Upload
others
View
4
Download
0
Embed Size (px)
Citation preview
0
Southern Copper CorporationDecember, 2015
1
I. Introduction
2
Management Presenter
Presenter
Raul Jacob
Title
Vice President, Finance & CFO
3
This presentation contains certain statements that are neither reported financial results nor other
historical information. These estimates are forward-looking statements within the meaning of the
safe-harbor provisions of the Mexican securities laws. These forward-looking estimates are
subject to risk and uncertainties that could cause actual results to differ materially from the
expressed in the forward-looking statements. Many of these risks and uncertainties relate to
factors that are beyond Grupo Mexico’s ability to control or estimate precisely, such as future
market conditions, commodity prices, the behavior of other market participants and the actions of
governmental regulators. Readers are cautioned not to place undue reliance on these forward-
looking statements, which speak only as of the date of this presentation. Grupo Mexico does not
undertake any obligation to publicly release any revision to these forward-looking estimates to
reflect events or circumstances after the date of this presentation.
Safe Harbor Statement
4
Corporate Structure
100.0% (*)
99.29 % 99.96 %
12.5% (*)
Public Float
SCC Peru Branch Minera Mexico
(*) As of September 30, 2015
AMERICASMINING
CORPORATION
87.5% (*)
Transport12%
Electrical Network
19%
Construction30%
Industrial Machinery
10%
Consumer Products
29%
China44%
Asia Ex China12%
Europe17%
USA9%
Japan5%
Other13%
LME Copper Cash Price vs. Inventories Copper Consumption by End-use
Solid Fundamentals Copper Consumption by Region
Wood Mackenzie 2014
Wood Mackenzie Dec 2014
Copper – The Best Fundamental Story in Commodities
5
► Copper has the best fundamentals in the basic materials space:
― 2015 demand driven by the US strong recovery and the EU
export oriented industries.
― China: Expect 3% demand growth. Automotive and state
electrical infrastructure demand partially offset by weak
housing market.
― Additional production expected 2015-2016, will be offset
by productions costs, restocking in Europe, ore grade decay
and scrap scarcity.
― Current copper prices below estimated (WM) incentive price
for greenfield production of approximately $3.50.
-
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
1,000,000
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
4.50
5.00
3-J
an-1
1
6-M
ay-1
1
9-S
ep-1
1
16
-Jan
-12
21
-May-1
2
21
-Sep
-12
25
-Jan
-13
3-J
un-1
3
4-O
ct-
13
10
-Fe
b-1
4
16
-Jun
-14
17
-Oct-
14
23
-Fe
b-1
5
29
-Jun
-15
30
-Oct-
15
LME COMEX shanghai LME Cash
6
Southern Copper Strengths
►Highest copper reserves of the industry
►Excellent organic growth projects
►Low cost, fully integrated operations
►Experienced management team
►Strong financial performance / investment grade since 2005
►Outstanding dividend history
►Good long-term copper & molybdenum fundamentals
7
II. Overview of Operations
8
Peru
Ilo
Mexico
Copper open pit mines
Underground mines
Smelters and Refineries
Key
Company Overview
Copper Reserves 1: 69.9 mmt
2014 Cash Cost: $ 1.05/lb.
9M 2015 Cash Cost $ 1.06/lb.
2015 Estimates (@ $2.50 x Lb of Cu):
Copper Production: 747 kt (+70 kt)
Sales: $ 5.1 B
EBITDA: $ 2.1 B
41% of Sales
#1 copper company by reserves 2
#5 copper producer 3
#10 copper smelter 3
#8 refinery 3
Source: Company FilingsNotes: 1 Copper contained in reserves based on US$2.90 per pound of copper as of December 31, 20142 Based on available companies reports3 Wood Mackenzie Limited 2014
Santa Barbara
Charcas
Taxco
San Luis Potosi
Santa Eulalia
San Martin
Cuajone
La Caridad
Buenavista
ToquepalaTia Maria
9
Copper Reserves as Reported SCC Highlights
►#1 mine life among copper producers
►#5 world’s largest producer of mined copper
►Highly diversified geographical presence
►Four large-scale open-pit mines
Mine Life
World’s Largest Copper Reserves
105
59
34 34
2521 21 18
0
20
40
60
80
100
120
SCC SCC afterexpansion
AngloAmerican
Codelco Freeport BHPBilliton
Rio Tinto Xstrata
69.9
56.7
36.632.6 31.8
27.0
20.7
13.0 10.7
0
10
20
30
40
50
60
70
80
SC
C
Co
de
lco
Fre
ep
ort
BH
P B
illito
n
An
glo
Am
erica
n
Gle
nco
reX
str
ata
Rio
Tin
to
An
tofa
ga
sta
VA
LE
Co
pp
er
Re
serv
es (
Mt)
