Cap S.a. · BCS:CAP
Cap — Investor Presentation (March 2014)
47 slides from Cap's investor presentation, March 2014
Slide 1: CAP Group Update
CAP GROUP UPDATE Fernando Reitich President & CEO March, 2014
Slide 2: Agenda
Global industry update Financial performance Future prospects
Slide 3: Ownership Structure
Ownership Structure Source: CAP, March. 2014 2
Slide 4: Integrated Operations
Integrated Operations Mining Steel Steel Processing • Production capacity: • Production: 0,7 Mt/y • Production 15 Mt/y • Nominal capacity: 1.45 capacity:400 kt/y • Only large-scale iron Mt/y • Leading steel ore producer in Chile • Domestic market processor in Chile • On track to reach 18 • Focus on
Slide 5: Los Colorados mine
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Slide 6: Mining sites
Mining sites El Laco Punta Totoralillo Port CAP Mining has three Cerro Negro Norte different areas of operation in Desalination Plant Copiapó the north of Chile, Magnetite Plant located around the cities of: • La Serena • Vallenar • Copiapó Los Colorados Guacolda II Port Cities Vallenar Pellets Plan
Slide 7: Iron ore mining operations
Iron ore mining operations Elqui Valley / La Serena El Romeral Mine / 4.0 million tons Pellet Feed, Lumps and Fines Infrastructure: Guayacan Port (165.000 dwt) and Railroad (38 km) Huasco Valley / Vallenar Los Colorados Mine - Pellet Plant / 7.2 million tons Pellets, Pellet Feed, Lumps and
Slide 8: Mining products
Mining products BF and DR Pellets (Fe 65% - 66%) Lumps (Fe 62%) Pellet Feed (Fe 67% - 68%) Fines (Fe 62%) 7
Slide 9: Mining Property
Mining Property Ranking 2012 Hectares in exploration concessions - Chile N° Company Hectares % 1 BHP Chile Inc. 2.219.500 12,38 2 Codelco 969.400 5,41 3 Antofagasta Minerals S.A. 736.800 4,11 4 Teck Exploraciones Mineras Chile Ltda. 728.600 4,07 5 CAP 609.400 3,4 Ranking 2012 Hectares in exploitatio
Slide 10: 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 6.350 million tons in 2013 Total Mineral Resources Mine / Deposit Reserves (2) (1) Mine Location Ton Grade (% Fe) Ton Grade (% F
Slide 11: Mining shipments and markets
Mining shipments and markets Shipments 14000,0 12.246 12.086 12000,0 11.469 10.145 10.213 10000,0 8000,0 Th. MT 7.251 6000,0 4000,0 2000,0 ,0 2008 2009 2010 2011 2012 2013 Shipments by markets and products (CY 2013) Self - fluxing DR H&L Lumps, 8% pellets, 14% Indonesia, pellets, 4% Sinter feed, 8%
Slide 12: Cash cost curve (2014)
Cash cost curve (2014) Global production cost • CAP Mining is a low cost producer of high grade magnetite concentrate • Mine depletion will lead to higher CAP demand for high grade pellet feed • Environmental and economic constraints support the increased need for magnetite concentrate Pellet feed g
Slide 13: Steel
Slide 14: Steel - Location
Steel - Location • Strategically located. Good logistics for raw materials, water and energy. • Pier available more than 95% of the year. • Part of an industrial area, near to universities and technical educational centers. San Vicente Bay. Talcahuano - Chile Huachipato Steel Mill 13
Slide 15: Steel focus on long products only
Steel focus on long products only • Worldwide low capacity utilization has destroyed steel producers margins in the last years • During 2013 the company shifted focus to long products only, aiming to exploit its competitive advantages • HRC: Negative margins due to oversupplied market and subsidized
Slide 16: Steel products and shipments
Steel products and shipments Shipments and prices 2.500 1.117 1.200 883 1.000 2.000 799 811 699 737 800 1.500 US$/Ton Th. tons 1.161 1.124 600 1.113 922 859 1.000 671 (1) 400 500 200 0 0 2008 2009 2010 2011 2012 2013 Shipments Prices (1) 2010 production was affected by an earthquake Product portfoli
