Volcan CompaĂąĂa Minera S.A.A.
Corporate Presentation 1
Disclaimer Some statements contained in this presentation or in documents referring to this presentation may contain inaccuracies. No reliance for any purpose whatsoever may be placed on the information or opinions contained in this presentation or on the completeness of this presentation. Volcan CompaĂąĂa Minera S.A.A. (the Company), its shareholders and its officers make no representation or warranty as to the accuracy or completeness of the information contained in this presentation. Any person who has access to this presentation shall need to evaluate independently all information provided in it and shall not rely on it. Nothing in this presentation is to be construed as a profit forecast. Some statements contained in this presentation or in documents referring to this presentation may include forward-looking statements. Actual results may differ from those expressed in such statements, depending on a variety of factors. Past performance of the Company or its shares cannot be relied on as a guide to future performance. Any forward-looking information contained in this presentation was prepared on the basis of a number of assumptions that may prove to be incorrect. Actual results may vary accordingly. This presentation does not constitute, form part of or contain any invitation or offer to any person to carry out any investment or underwrite, subscribe or otherwise acquire or dispose of any shares in the Company or its subsidiaries; or advise persons to do so in any jurisdiction or under any applicable law. No part of this document shall form the basis of or be relied upon in any connection with or act as an inducement to enter into any contract or commitment. No liability whatsoever is accepted by the Company, its shareholders, its officers or any related parties for any loss howsoever arising from any use of this presentation or its contents in connection therewith. To the maximum extent permitted by law and except in case of gross negligence or willful misconduct, the Company and its respective shareholders, officers, employees, agents, contractors or advisers are not liable to any person for any loss or damage they suffer, incur or are liable for as a result of using or relying on this presentation. 2
Diversified operational base and logistical network Map of operations
Key highlights
•
3 mining units –
Cerro de Pasco, Chungar and Yauli
•
8 mines – Largest mine accounts for 19% of 2012 production
•
6 concentrate plants
•
Logistical flexibility – Railroad – Multiple road alternatives
Revenues – 2012
By Metal
By Operation
Au 1%
Chungar 27% Zn 37%
Cerro de Pasco 19%
Ag 50%
Cu 3%
Pb 9%
Total: US$1,161 MM 3
Source: Company filings
Yauli 54%
Volcan is one of the main global producers of Zinc, Silver and Lead Zinc production vs. global peers–2012 production (000 MT)
Silver production vs. global peers–2012 production (MM Oz)
1072
Lead production vs. global peers–2012 production (000 MT)
238
41.0
963
230
39.0
622
164
36.9
601
101
30.5
414
89
26.5
297
25.1
283
22.0
78 73
274
18.3
72.5
271
18.0
71
215
13.3
62
• Significant negotiating leverage due to ability to deliver large volumes across several key metals • Broad client base composed of major global commodity traders and refineries
4
Source: AME GROUP, Wod Mackenzie, Silver Institute, company filings
