COBRE DEL MAYO Investor Presentation Data as of 2Q15 (all amounts in USD unless otherwise noted)

Transcription

1 COBRE DEL MAYO Investor Presentation Data as of 2Q15 (all amounts in USD unless otherwise noted) 1"

2 COBRE DEL MAYO 2" Disclaimer and Forward Looking Statements The information contained herein has been prepared to assist interested parties in making their own evaluation of the Company and does not purport to be all inclusive or to contain all of the information that a prospective purchaser may desire. You should refer to the information in the Preliminary Offering Circular before making any investment decision to purchase the offered Notes. Forward Looking Statements This Investor Presentation and other communication with investors include forward-looking statements. These forward- looking statements include, without limitation, statements regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we participate or are seeking to participate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, forward-looking statements can be identified by terminology such as aim, anticipate, believe, continue, could, estimate, expect, forecast, guidance, intend, may, plan, potential, predict, project, should or will or the negative of such terms or other comparable terminology. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution potential investors that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that our actual results of operations, financial condition and liquidity may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this Investor Presentation. In addition, even if our results of operations, financial condition and liquidity and the development of the industry in which we operate, are consistent with the forward-looking statements contained in this Investor Presentation, those results or developments may not be indicative of results or developments in subsequent periods. Important factors that could cause these differences include, but are not limited to: risks related to our competitive position; risks related to our strategy and expectations about growth in demand for copper and business operations, financial condition and results of operations; risks related to the revocation, expropriation or termination of our mining concessions or our water concessions or of the agreements pursuant to which we explore or exploit mining concessions belonging to third parties; the inability to be compensated fairly in the event of termination of our mining concessions or our water concessions; the impact of fluctuations in the market price for copper; the impact of changes in the prices of raw materials, labor and our products; our relationship with unions and our ability to negotiate collective bargaining agreements; the availability of materials and equipment; our access to funding sources, and the cost of the funding; changes in regulatory, administrative or economic conditions affecting the mining industry, including government interpretations and policies; the application and enforcement of environmental laws and regulations; risks related to Mexico s social, political or economic environment; the impact of changes in the end uses of our products; fluctuations in the value of the U.S. dollar against the Mexican peso; risks associated with market demand for and liquidity of the notes; and changes in the taxation of our business. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Investor Presentation may not occur. We undertake no obligation to update or revise any forward-looking statement, whether as a result of new information or future events or developments.

3 Index I. Company Overview 4 II. Industry and Commodity Overview 14 III. Operational Environment IV. Historical Financial Performance V. Conclusion " COBRE DEL MAYO 3"

4 I. Company Overview

5 COBRE DEL MAYO 5" Cobre del Mayo Snapshot! Cobre del Mayo is a Mexican mining company that operates the Piedras Verdes (PV) open-pit copper mine in Sonora, Mexico! PV is the third largest copper mine in Mexico as measured by production! It began commercial production in 2006! Purchased by Invecture in mid 2009! During 2012 a flotation circuit operated by Kupari Metals with capacity of ~5,500 tons per day ( tpd ) was built and in April 20 copper concentrate production began! Produces LME Grade A copper cathode and sells refractory and vein type ore for processing into concentrate! Mineral Reserves of 1. million tons of copper and 15+ year mine life Piedras Verdes Advantaged Location and Access:! All infrastructure is in place P Deep Water Port Private Airport! Easily accessible by air, road, rail and ports! Extremely competitive transportation costs for off-takers given PV s location and nearby infrastructure Guaymas Sonora Chihuahua C Commercial Airport Railway! Power: Connected to CFE (Federal Electricity Commission) grid to the mine owned and maintained substation with continuous capacity of 25 MW; CDM is CFE s single largest customer in the area Ciudad Obregon Navojoa C Piedras Verdes Alamos P Rail Station Major Highway! Water: CDM holds 7 titled water concessions for ~3.9 Mm³/yr while the requirement for the operation of the PV Mine is ~3.0 Mm³/yr Huatabampo Sinaloa