Slide 17: Steel – Key considerations
Steel – Key considerations Strong market position based on high quality products and good logistics that over perform foreign competitors Independent player in Latin America Market leadership Undisputed leadership in Chilean market, 49% share on long products target market in 2013 Iron ore a
Slide 18: Steel processing
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Slide 19: Steel Processing
Steel Processing o Main flat steel importer of the Pacific coast of South America o Creates value-added solutions for the construction, industry and infrastructure sectors in Chile, Peru and Argentina o Chile is LATAM´s most intensive user of steel in construction Shipments and prices 1.300 600 1.25
Slide 20: Steel Processing – Key considerations
Steel Processing – Key considerations • CAP Steel Processing is the largest processor and seller of flat steel products in the Market Pacific coast of South America Leader • Revenues of MUS$ 365 per year, with a market share of 30%. • World class plants and equipment • From a manufacturer of steel t
Slide 21: Agenda
Company overview Financial performance Future prospects Company overview [Siobal industry update [Finencialperformence Future prospects Final remars 20
Slide 22: Short-term growth in China
Short-term growth in China o GDP growth reached 7.7% in year 2013 o Growth lead by domestic demand should continue, even though fixed assets investment slows. o This divergent development will continue in 2014 Expect 7.5% YoY GDP growth in 2014 21
Slide 23: Demands of the Chinese urbanization and development process
Demands of the chinese urbanization and development process 22
Slide 24: Iron ore quality evolution
Iron ore quality evolution • Crude iron ore grade is dropping • Mine depletion will lead to higher demand for high grade concentrates Production from key CISA Chinese iron ore producers (Mt) Magnetite concentrate 70 68 Average grade of hematite fines 66 (Pilbara, Australia) 64 62 60 58 56 1998 2000
Slide 25: Preference for higher quality iron ore
Preference for higher quality iron ore Relative price performance of ores of different grades SOURCE: Macquarie, commodities research 24
Slide 26: Global steel demand growth
Global steel demand growth o 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 27: Global steel capacity utilization
Global steel capacity utilization o Nevertheless, world capacity utilization has been below 80% for the last 5 years, thereby practically destroying the margins of the steel production industry o Most of the excess capacity is concentrated in China. Current efforts to diminish this excess capacity h
Slide 28: Steel market in Chile
Steel – Key Steel considerations market in Chile 2011 steel per capita consumption (kg per capita) Steel consumption per capita 700 1.074 Finished steel consumption per capita (Kg) Japan 600 Singapore 500 400 580 Greece Australia 300 Poland 425 France Iceland Chile ('25) 295 200 New Zealand Mexico 1
Slide 29: Agenda
Agenda 28
Slide 30: CAP - Financial evolution
CAP - Financial evolution USD Million 2008 2009 2010 2011 2012 2013 Sales 1.972 1.375 1.994 2.787 2.470 2.297 EBITDA 534 128 740 1.184 764 708 EBITDA Margin 27,1% 9,3% 37,1% 42,5% 30,9% 30,8% Net Income 291 25 590 442 234 184(1) Cash 379 393 981 883 711 309 Gross Financial debt 880 907 1.001 628 719
Slide 31: EBITDA contribution by business
EBITDA contribution by business 100% 97% 98% 94% 94% 80% 77% 60% 40% 18% 20% 6% 6% 8% 5% 4% 0% 0% 2009 2010 2011 2012 2013 -3% -2% -2% -20% Iron Steel Steel Processing (1) EBITDA: Gross Margin – S&AE + Depreciation and Amortization + Dividends received in cash, over the last twelve months 30
Slide 32: Agenda