One of the most important mining operations in PerĂş 2012 Production Zinc (000 MT) 23.1% 297
Lead (000 MT) 29.2% 73
21.1% 270 14.5% 186 8.8% 113
7.7% 19
7.2% 18
6.8% 17
Buenaventura
Milpo
Corona
3.5% 46
Volcan
Antamina
Milpo
Volcan
Los Quenuales Atacocha
Silver (000 Oz) 19.7% 22.0 13.1% 14.7
11.9% 13.3 6.7% 7.5
Volcan
5
Buenaventura
Source: Peruvian Ministry of Energy and Mines
Antamina
Suyamarca
5.7% 6.3
Ares
5.4% 14
El Brocal
Robust life of mine & significant potential to explore Evolution of reserves and resources (MM MT) 1,3 Reserves
Resources
2
360
256
310
170
162
140
148
Exploration 7%
377
Production 13%
279
203 146
310
Significant untapped potential
225
268
156
127 110
77 2006
2007
123
2008
2009
2010
136
2011
110 2012
No Activity 80%
Average reserve and resource life (years)
Total: ~365,537 hectares of concessions
Reserves3
9
13
14
16
18
18
12
22
25
31
37
28
Reserves and Resources3
14
20
Source: Company filings
1
6
Ore reserve and mineral resource estimated following the guidelines of international definitions as established by the JORC Includes measured, indicated and inferred 3 For additional details please refer to the 2012 Annual Report 2
Volcan’s Growth Strategy in Mining Additional detail ahead
Short Term
• Chungar’s plant expansion from 4,200 to 5,200 tpd
Expansion of Current Operations
• Andaychagua’s plant expansion from 2,850 to 3,200 tpd • Victoria’s plant expansion from 4,000 to 4,500 tpd
+ G R O W T H
Short- and Medium-term Mining Projects
+ Regional Exploration
+ Search for New Opportunities Long Term 7
• • • •
Silver Oxides Alpamarca – Río Pallanga Silver Pyrites Rondoní
• • • • •
San Sebastián Palma Zoraida El Muqui Carhuacayán
• In constant evaluation • Business development • Greenfield exploration (new projects)
Expansion Projects
Stage
Est. Completion
CAPEX (US$ MM)
Increase in Capacity
1. Chungar’s Plant Expansion
Concluded
Operating
18
4,200 tpd to 5,200 tpd
2. Andaychagua’s Plant Expansion
Concluded
Operating
2
2,850 tpd to 3,200 tpd
3. Victoria’s Plant Expansion
Execution
2013 - II
3.5
4,000 tpd to 4,500 tpd
Project
8
1. Chungar Plant Expansion
•
Increased plant capacity by 25%, from 4,200 tpd to 5,200 tpd
•
Plant expansion completed in January 2013; Currently operating at full capacity
•
Estimated CAPEX of US$ 18 MM
•
Additional annual contribution of 2.0 MM Oz of Ag
•
Reduction in production costs in 2013 due to increased tonnage and start-up of Jacob Timmers Shaft
9
2. Andaychagua Plant Expansion (Yauli)
•
Plant expansion from 2,850 to 3,200 tpd completed
•
Tonnage being increased gradually until full capacity is met
•
On-line Control System Analyzer with Courier 6iSL in process of calibration
10
3. Victoria Plant Expansion (Yauli)
•
Plant expansion from 4,000 to 4,250 tpd completed
•
On-line Control Operations with Courier 6iSL in place
•
Expansion from 4,250 to 4,500 tpd estimated for June 2013
•
Conceptual engineering in preparation for a possible expansion of treatment capacity to 7,000 tpd
11
Mining Growth Projects
Stage
Timing
CAPEX 1 (US$ MM)
1. Silver Oxides
Execution
2013 – Q4
145
3 - 5 MM Oz Ag
2. Alpamarca - Río Pallanga
Execution
2013 – Q4
128
3.5 MM Oz Ag
In study
2015 – Q32
To be defined
3 - 6 MM Oz Ag
Pre-feasibility
To be defined
To be defined
20,000 – 30,000 MT
Project
3. Silver Pyrites 4. Rondoní
•
Oxides and Alpamarca projects to be completed by end of Q4 2013
•
Net gain of approximately 6 million ounces of Ag by 2014; 9 million ounces of