Source 10K Annual Rep. 10K 20F Annual Rep. Reserve Rep. Annual Rep. 20F 20F
Period Dec.31, 2014 Dec.31, 2014 Dec.31, 2014 Jun. 30, 2014 Dec.31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014 Dec. 31, 2014
Cu Price $2.90 N/A $2.00 3.65 N/A N/A N/A $3.10 $3.35
Geographic Footprint & Product Diversification
9M 2015 Revenue by Product 9M 2015 Revenue by Market
10
Copper79%
Silver4%
Molybdenum5%
Zinc4%
Acid3%
Other5%
(76 pp refined or
further processed)
Mexico 35%
Europe 11%
United States15%
Asia 22%
Brasil 6%
Chile 2%
Peru 7%
Other 2%
Operating Materials
20%
Fuel15%
Power16%
Labor14%
Maintenance18%
Other17%
11
Low Cost Operations
Cash Cost per Pound of Copper Produced
Net of By-Products
Cost Structure (1)Operating Cash Cost per Pound of Copper
Produced
Low Cost Drivers
Fully integrated low cost operations
World class assets
Significant SX-EW production
Strong by-product credits
Management focus on cost efficiency
(1) 9M 2015
0.71
1.00 1.05
0.98
1.121.06
0.0
0.5
1.0
1.5
2012 2013 2014 1Q15 2Q15 3Q15
(US
$/lb
)
1.751.92 1.88
1.66 1.67 1.64
0.50
1.00
1.50
2.00
2.50
2012 2013 2014 1Q15 2Q15 3Q15
(US
$/lb)
Source: Wood Mackenzie (Metals Costs Benchmarking 2014 Q4), SCCO cash cost per SCCO filings(1) C1 cost estimates from Wood Mackenzie (Metals Costs Benchmarking Q4 2014), except for SCCO where the 2014 historical cash cost figure reported by the company is shown (SCCO 2014 C1 cost estimate from Wood Mackenzie is 71 c/Ib Cu)(2) C1 cost is the direct cash cost of producing paid metal, incorporating mining, processing and offsite realization costs, with an allowance for the by-product credits (3) Maximum, minimum and consensus mean price forecasts by various brokers (Bloomberg) as of March 31, 2015 12
2014 Copper Production Cash Cost by Company (1)
0
50
100
150
200
250
300
0 5,000 10,000 15,000 20,000 25,000 30,000 35,000
SCCO
Rio Tinto
Antofagasta
BHP Glencore
Vale Anglo
C1 C
ash C
ost
Com
posite (
C/lb
Cu)(
2)
Cumulative Production (Paid Mlb Cu)
Freeport-McM
Global Weighted Avg.
154 c/lb
Codelco
13
III. Financial Overview
14
SCC Financial Summary
(US$ MM) 2013 2014 LTM 2015 2015 E
Copper Price (LME) US$ per pound 3.32 3.11 2.69 2.50
Income Statement:
Net Revenues $5,953 $5,788 $5,263 $5,080
EBITDA 2,954 2,728 2,277 2,087
EBITDA Margin 50% 47% 43% 41%
Net Income 1,618 1,333 1,007 763
Dividends paid per share 0.68 0.46 0.42 0.30
Balance Sheet Statement:
Cash & Equivalents $1,673 $364 $504 $1,109
Total Assets 10,996 11,552 12,974 13,152
Total Debt 4,205 4,206 5,951 5,978
Total Liabilities 5,434 5,715 7,422 7,337
Total Shareholders' Equity 5,534 5,804 5,517 5,781
Cash Flow Statement:
Capital Expenditures $1,703 $1,530 $1,094 $1,310
Free Cash Flow 1
154 (174) (212) (240)
Dividends paid to common shareholders 574 381 338 240
Total Debt / EBITDA 1.4x 1.5x 2.6x 2.9x
1 Free Cash Flow defined as net cash from operating activities less capital expenditures.
Top Tier Margins and Conservative Leverage for Increased Financial Flexibility
2015 Total Debt / EBITDA (x)9M 2015 EBITDA Margin (%)
15
Source: Company Reports1 9M 20152 1H 2015
Amortization Schedule
Source: Company Reports1 9M 20152 1H 2015
Solid Financial Performance
23%
24%
28%
31%
40%
43%
49%
Freeport
Anglo
Vale
Antofagasta
Rio Tinto
SCC
BHP
1
1
2
2
2
1
2
3.80
2.89
2.76
2.20
1.74
1.46
1.43
Vale
Anglo
SCC
Antofagasta
Rio Tinto
Freeport
BHP
2
1
2
1
2
2
1
$1,500
$1,200
$1,100
$1,000
$51
$500
$300
$400
2045
2042
2040
2035
2028
2025
2022
2020
16Source: SCC
Toquepala Concentrator Expansion
4Q17 - $1.2B - 100K Tons Cu , 3.1K
Tons Mo
2013-14 2015-18Buenavista Molybdenum Plant 3Q13 -
$38M - 2K Tons Mo
Buenavista:
- Concentrator Plant 4Q15 - $1.4B -
188K Tons Cu, 2.6K Tons Mo
- Mine equipment $505M
Los Chancas. - $1.2B - 100K
Tons Cu, 7.5K Tons Mo
Los Chalchihuites 2016 -
$140M, 26K Tons Cu
Buenavista Zinc Conc. 2016 -
$332M 16K Tons Cu - 55K
Tons Zn
Investment Program to SignificantlyIncrease Production
Board approved Other projects
Buenavista SX/EW III 4Q14 - $525M
120K Tons Cu
Cuajone: Variable Cut-off Grade + HPGR
2H13 - $158M - 22K Tons Cu,
0.7K Tons Mo
2014-2018 Capex Program Overview (MM) 2014-2018 Copper Production Forecast (‘000 MT Cu)
Tia Maria SX/EW 2Q18 – $1.4B - 120K
Tons Cu
El Arco Conc & SX/EW 2017 -
$2.6B – 190K Tons Cu, 105K
Oz Au
Empalme Cu Smelter 2017 -
$812M – 350K Tons Cu Cont.
