Southern Copper Corporation May, 2015

Transcription

1 Southern Copper Corporation May,

2 I. Introduction 1

3 Management Presenter Presenter Raul Jacob Title Vice President, Finance & CFO 2

4 Safe Harbor Statement 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 forwardlooking 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. 3

5 Corporate Structure 100.0% (*) AMERICAS MINING CORPORATION 86.0% (*) Public Float 14.0% (*) % % SCC Peru Branch Minera Mexico (*) As of March 31,

6 3-Jan Feb Mar May Jun-11 9-Aug Sep-11 3-Nov Dec-11 1-Feb Mar-12 Copper The Best Fundamental Story in Commodities 30-Apr Jun Jul-12 6-Sep Oct-12 3-Dec Jan Feb Apr May Jul Aug-13 7-Oct Nov-13 3-Jan Feb-14 1-Apr May Jun Aug Sep-14 5-Nov Dec-14 3-Feb Mar-15 1-May-15 Solid Fundamentals Copper Consumption by Region 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 4% demand growth. Automotive and infrastructure demand partially offset by weak housing market. USA 9% Japan 5% Other 13% China 44% Additional production expected , willbe partially offset by restocking in Europe, ore grade decay and scrap scarcity. Current copper prices below estimated (WM) incentive price for greenfield production of approximately $3.50. Wood Mackenzie Dec 2014 Europe 17% Asia Ex China 12% LME Copper Cash Price vs. Inventories Copper Consumption by End-use ,000, , ,000 Consumer Products 29% Transport 12% , , ,000 Electrical Network 19% , , , ,000 - Industrial Machinery 10% LME COMEX shanghai LME Cash Wood Mackenzie 2014 Construction 30% 5

7 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 Outstanding dividend history Good long-term copper & molybdenum fundamentals 6

8 II. Overview of Operations 7

9 Company Overview Copper Reserves 1 : 69.9 mmt Mexico 2014 Cash Cost: $ 1.05/lb. 1Q 2015 Cash Cost $ 0.98/lb Estimates (@ $2.75 x Lb of Cu): Copper Production: Sales: EBITDA: 782 kt (+106 kt) $ 5.7 B $ 2.5 B 44% of Sales #1 copper company by reserves 2 #5 copper producer 3 #10 copper smelter 3 #8 refinery 3 Source: Company Filings Notes: 1 Copper contained in reserves based on US$2.90 per pound of copper as of December 31, Based on available companies reports 3 Wood Mackenzie Limited 2014 Buenavista La Caridad Santa Eulalia Santa Barbara San Martin Charcas San Luis Potosi Taxco Peru Key Copper open pit mines Underground mines Smelters and Refineries Cuajone Tia Maria Ilo Toquepala 8

10 SCC Codelco Freeport BHP Billiton Anglo American Glencore Xstrata Rio Tinto Antofagasta VALE Copper Reserves (Mt) World s Largest Copper Reserves 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 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 $ N/A N/A N/A $3.10 $ SCC SCC after Anglo expansion American Codelco Freeport BHP Billiton Rio Tinto Xstrata 9

11 Geographic Footprint & Product Diversification 1Q 2015 Revenue by Product 1Q 2015 Revenue by Market Molybdenum 7% Silver 4% Zinc 5% Acid 3% Other 4% Peru 6% Chile 3% Brasil 6% Other 2% Mexico 37% Copper 77% (76 pp refined or further processed) Asia 18% Europe 12% United States 16% 10

12 (US$/lb) (US$/lb) Low Cost Operations Cash Cost per Pound of Copper Produced Net of By-Products Low Cost Drivers 1.5 Fully integrated low cost operations World class assets Significant SX-EW production 0.5 Strong by-product credits 0.0 Management focus on cost efficiency Q15 Operating Cash Cost per Pound of Copper Produced Cost Structure (1) Other 16% Operating Materials 19% Maintenance 18% Fuel 15% Q15 (1) 1Q 2015 Labor 14% Power 18% 11

13 2014 Copper Production Cash Cost by Company (1) C1 Cash Cost Composite (C/lb Cu) (2) Freeport- McM Rio Tinto SCCO Antofagasta BHP Codelco Glencore 0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 Vale Cumulative Production (Paid Mlb Cu) Anglo Global Weighted Avg. 154 c/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,

