Cap S.a. · BCS:CAP
Cap — BTG Pactual IV Andean CEO Conference 2015
57 slides from Cap's conference presentation, Nov 13, 2015
Slide 1: BTG Pactual IV Andean CEO Conference – Nov 2015
BTG Pactual IV Andean CEO Conference – Nov 2015 Raúl Gamonal CFO – Javiera Mercado IR
Slide 2: Ownership structure
Ownership structure Mitsubishi Pension Invercap Other Corporation Funds 19,3% 2,0% 31,3% 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 Infrastructure Iron O
Slide 3: Iron ore mining
Iron ore mining 3
Slide 4: Mining sites
Mining sites Punta Totoralillo Port El Laco 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 5
Slide 6: Magnetite plant
Magnetite plant 6
Slide 7: Los Colorados mine
Los Colorados mine
Slide 8: Pellets Plant
Pellets Plant
Slide 9: El Romeral mine
El Romeral Iron ore mine 9
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%) 12
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 9.595 Jan – Sep 2015 2010 2011 2012 2013 2014 2015 (E) Shipments by markets and products as of September 2015 Lumps, 1,1% Korea Others Other, 0,8% Self - fluxing 6% 1% Sinter feed, pellets and Bahrein 11,0% 8%
Slide 14: Main clients
Main clients Deutsche Bank* Posco Glencore* Koch Cargill* JFE Steel Corporation Bahrain Steel Qingdao Iron and Steel Kobelco Wuhu Fuxin Iron & Steel Nisshin Steel RGL Group* HBIS Group Xinyu Iron and Steel Rizhao Iron and Steel Yaochang Group Fangda Iron and Steel CAP Acero Hangzhou Iron and Steel J
Slide 15: Steel production
Steel production 15
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 10 8 7 2 5 5 -10 -7 1 2 4 0 3 -9 -12 -3 -3 -6 -5 -4 -10 -7 -17 -9 Impairment -20 Net income -14 -22 EBITDA -30 -31 -44 -40 -50 -60 -56 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 • Due to the reorganization and adjust
Slide 18: Steel processing
Steel processing 18
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. 99.99% 99.99% 99.99% 100% Cintac S.A. 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 21
Slide 22: Infrastructure – Power transmission line
Infrastructure Power transmission line 22
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 September 2015, the infrastructure business has contributed to the holding company as follows: US$ million Jan – Sep 2014 Jan – Sep 2015 EB
Slide 24: Global industry update
Global industry update 24
Slide 25: Emerging markets performance and China economic influence worldwide
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 26: 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 26
Slide 27: Iron ore price evolution
Iron ore price evolution Platts IODEX and 1% diff vs Platts IO fines 65% ($/dmt) 185,00 Platts IO fines 65% Fe IODEX CFR CHINA 62% Fe plus 3* Mid Range Diff 165,00 145,00 125,00 105,00 85,00 65,00 45,00 Dec-13 Mar-13 Dec-14 Apr-13 May-13 Aug-13 Mar-14 Apr-14 May-14 Aug-14 Mar-15 Apr-15 May-15 Aug-15
Slide 28: Iron ore – production cuts in 2014
Iron ore – production cuts of 170 Mtpy in 2014 Cliffs Feb – 14, US$ 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
Slide 29: 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$/dmt) China Various privately owned 100 Price related closures 15-mar USA US Steel Keetac pellet plant 5.5 57.0 Price / demand rela
Slide 30: Iron ore – trade balance and price forecast
Iron ore – trade balance and price forecast 30 Source: Wood Mackenzie, October 2015
Slide 31: Iron ore – short term price forecast consensus
Iron ore – short term price forecast consensus US$/dmt (62% Fe) 2016: Institution Report date Q4-15 Q1-16 Q2-16 Q3-16 Q4-16 Commerzbank AG 19-Oct-15 56 60 63 64 66 Westpac Banking Corp 16-Oct-15 50 51 56 51 47 Itau Unibanco Holding SA 1-Oct-15 52 50 50 50 50 Prestige Economics LLC 28-Sep-15 57 61 65
Slide 32: 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 32
Slide 33: 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 33 Source: Wood Mackenzie, July 2015
Slide 34: CMP produces high quality products
CMP produces high quality products US$/t Average price (US$/t) – 1H15 85 80 75 70 65 60 55 50 Peru Australia S. Africa Iran Brazil Mauritania 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 35: 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$/t) 57,4 49,2 35