Copper Refinery 2017 - $318M
350K Tons Cu Cont.
Zinc Refinery - $600M – 120K
Tons Zn
Cuajone Concentrator
Expansion - $500M – 50K
Tons Cu, 0.7 Tons Mo
Ilo Smelter & Refinery
Expansion
El Pilar 1Q17 - $307M - 20K Tons Cu ,
1,530 1,400
2,300
1,200
640
-
400
800
1,200
1,600
2,000
2,400
2014 2015 2016 2017 2018
677 747
909
1,020
1,160
0
200
400
600
800
1,000
1,200
2014 2015 2016 2017 2018
Initial Capex % of Total Incremental Production Capital Intensity
Type (US$MM) Capex Av. Cu Eq. (kt/a) (US$/tpa Av. Cu Eq.)
Brownfield Projects
Cuajone variable cut-off grade + HPGR Expansion (X) 158.0 2.5% 22.0 7,182
Toquepala concentrator expansion Expansion (N) 1,253.2 19.9% 100.0 12,532
Buenavista SXEW III Expansion (N) 1,363.5 21.6% 120.0 11,363
Buenavista concentrator expansion Expansion (N) 1,785.4 28.3% 188.0 9,497
Pilares Extension 189.5 3.0% 40.0 4,738
Total / Weighted Average Intensity 4,749.6 75.3% 470.0 10,105
Greenfield Projects
Tia Maria SXEW Project Probable 1,379.2 21.9% 120.0 11,493
Angangueo Possible 174.7 2.8% 10.4 16,798
Total / Weighted Average Intensity 1,553.9 24.7% 130.4 11,916
Key Differentiators to Achieve Lower Capital Intensity
• Use of less capital intensive and environmentally friendly SX/EWtechnology for 45% of production growth
• Significant economies of scale in infrastructure for 77% of production increase coming from brownfield expansions
• Reduced mining preparation cost due to low pre stripping for Tia Maria and Buenavista projects
• Experienced project development team focused on capital efficiency
Source: Wood Mackenzie (Global Copper Mine Supply Summary, May 2014), SCCO filings and presentations
Project Capital Intensity at SCCO Projects
Industry-Wide Capital Intensity Comparison vs. SCCO Projects 2010-2014 Capex Evolution
US$MMWeighted Avg. Project Capital Intensity of Existing Projects
US$ 000 per tonne of Cu Equivalent Annual Incremental Production
409
613
1,052
1,703
1,535
0
400
800
1,200
1,600
2,000
'10 '11 '12 '13 '14
4.9
9.9 11.7
16.5
10.1
17.7
21.6
11.9
0
5
10
15
20
25
Restarts Extensions ofExisting Mine
Life
Expansionsto Existing
Mine/Plant (X)
ExpansionsNew Process
Plant (N)
SCCOBrownfield
Probable Possible SCCOGreenfield
Brownfield - Industry Greenfield - Industry
SCCO Project Pipeline
17
Best-in-class Mining Projects Reaching Completion Providing Competitive Cash Costs and Increased Production Levels
$1,814
$2,865
$3,910 $3,773
$2,945$2,728
$2,087
48.6% 56.0% 57.0% 57.0% 49.0% 47.0%41.1%
2009 2010 2011 2012 2013 2014 2015 E
SCC is the Premier Copper Play
• World class assets in investment grade countries
• #1 in reserves of any company with various exploration prospects
- Increasing copper production
• Capacity to deliver projects through flexible capital structure and significant cash
generation capability. Investments focused on cost competitiveness
• Fully integrated low cost operations
• Outstanding dividend history
• Experienced management with proven track record
18
(in US$ millions)
SCC EBITDA and % Margin
SCC’s Major Strengths
Cu price $2.34 $3.61 $3.32 $2.50$3.42 $4.00 $3.11