6 COBRE DEL MAYO 6" Key Initiatives Implemented Since Invecture Acquisition! In 2009, changed from contract mining to owner operation and purchased the former contractor s equipment fleet. Purchased, re-engineered and installed a crushing, screening, conveying and stacking system! Diversification of processes: Crush for Leach, Run of Mine (ROM) leach, and SX/EW produce copper cathode Installed capacity of 87 tpd, increasing to ~100 tpd in 2H15 Sales of refractory and vein type ore for concentrate production Flotation plant current installed capacity of ~5.5 ktpd + ~1.7 ktpd of high clay slimes from the Fines Classification System 1 Copper Cathode Monthly Production Evolution (t)!3,000!!!2,500!! 2,157" Tons!!2,000!!!1,500!! Acquisi'on*by* Invecture*!1,000!!!500!!!"!!!! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! 2009! 2010! 2011! 2012! 20! 2014! 2015! 1. See slide 11 for further reference

7 COBRE DEL MAYO 7" Stable Low Risk Operations and Processes! $312.0 M in capex has been invested since 2009 with limited sustaining capex going forward of ~ $ M/yr LOM! Ore processing method is chosen according to grade, mineralization, and leaching and flotation characteristics to provide the best overall allocation using: (i) ROM heap leach (ii) crushed ore heap leach (iii) ore for concentration

8 Cobre del Mayo Today! The PV Mine has been transformed into a high quality copper producing asset with strong operating metrics and competitive Cash Cost Since January 2012, PV cathode production has averaged 80 tpd 2Q15 LTM sales totaled $206.3 M Copper cathode production of 26,542 t generating $184.7 M of sales Copper contained in ore totaled 14,693 t generating $21.6 M of sales 1 2Q15 LTM EBITDA of $53.8 M Credit metrics 2 : Leverage is 4.15x Net Debt / 2Q15 LTM EBITDA Debt / Total Capitalization is 40.9% (2Q15 LTM) Strip Ratio has declined from 3.28x in FY 2012 to 2.01x during 2Q15 LTM Cu Cathode Production and Total Sales EBITDA and EBITDA Margin $300 $125 44% 50% kt $ $31.1 $21.6 $250 $200 $150 $100 $M $M $100 $75 $50 33% 33% 37% 30% 26% 40% 30% 20% % 6 $50 $78.2 $197.7 $238.2 $225.2 $194.8 $ $0 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM Cathode Sales ($M) Sales of Ore ($M) Cathode Production (Kt) $25 $0 $26.0 $65.6 $105.7 $92.0 $67.4 $53.8 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM EBITDA ($M) EBITDA Margin (%) 10% 0% 1. Pursuant to the agreement between Kupari Metals and Cobre del Mayo, the amount payable to the Company is dependent, among other variables, on the grade of the ore sold by Cobre del Mayo and on the grade of the concentrate produced by Kupari Metals. 2. Considering 2Q15 LTM total debt of $239.3 M (weighted average interest rate of 10.02%) and $16.3 M of Cash and Equivalents COBRE DEL MAYO 8"

9 COBRE DEL MAYO 9" Kupari Acquisition! During 4Q14, Cobre del Mayo acquired 40% of the common stock of Kupari Holdings, which owns the flotation plant adjacent to the Piedras Verdes Mine. As a result, Cobre del Mayo now accounts for its 40% participation in Kupari Holdings by using the equity method.! Cobre del Mayo s participation in Kupari Holdings: Simplifies and optimizes ore allocation among processes Facilitates process improvements that involve both heap leaching and flotation Diversifies operational risk across two processes and products Adjusted 2Q15 EBITDA Adjusted 2Q15 C1 Cash Cost $ M $18 $16 $14 $12 $10 $8 $6 $12.6 4Q14 1Q15 2Q15 $1.6 $14.3 $14.3 $1.7 $16.0 $10.0 $2.4 $12.4 $/lb $3.00 $2.50 $2.00 $1.50 $1.00 $2.59 4Q14 1Q15 2Q15 -$0.09 $2.50 $2.40 $2.30 $2.40 $2.30 -$0.11 -$0.10 $4 $2 $0 EBITDA 40% KM Contribution Adjusted EBITDA EBITDA 40% KM Contribution Adjusted EBITDA EBITDA 40% KM Contribution Adjusted EBITDA $0.50 $0.00 C1 Cash Cost 40% KM Adjusted C1 Contribution CC C1 Cash Cost 40% KM Adjusted C1 Contribution CC C1 Cash Cost 40% KM Adjusted C1 Contribution CC