Global industry update Financial performance 31
Slide 33: Mining – Future Prospects
Mining – Future Prospects El Laco Totoralillo Port Project Production Est. Capex CNN Mt MUS$ Desalination Plant Copiapó Magnetite Plant Magnetite Plant 1 Pf 110 Expansion 6,5 Pf 1.700 Tofo 13,5 Pf 2.900 Guacolda Port Los Colorados Vallenar Pellets Plant 6 Pf 1.600 Alcaparra Alcaparra Algarrobo 135 K
Slide 34: Mining – Future Prospects - Magnetite Plant expansion
Mining – Future Prospects - Magnetite Plant expansion o The project consists in designing and building a third grinding and concentration line at the existing magnetite plant, to increase production in 1 Mt/y. o Some of the expected benefits are: • Increased volumes of preconcentrate from Los Colora
Slide 35: Mining – Future Prospects - Tofo
Mining – Future Prospects - Tofo 297 297 500 298 500 000 298 000 E E E E Investment (E) : 1,700 – 2,900 MUS$ N 6765000 • Greenfield N 6764500 Production: 6.5-13,5 Mt/y of pellet feed N 6764000 SIMBOLOGY S Waste 10≤Fe%<15 N 15≤Fe%<26 Stage: Conceptual engineering 6763500 26≤Fe%<45 NIVEL 1110 Fe% ≥ 45
Slide 36: Mining – Future Prospects - Alcaparra Iron/Copper
Mining – Future Prospects - Alcaparra Iron/Copper Iron ore body Investment (E): 1,600 + 300 MUS$ Simbology Production: 6 Mt/y of pellet feed Topography 135 kt/y of copper concentrate Drilling Fe% ≥ 45 Stage: Advanced exploration 25 ≥ Fe% < 45 15 ≥ Fe% < 25 Exploratory metallurgy 10 ≥ Fe% < 15 Núcleo
Slide 37: Mining – Future Prospects – Colorados Expansion
Mining – Future Prospects – Colorados Expansion Investment : 500 MUS$ • Brownfield Production: 4 Mt/y of fines Stage: Basic engineering Resources Volume Fe Actual final pit LEYENDA 2012 [Mt] [%] Topografía Nov-13 SIMBOLOGY Pit Final 2008 Measured 694 31,5 Actual level Pit Final 2013 Final pit Indica
Slide 38: Future prospects - Infrastructure – Desalination Plant
Future prospects - Infrastructure – Desalination Plant 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
Slide 39: Future prospects - Infrastructure - Desalination Plant
Future prospects - Infrastructure - Desalination Plant • Desalination Plant and CNN Aqueduct is operating from Feb 2014 and will provide 120 l/s to CNN • Tierra Amarilla Aqueduct will be completed in April 2014 and will transport: • 80 l/s to CMP s magnetite plant • 170 l/s to Caserones mine • CAP(5
Slide 40: Future prospects - Infrastructure - Ports
Future prospects - Infrastructure - Ports CAP Ports Punta Totoralillo: Guayacán: • 29 km north of Caldera • Herradura bay, Coquimbo • Iron ore shipping • Iron ore shipping • 200,000 dwt • 165,000 dwt Guacolda II: Huachipato: • Located in Huasco City • Talcahuano bay • Iron ore shipping • Unloading c
Slide 41: Infrastructure – Providing services to third parties
Future prospects - Infrastructure – Providing 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 • EBITDA generation: 20 MUS$ in 2013 and 22 MUS$ in 2014 • With the
Slide 42: Future prospects - Infrastructure – Solar Energy
Future prospects - Infrastructure – 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 41
Slide 43: Future prospects – Infrastructure - Solar Energy
Future prospects – Infrastructure - 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 • Financial hedge • Compliance with NCRE law • Connected to a 142 km long 220 kv transmission line owned by
Slide 44: Agenda
Agenda 43
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; achievement of overcapacity; … • CAP Steel: op
Slide 46: Final remarks
Final remarks • 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 • Global environmental and economic constraints support the growing need for CAP´s magnetite concentrate
Slide 47: CAP Group Update
CAP GROUP UPDATE Fernando Reitich President & CEO March, 2014