 35 35 35 31 31 US$/t 30,0 29 20,0 10,0 0,0 1Q14 2Q4 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 38
Slide 39: Flexibility of CMP’s product mix
Flexibility of CMP’s product mix Product mix 1Q16 Product mix 2Q16 Product mix 3Q16 Product mix 4Q16 Sinter Other; Sinter Other; Sinter Other; feed; 0% Other; feed; 0% Sinter feed; 2% 34% 2% 10% feed; 19% Pellets Pellets 12% ; 20% ; 17% Pellets Pellet ; 24% Pellets Feed; Pellet ; 29% Pellet 58% Pell
Slide 40: Recovery of international iron ore prices and CMP’s cost kept at low levels (2016)
Recovery of international iron ore prices and CMP’s cost kept at low levels (2016) Source: Platts, December 2016 2016 CMP’s cash cost (US$/t) 33,6 40
Slide 41: Quality premiums are back
Quality premiums are back • Premiums for higher quality are reflected by the increase in the difference between Platts 65% Fe and Platts 62% Fe • The 1% Fe premium currently is at a level of US$ 1.20 per ton • The pellet premium of US$32 per ton in 2016 is projected up to US$ 45 per ton in 2017 16,0
Slide 42: Freight rates Brazil - China
US$/wmt 10 15 20 25 30 0 5 02-01-2014 02-02-2014 02-03-2014 02-04-2014 02-05-2014 Source: Platts, April 2017 02-06-2014 02-07-2014 02-08-2014 02-09-2014 02-10-2014 02-11-2014 02-12-2014 02-01-2015 02-02-2015 02-03-2015 02-04-2015 02-05-2015 02-06-2015 02-07-2015 02-08-2015 Freight rates Brazil - Chi
Slide 43: Financial performance
Financial performance 43
Slide 44: Financial snapshot 2016
Financial snapshot 2016 Main EBITDA figures contribution 77% Sales: US$ 949 million Mining Gross margin: US$ 224 million business EBITDA: US$ 342 million EBITDA margin: 36.0% 3% Sales: US$ 403 million Steel Gross margin: US$ 11 million business EBITDA: US$ 14 million EBITDA margin: 3.4% 6% Steel Sal
Slide 45: CAP - Financial evolution
CAP - Financial evolution USD Million 2010 2011 2012 2013 2014 2015 2016 Sales 1.994 2.787 2.470 2.297 1.790 1.475 1.635 EBITDA (L12M) 740 1.184 764 708 381 287 442 EBITDA Margin 37,1% 42,5% 30,9% 30,8% 21,3% 19,4% 27,1% Net Income 590 442 234 184 56 2 60 Cash 981 883 711 309 348 668 786 Gross Finan
Slide 46: CMP - Financial evolution
CMP - Financial evolution USD Million 2010 2011 2012 2013 2014 2015 2016 Sales 1.271 1.770 1.406 1.431 942 662 949 EBITDA (L12M) 782 1.116 720 678 309 182 342 EBITDA Margin 61,5% 63,1% 51,2% 47,4% 32,8% 27,5% 36,0% Net Income 902 700 355 402 113 19 106 Cash 558 501 205 46 50 177 180 Gross Financial
Slide 47: EBITDA contribution per business
EBITDA contribution per business 97% 98% 100% 94% 94% 89% 77% 80% 65% 60% 40% 20% 20% 12% 6% 8% 4% 7% 8% 7% 6% 6% 4% 3% 0% 0% 2010 2011 2012 -2% 2013 2014 2015 December 2016 -3% -2% (L12M) -20% Iron ore Steel Steel Processing Infrastructure 47
Slide 48: CMP – Continuous optimization and flexibility leads to improved results
CMP – Continuous optimization and flexibility leads to improved results in spite of significantly lower prices 120 180 169,37 160 100 97 130,08 135,13 140 80 120 96,77 100 61 US$/ton US$/ton 59 60 56 80 58,47 40 55,41 60 33,3 29 24 40 20 20 13 8,7 20 6,3 1,3 0 0 2011 2012 2013 2014 2015 2016 EBITDA
Slide 49: Business outlook
Business outlook 49
Slide 50: Protecting CAP’s cash flow and liquidity levels
Protecting CAP’s cash flow and liquidity levels 975 1.000 900 Investment rate has followed a slower pace for the last 777 800 two years, reaching US$60 million in 2015 and US$58 in 700 2016, mainly related to maintenance CAPEX US$ million 600 450 Capex for 2017 would reach an amount of approximately
Slide 51: Growth potential in ports
Growth potential in ports 51
Slide 52: Value creation in Las Losas port
Value creation in Las Losas port Las Losas port is a multi purpose port located in Huasco. It has a capacity of 2 million tons per year. Its management has been looking for new businesses to improve the utilization rate, signing contracts with fruit producers to ship their products to USA, and with
Slide 53: Value creation in Punta Totoralillo port
Value creation in Punta Totoralillo port • Punta Totoralillo is an iron ore automized port, which provides services to Cerro Negro Norte mine and the Magnetite plant located around the city of Copiapó. It has a capacity of 12 million tons per year. • A take-or-pay contract with Caserones copper mine
Slide 54: Efforts for growth and value creation – Diversifying to copper
Efforts for growth and value creation – Diversifying to copper City Punta Totoralillo Port Mine Desalination Plant Cerro Negro Norte Plant Copiapó Port Magnetite Plant Las Losas Port Project Guacolda II Port Los Colorados Pellets Plant Vallenar El Algarrobo Alcaparra Cristales Productora Productora
Slide 55: Conclusions
Conclusions Under current market conditions, the protection of the company’s cash flow and liquidity levels continues to be of the utmost importance. However, the stronger financial position achieved by CAP allows for the consideration of new investment opportunities Cost reduction initiatives and p
Slide 56: 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 57: Southern Cone & Andean Opportunities Conference
Southern Cone & Andean Opportunities Conference April 2017 – Santiago, Chile 57
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