10 COBRE DEL MAYO 10" On a Path to Achieve a Competitive Cash Cost $4.00 Cobre del Mayo Historical C1 Cash Cost $3.00 $/lb $2.00 $1.00 $0.00 $3.63 $2.69 $2.08 $1.99 $2.22 $2.40 FY 2010 FY 2011 FY 2012 FY 20 FY Q 2015 $5.00& $4.50& $4.00& $3.50& C1&Cash&Cost& C1&CC&+&Sustaining&Capex&& 2Q15 Estimated Global Copper C1 Cash Cost Curve 1 C1 CC < $1.22/lb C1 CC < $1.67/lb C1 CC < $2.01/lb C1 CC < $3.78/lb C1 Cash Cost + Sust. Capex: 2Q15 LTM $2.74 C1 Cash Cost: 2Q15 LTM $2.42 ($/lb)' $3.00& $2.50& $2.00& $1.50& $1.00& $0.50& $0.00& 0%& 4%& 7%& 11%& 15%& 19%& 22%& 26%& 30%& 34%& 37%& 41%& 45%& 49%& 52%& 56%& 60%& 63%& 67%& 71%& 75%& 78%& 82%& 86%& 90%& 93%& 97%&!$0.50& Percen-le'of'Cumula-ve'Metal' 1. Source: Wood Mackenzie

11 COBRE DEL MAYO 11" Reserves and Resources completed in 3Q14! Updated compliant Reserve Report released in August 2014 (published October, 2014)! Reserve of 1. million tons of copper with a mine life of 15+ years! Elaborated optimizing both copper cathode and copper concentrate production of the Piedras Verdes deposit! Annual average production of ~30 kt/a of copper cathode and 8.2 ktpd of ore for copper concentrate Summary Mineral Reserves and Resources Estimated$Reserves Ore$(kt) Grade$(%) Total$Cu$(t)!!!Ore!to!ROM 211, ,261!!!Ore!to!Crushing 151, ,283!!!Ore!for!Concentrate 57, ,374 Proven$&$Probable 420, ,4,918!!!Waste 548,998!!!Strip!Ratio 1.31x Resources Ore$(kt) Grade$(%) Total$Cu$(t)!!!!!!Measured 304, ,922!!!!!!Indicated! 210, ,150!!!Total!M+I 515, ,318,072!!!Inferred 52, ,456 Total$Resource 567, ,444,528 A"new"43*101"will"be"released"during"2H15"

12 Relevant Agreements and Risk Management! We have the exclusive right to explore and exploit 30 mining concessions with an initial term of 50 years which terminate between 2043 and mining concessions owned by PV Mining Concessions 5 mining concessions owned by Grupo Rexgo. The right to exploit these concessions is governed by a contract subject to international arbitration! Royalties: Grupo Rexgo charges PV a 3% net sales royalty for the copper mined from their underground resource concessions! Land Ownership: PV owns all of the land at the mine in addition to a reserve for leach pad and waste dump expansion Copper Cathode! Agreement for sale of 100% of 2015 PV cathode production to two internationally renowned, credit-worthy commodity traders (50% of cathode production to each trader). Both agreements are valid from January 1, 2015 through and including December 31, Cathode sold FOB at the mine and paid twice weekly against holding certificates! CDM sells copper ore to KM to produce copper concentrate Ore for Concentrate Purchase Price of Ore: Purchase of the ore is a function of the copper recovered and the current LME copper price with certain freight, handling and operating charges Term: Initial fixed term of 10 years and provides for renewals Volume: Since April, 20, CDM has sold an average of 5,219 tpd with 46 tpd of copper contained COBRE DEL MAYO 12"