14 III. Financial Overview 13

15 SCC Financial Summary (US$ MM) LTM E Copper Price (LME) US$ per pound Income Statement: Net Revenues $5,953 $5,788 $5,708 $5,700 EBITDA 2,954 2,728 2,614 2,540 EBITDA Margin 50% 47% 46% 45% Net Income 1,618 1,333 1, Dividends paid per share TBD Balance Sheet Statement: Cash & Equivalents $1,673 $364 $192 $1,300 Total Assets 10,996 11,552 11,248 13,768 Total Debt 1 4,205 4,206 4,206 6,000 Total Liabilities 5,434 5,715 5,578 7,404 Total Shareholders' Equity 5,534 5,804 5,636 6,330 Cash Flow Statement: Capital Expenditures $1,703 $1,530 $1,439 $2,150 Free Cash Flow (174) (209) (780) Dividends paid to common shareholders TBD Total Debt / EBITDA 1.4x 1.5x 1.6x 2.4x 1 Includes short-term and long-term debt. Does not include recent $2.0 B Notes. 2 Free Cash Flow defined as net cash from operating activities less capital expenditures. 14

16 Solid Financial Performance Top Tier Margins and Conservative Leverage for Increased Financial Flexibility 1Q 2015 EBITDA Margin (%) 2015 Total Debt / EBITDA (x) Amortization Schedule 2 BHP 48% 2 Antofagasta $200 1 SCC 44% 2 BHP $400 2 Antofagasta 42% 2 Rio Tinto $300 $500 2 Rio Tinto 39% 1 Freeport $51 1 Freeport 27% Anglo $1,000 1 Vale 26% 1 SCC $1, $1,200 2 Anglo 25% 1 Vale $1,500 Source: Company Reports 1 1Q Source: Company Reports 1 1Q

17 Investment Program to Significantly Increase Production Board approved Other projects Buenavista Molybdenum Plant 3Q13 - $38M - 2K Tons Mo Cuajone: Variable Cut-off Grade + HPGR 2H13 - $158M - 22K Tons Cu, 0.7K Tons Mo Buenavista SX/EW III 4Q14 - $525M 120K Tons Cu Buenavista: - Concentrator Plant 3Q15 - $1.4B - 188K Tons Cu, 2.6K Tons Mo - Mine equipment $505M Toquepala Concentrator Expansion 1Q17 - $1.2B - 100K Tons Cu, 3.1K Tons Mo Tia Maria SX/EW 1Q17 $1.4B - 120K Tons Cu Buenavista Zinc Conc $332M 16K Tons Cu - 55K Tons Zn Los Chalchihuites $140M, 26K Tons Cu El Arco Conc & SX/EW $2.6B 190K Tons Cu, 105K Oz Au Empalme Cu Smelter $812M 350K Tons Cu Cont. Copper Refinery $318M 350K Tons Cu Cont. Zinc Refinery - $600M 120K Tons Zn Los Chancas. - $1.2B - 100K Tons Cu, 7.5K Tons Mo Cuajone Concentrator Expansion - $500M 50K Tons Cu, 0.7 Tons Mo Ilo Smelter & Refinery Expansion Capex Program Overview (MM) Copper Production Forecast ( 000 MT Cu) 2,400 2,000 1,600 1,530 2,150 1,740 1,200 1, ,034 1,165 1, Source: SCC

18 Best-in-class Mining Projects Reaching Completion Providing Competitive Cash Costs and Increased Production Levels SCCO Project Pipeline Project Capital Intensity at SCCO Projects 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) % ,182 Toquepala concentrator expansion Expansion (N) 1, % ,532 Buenavista SXEW III Expansion (N) 1, % ,363 Buenavista concentrator expansion Expansion (N) 1, % ,497 Pilares Extension % ,738 Total / Weighted Average Intensity 4, % ,105 Greenfield Projects Tia Maria SXEW Project Probable 1, % ,493 Angangueo Possible % ,798 Total / Weighted Average Intensity 1, % ,916 Key Differentiators to Achieve Lower Capital Intensity Use of less capital intensive and environmentally friendly SX/EW technology 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 Industry-Wide Capital Intensity Comparison vs. SCCO Projects Capex Evolution Weighted Avg. Project Capital Intensity of Existing Projects US$MM US$ 000 per tonne of Cu Equivalent Annual Incremental Production ,000 1,600 1,703 1, Restarts Brownfield - Industry 9.9 Extensions of Existing Mine Life 11.7 Expansions to Existing Mine/Plant (X) Greenfield - Industry Expansions New Process Plant (N) 10.1 SCCO Brownfield 11.9 Probable Possible SCCO Greenfield 1, , '10 '11 '12 '13 '14 Source: Wood Mackenzie (Global Copper Mine Supply Summary, May 2014), SCCO filings and presentations 17

19 SCC s Major Strengths 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 Fully integrated low cost operations - Strategic investments focused on cost competitiveness Outstanding dividend history Experienced management with proven track record (in US$ millions) SCC EBITDA and % Margin $3,910 $3,773 $1,814 $2,865 $2,945 $2,728 $2, % 56.0% 57.0% 57.0% 49.0% 47.0% 44.8% E Cu price $2.34 $3.42 $4.00 $3.61 $3.32 $3.11 $