Slide 36: International iron ore price adjustment and CMP's cost reduction
International iron ore price adjustment and CMP’s cost reduction Premium for higher grades ... but most concentrate producers are struggling … Source: Platts, August 2015 1Q 2015 1H 2015 CMP’s cash cost (US$/t) 37,8 36,4 36
Slide 37: CMP cost and expenses reduction efforts
CMP cost and expenses reduction efforts 130 120 110 104,2 100 90 83,1 80 US$/t 70 60 58,5 51,8 3,3 52,4 50 7,6 2,4 40 1,3 0,0 1,4 1,1 2,6 34,3 30 1,5 20 Cash cost as Candelaria Outsourcing Raw Materials Energy Personnel Oil Exchange Various Cash cost as of Sep 2014 Tailings materials and GE rate (In
Slide 38: CMP cash cost projected by operation (2H15)
CMP cash cost projected by operation (2H15) Cash Cost (US$/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 38
Slide 39: Freight rates Brazil - China
US$/dmt 10 15 20 25 30 0 5 02/01/2014 23/01/2014 13/02/2014 06/03/2014 Source: Platts, November 2015 27/03/2014 17/04/2014 08/05/2014 29/05/2014 19/06/2014 10/07/2014 31/07/2014 21/08/2014 11/09/2014 02/10/2014 23/10/2014 13/11/2014 Freight rates Brazil - China 04/12/2014 25/12/2014 15/01/2015 05/02
Slide 40: Steel price evolution
US$ per ton US$per ton 00 50 100 150 200 250 300 350 00 100 200 300 400 500 600 Jan 2007 Jan 2007 May 2007 May 2007 Sep 2007 Sep 2007 Source: CRUspi, November 2015 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 Jan 2010 May 2010 M
Slide 41: Financial performance
Financial performance 41
Slide 42: CAP's financial highlights as of September 2015
CAP’s financial highlights as of September 2015 Jan-Sep USD Million 2010 2011 2012 2013 2014 2015 Sales 1.994 2.787 2.470 2.297 1.790 1.079 EBITDA (L12M) 740 1.184 764 708 381 286 EBITDA Margin 37,1% 42,5% 30,9% 30,8% 21,3% 20,1% Net Income 590 442 234 184 56 4 Cash 981 883 711 309 348 397 Gross Fin
Slide 43: CMP's financial highlights as of September 2015
CMP’s financial highlights as of September 2015 Jan-Sep USD Million 2010 2011 2012 2013 2014 2015 Sales 1.271 1.770 1.406 1.431 942 459 EBITDA (L12M) 782 1116 720 678 309 206 EBITDA Margin 61,5% 63,1% 51,2% 47,4% 32,8% 29,9% Net Income 902 700 355 402 113 17 Cash 558 501 205 46 50 53 Gross Financial
Slide 44: EBITDA contribution by business (L12M)
EBITDA contribution by business (L12M) 100% 97% 98% 94% 94% 89% 80% 77% 69% 60% 40% 20% 18% 15% 6% 8% 7% 9% 8% 5% 6% 4% 0% 4% 0% 2009 2010 2011 2012 2013 2014 As of September 2015 -3% -2% -2% -20% Iron Steel Steel Processing Infrastructure 44
Slide 45: 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 46: 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 46
Slide 47: Business outlook
Business outlook 47
Slide 48: 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 As of September 2015 Others
Slide 49: 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 50: Protecting CAP's cash flow and liquidity levels
Protecting CAP’s cash flow and liquidity levels 1.200 975 1.000 There are no relevant investments planned for 777 the short-term, therefore pressure on cash 800 US$ million disbursements has been diminished. 600 450 Investment rate has followed a slower pace, of 400 282 around US$20 million per quar
Slide 51: CAPEX limitation
CAPEX limitation 140 120 115 102 100 87 95 Growth US$ 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 52: 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 53: 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 54: Efforts for growth and value creation – Diversifying to copper
Efforts for growth and value creation – Diversifying to copper El Laco Punta Totoralillo Port Cerro Negro Norte Desalination Plant Productora Copiapó • Pre feasibility study underway Magnetite Plant Alice • Broadening scope together with Productora Los Colorados Guacolda II Port Pajonales/Frontera V
Slide 55: 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 CAP Steel Efficiency plans have resulted in significant
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: BTG Pactual IV Andean CEO Conference – Nov 2015
BTG Pactual IV Andean CEO Conference – Nov 2015 Raúl Gamonal CFO – Javiera Mercado IR