cumulative net gain by 2016
12
Production
1±
20%
2 Rough
estimate
1. Silver Oxides (1/2)
•
Completion expected by Q4 2013
•
Environmental Impact Assessment (EIA) approved; equipment purchased; construction 23.5% completed
•
9 MM MT of reserves in stockpiles & mineral in situ
•
Plant capacity of 2,500 tpd with an annual production between 3 to 5 MM Oz of Ag
•
Initial life-of-mine-estimate of 10 years
•
Projected CAPEX of US$ 145 MM1 for a plant design expandable to 4,000 tpd
13
1±
20%
1. Silver Oxides (2/2) Plant Progress
Rings at the Cyanidation Tanks
14
Construction for Merrill Crowe Process
2. Alpamarca - Río Pallanga (1/2)
Alpamarca Plant: • Completion expected by Q4 2013 • Environmental Impact Assessment (EIA) and construction permits granted, equipment purchased; construction 20% completed • Plant capacity of 2,000 tpd • Ag annual production: 3.5 MM Oz • Estimated CAPEX: US$ 128 MM1 Alpamarca Open Pit: Reserves of 4.5 MM MT, Resources of 4.9 MM MT •
Projected production: 1,500 to be processed at the Alpamarca plant
Río Pallanga Underground Mine: Reserves of 0.4 MM MT, Resources of 1.4 MM MT
15
•
Located 10 km from the Alpamarca plant
•
Projected production: 500 tpd, to be processed at the Alpamarca plant 1±
20%
2. Alpamarca - RĂo Pallanga (2/2)
16
Alpamarca Open Pit
Camp Area
Plant Progress
Rio Pallanga Mine
3. Silver Pyrites •
Reserves & Resources Stockpiles: 25.5 MM MT of 4.8 Oz/MT of Ag Low mining cost and high certainty In situ: 61.0 MM MT with 4.5 Oz/MT of Ag in the West Wall of the Raul Rojas open pit
•
•
Treatment alternatives a)
Pre-concentrate produced through flotation process; subsequent leaching
b)
Direct leaching of mineral
c)
Ultrafine grinding of material to 10 microns, to release Ag in preparation for flotation
Project Status
17
o
SGS in Canada & other laboratories testing samples to define the optimal metallurgical process
o
Industrial testing program in pilot plants with some residual Ag production
o
Expected production of 3 to 6 MM Ag Oz per year with a plant capacity of 4,000 tpd
4. Rondoní Project Current Status: •
98,000 meters of diamond drill holes performed out to date in the Rondoní area
•
10,000 meters of diamond drill holes performed in 2012 in the Acejar area
•
Total investment of U.S. $ 15 MM in 2012
•
Agreement signed with local communities for exploration activities to 2016
•
Activities to obtain EIA in progress
•
Resources as of December 2012: 51 MM MT with Cu grades: 0.45% at Rondoní and 8.3 MM MT with Cu grades: 0.49% at Acejar
•
Completion of the pre-feasibility study and definition of options by end of 1H 2013 RONDONI La. Cunto
W msnm
ACEJAR
3,000
2,000
1,000
18
msnm
Skarn Cu
5,000
4,000
4,850
Falla Quio - Chaulan
Río Quio
La. Secsecocha
E
Volcan is partially self-sufficient in Energy Capacity
2012
2013
Number
Capacity
Number
Capacity
12
42 MW
12
42 MW
Hydropower Plants Transmission Lines
10
Electrical Substations
22
194 km 130 MVA
MW
2012 GWh
%
42
238
Hydros Chungar
22
Huanchor
(180 MW)
Chancay
(60 MW)
271 km
400 km
25
240 MVA
29
MW
%
39%
42
304
49%
116
19%
22
154
25%
20
122
20%
20
150
24%
Purchased at SEIN
57
489
81%
61
466
75%
Consumption
79
608
83
620
Own Generation1
Belo Horizonte
14
2013 GWh
Poewer generation and demand
Projects
1 48%
of the energy generated by Huanchor is sold to the national grid
2 2
Cost
USD Cents / kWh
USD Cents / kWh
Hydroelectric Generation
2.5
2
Purchased at SEIN
7.5