13 Relevant Agreements and Risk Management Labor / Environmental! Safety, environmental compliance and labor relations are key areas of focus! Since Invecture s acquisition, CDM has had a solid safety track record Lowest premium for Riesgo de Trabajo (worker risk) as classified by IMSS (Mexican Social Security Institute), demonstrating high safety standards! Approx. 409 of our 918 employees are represented by the Confederación de Trabajadores de Mexico ( CTM )! Certified as a Socially Responsible company by the Mexican Center for Philanthropy (Centro Mexicano para la Filantropía) and certified as a Clean Industry by the Mexican Federal Attorney for Environmental Protection (Procuraduría Federal de Protección al Ambiente), the enforcement arm of the Mexican environmental ministry Mining Tax! Mexican government implemented a special duty on mining concessions roughly equivalent to 7.5% of EBITDA starting January, 2014! As roughly 95% of CDM ore is derived from Grupo Rexgo mining concessions, tax is payable by the concession holder with respect to its EBITDA Insurance Policy! Insurance policy coverage for all risk with business interruption Policy underwritten by Royal & SunAlliance with general coverage up to $200 M COBRE DEL MAYO "

14 II. Industry and Commodity Overview

15 Copper Price Forecasts Over Time! The market has consistently underestimated the copper price when forecasting long term prices! Copper prices have been much higher due to continuing shortfalls in supply. Delays in new projects, supply interruption and declining production from existing mines have been the main drivers $4.50 Copper Historical Price vs. Forecasts $ $3.50 $3.00 Actual Current 2014 LT Current LT: US$3.06 / lb ($/lb) $ LT 2012 LT 20 LT $ LT 2010 LT 2008 LT $ LT 2006 LT $ LT 2001 LT 2002 LT 2003 LT 2004 LT 2005 LT $0.50 $0.00 Actual Copper Price Broker Consensus (as forecast during Q4 of year indicated) Long Term Price (as forecast during Q4 of year indicated) Source: Broker Research, Jefferies COBRE DEL MAYO 15"

16 Incentive Price Drives the Floor Value of Copper " Investment in large projects is very capital intensive and is increasingly so as head grade declines " The incentive price required to justify investments in the expansion of existing mines and the construction of new ones is estimated at $3.30/lb ($7,275/t) Incentive price considers required Cu price to achieve specified rate of return on expansion capex (1) Incentive price has been adjusted downward by $0.20/lb from $3.50/lb ($7,716/t) to reflect the decline in oil driven input prices since 2Q14 and the USD strength. " Although short term copper prices are unpredictable, we believe that long term prices must be driven by the increase over time of the incentive price (necessary to justify the investment in new production to maintain global output) Incentive Prices for Major Projects Adjusted"incen;ve" price"$3.30/lb" c / lb Paid Metal (M lbs) Source: Wood Mackenzie 1. Analysis based on long term price required to give a 12.0% risk adjusted IRR on a pre-tax 100% equity basis. COBRE DEL MAYO 16"

17 COBRE DEL MAYO 17" Cu Pricing Considerations! Copper has traded in the market at a premium to the 90 th percentile of the C1 cash cost curve C1 cash cost as estimated by Wood Mackenzie $5.00 C1 90 th Percentile Costs 1 vs. Cu Price $4.00 $4.00 $3.00 $3.42 $3.61 $3.32 $3.11 $2.90 $/lb $2.00 $1.67 $1.00 $0.00 $1.11 $1.62 $2.57 $2.55 $2.39 $2.42 $ Q15 LTM C1 Cash Cost 90th Percentile ($/lb) Average LME Spot Cu Price ($/lb) Source: Wood Mackenzie, LME 1. 90th percentile as estimated by Wood Mackenzie.

18 III. Operational Environment

19 Stable Operating Environment in Mexico 1! Mexico is an economic leader in Latin America and is the world s th largest economy by GDP (2015E and 2016E real GDP growth of 3.0% and 3.3%, respectively) High degree of political stability OECD/WTO country and member of 12 free trade agreements, including NAFTA Mexican Peso has a long history as one of the ten most traded global currencies! As a result of mining-supportive governmental policies, stability, OECD tax regime and abundance of resources, Mexico has attracted extensive investment from international mining companies There are over 900 mining projects with foreign investment; 95 of which are producing projects. The exploration, development and operation of these projects is carried out by over 275 foreign companies.! Mexico is recognized as a mining friendly jurisdiction Largest producer of silver globally (18% of global production) 3rd largest producer of copper in Latin America! Sonora is among the most prolific mining areas and one of the safest states in Mexico Total Mining Production in Mexico Copper Production in Mexico 3 Others: 35% Sonora: 27% San Luis Potosí: 5% Zacatecas: 9% Others: 7% Chihuahua: % Sources: 1. IMF, World Bank, April Secretariat of the Economy, National Institute of Statistics & Geography Zacatecas: 25% Sonora: 79% COBRE DEL MAYO 19"

20 IV. Historical Financial Performance COBRE DEL MAYO 20"

21 COBRE DEL MAYO 21" Summary of Historical Financials Cathode Produced & Copper Contained in Ore Sold Total Sales and Realized Cu Price tpd $M $300 $225 $150 $75 $3.28 $3.91 $3.57 $3.31 $3.21 $3.15 $26.8 $31.1 $21.6 $4.00 $3.00 $2.00 $1.00 $/lb 0 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM Cathode Production (tpd) Copper contained in ore sold (tpd) $0 $78.2 $197.7 $238.2 $225.2 $194.8 $184.7 $0.00 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM Cathode Sales ($M) Sales of Ore ($M) Cu Price ($/lb) Operating Costs 1 C1 Cash Costs $200 $4.50 $ $150 $3.50 $ $M $100 $/lb $2.50 $2.00 $ tpd $50 $ $0 $87.3 $5.6 $141.1 $160.0 $166.2 $163.0 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM $0.50 $0.00 $3.63 $2.69 $2.08 $1.99 $2.22 $2.42 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM Cu Price ($/lb) Cathode Production (tpd) Operating cost exclude: Depreciation & amortization, change in Cu process inventory, ARO amortization, external exploration expenditure, and royalties

22 COBRE DEL MAYO 22" Summary Historical Financials (cont d) EBITDA and EBITDA Margin Capital Expenditures 1 $M $125 $100 $75 $50 $25 $0 44% 37% 33% 33% 30% 26% $26.0 $65.6 $105.7 $92.0 $67.4 $53.8 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM 50% 40% 30% 20% 10% 0% % $M $80 $70 $60 $50 $40 $30 $20 $10 $75.7 $16.1 $31.4 $41.6 $49.1 $39.4 EBITDA ($M) EBITDA Margin (%) $0 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM EBITDA minus Capex $100 $80 $60 $40 $M $20 $0 -$20 -$49.7 $49.5 $74.3 $50.4 $18.3 $14.4 -$40 -$60 FY 2010 FY 2011 FY 2012 FY 20 FY Q15 LTM 1. Capital expenditures: the acquisition of six CAT 789 trucks in 1Q14 and a CAT 6050 hydraulic mining shovel in 3Q14 did not have any significant impact on the cash flow as they were financed by capital lease agreements with Caterpillar Crédito S.A. de C.V.

23 V. Conclusion

24 COBRE DEL MAYO 24" Conclusion! Operating mine without new project development risk! Favorable logistics and infrastructure! Good labour relations! Long life of mine of 15+ years