8
19
Volcan has two 12 MW thermal generators on stand-by (with a generation cost of 30 cents/kWh)
Solid financial performance in different cycles EBITDA (US$ MM) and EBITDA margin (%)
Revenues (US$ MM) 1150
1,212
1,161
60% 50%
950
981
750 663
52% 39%
624 509
550 350
44%
40% 40% 461
294
2010
2011
-50
2012
-20%
2009
2010
329 253 211 170
20
Source: Company filings
2010
10% -10%
Net Income (US$ MM)
2009
20% 0%
150 2009
30%
2011
2012
2011
2012
-30%
2012 Results influenced by lower prices and cost inflation in the industry Volcan Consolidated (MM USD) Revenues Net Income EBITDA
•
2012
2011
Var %
1160.8 210.9 460.5
1211.6 328.9 623.7
-4% -36% -26%
Lower revenues from falling prices Average Prices Zinc ($/MT) Lead ($/MT) Copper ($/MT) Silver ($/Oz)
•
2012
2011
Var %
1,948 2,062 7,949 31
2,193 2,402 8,821 35
-11% -14% -10% -11%
Increased production costs
Own Production Unit Cost / mT
21
2012
2011
Var %
56.9
50.5
13%
• Inflation in the industry, between 15% and 20%, impact on labor costs, third party services and supplies (fuel, reagents, steel, etc.) • Nuevo Sol appreciation • Improved safety standards
Among the lowest cost producers in the industry First quartile, low-cost zinc producer C1 cash cost (C1)(c/lb) 130
March 2013 Zinc Mine, Composite, C1 Cash Cost Grouped by company and ranked by cash cost
120 110 100 90 80 70
Hindustan
Glencore
Minmetals
Xstrata
New Boliden
Teck
20
Nrystar
30
Votorantim
40
Vedanta
50
Yunnan
Volcan
60
Sumitomo
10 0
First quartile
Second quartile
0
4,833
Third quartile
Historical cash cost (C1) – Zinc (c/lb) Volcan
53 39
Industry
Volcan
22
2010
2011
4.9
4.7
4.8
0.6
(3) 2009
Industry
45
44
37
9
2008
14,499
Historical cash cost (C1) – Silver (US$/Oz) 1
49
46 35
Fourth quartile
9,666 Paid metal (mm lbs)
-2.0 2012
2008
2009
-4.6 2010
8.3
7.8
10.1
1.8
2011
Source: Wood Mackenzie and company filings ¹ Industry average silver cash cost (on a by-product basis) includes simple average of Coeur d’ Alene Mines Corporation, Fresnillo Plc, Hochschild Mining Plc and Panamerican Silver Corporation
2012
Solid Balance Sheet Leverage Deuda / Ebitda
Deuda Neta / Ebitda
1.53
0.3 0.1
0.1
0.10 -0.1
2009
2010
-0.2 2011
-0.15 2012
Interest coverage 226.2 x 170.7 x
186.1 x
13.0 x 2009
23
2010
2011
2012
Funds available for our projects, at low risk
US$ 575 Million
Investment Grade * 000 US$
Balance Jan 2012:
154,123
Bond Proceeds:
600,000
Cash Flow from Operations:
258,661
Investments:
-385,960
Dividends and other
-51,969
: BBB: Baa3 : BBB-
Balance December 2012:
574,855
* Reaffirmed by all three agencies after first annual review
24
Stock Market Highlights Stock Markets
Class A Shares: – –
Number: 1,362,307,564 Full voting rights
– BVL – Madrid (Latibex) – Santiago
since 1956 since 2000 since 2007
Class B Shares: – –
Number: 2,037,653,026 5% dividend premium over Class A
Some Funds / Stakeholders investing in Volcan Compañía Minera S.A.A. • • • • • • • 25
BlackRock Global Funds Abu Dhabi Invest. Authority City of New York Group Trust City of Zurich Pension Fund Barclays Capital Securities Microsoft Global Finance People Bank of China
• • • • • • •
Glencore International AG Credit Suisse Securities Larrain Vial California Public Employees Fidelity Funds Harvard University Mercury Asset Mgmt
• • • • • • •
Deutsche Bank AG Celfin AFP Prima AFP Horizonte AFP Integra AFP Profuturo El Pacífico Vida
Volcan CompaĂąĂa Minera S.A.A.
Corporate Presentation 26