Corporate Presentation

Transcription

1 Corporate Presentation 2012

2 Disclaimer 2 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 Compañía 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 to it and shall not reply 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 for, 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.

3 General Company Highlights Started operations in Ticlio and Carahuacra in 1943 Acquired Mahr Tunel in 1997 and Cerro de Pasco in 1999, through privatization of important government assets. Acquired Empresa Administradora Chungar in 2000 Operations located in central Peruvian highlands Production is diversified in zinc, lead, silver and copper Provides direct and indirect employment to approximately 11 thousand people Annual revenues 1/ of US$ 1,212 million; silver (48%), zinc (42%), lead (7%) and copper (3%) Zinc metal contained mt (thousands) 4x Silver oz (millions) 4x Lead metal contained mt (thousands) 6x / Based on 2011 Figures

4 Top 10 global producer of zinc, silver and lead Zinc production vs. global peers 2010 production (000 mt) Silver production vs. global peers 2010 production (mm Oz) Lead production vs. global peers production (000 mt) 1, , 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 Source: Wood Mackenzie, Silver Institute, company filings 1 Ex-China 2 Includes Hindustan Zinc 4

5 Diversified operational base and logistical network Key highlights 3 mining units Cerro de Pasco, Chungar and Yauli 8 mines Largest mine accounts for only 23% of 2010 production 6 concentrate plants Logistical flexibility Railroad Multiple road alternatives Map of operations Location in Peru Volcan s mine or subsidiary Third party mine Volcan s prospect Concentrator plant Town Volcan s concession area Railroad Road access Revenues 2011 By metal By operation Pb 7% Cu 3% Cerro de Pasco 18% Yauli 52% Zn 42% Ag 48% Chungar 30% 5 Source: Company filings Total: US$1,212mm

6 Diversified operational base and logistical network (cont d) Yauli 4 underground mines 3 concentrate plants (9,600 tons per day aggregate capacity) Metals and grades 1 : Zn (4.8%), Ag (3.7 ounces per tonne), Pb (0.8%) and Cu (0.2%) Average mine life 2 : Reserves: 10 years 3 Reserves and resources: 14 years 4 Metal production Yauli (Metal contained) 000 mt mm Oz Chungar 2 underground mines 1 concentrate plant (4,200 tons per day capacity) Metals and grades 1 : Zn (5.8%), Ag (3.3 ounces per tonne), Pb (1.6%) and Cu (0.1%) Average mine life 2 : Reserves: 7 years 3 Reserves and resources: 11 years 4 Chungar (Metal contained) 000 mt mm Oz Cerro de Pasco 1 underground mine, 1 open pit mine 2 concentrate plants (8,000 tons per day aggregate capacity) Metals and grades 1 : Zn (2.1%), Ag (3.1 ounces per tonne), Pb (1.0%) Average mine life 2 : Reserves: 32 years 3 Reserves and resources: 40 years 4,5 Cerro de Pasco (Metal contained) 000 mt mm Oz Zn ('000 mt) Pb ('000 mt) Ag mm Oz Zn ('000 mt) Pb ('000 mt) Ag mm Oz Zn ('000 mt) Pb ('000 mt) Ag mm Oz 6 Source: Company filings 1 Grades of reserves and resources December 31, Estimates based on 2011 production level 3 Based on Proven and Probable reserves 4 Based on Measured and Indicated resources 5 Does not consider oxides and pyrites

7 Robust life of mine and resources and 76% of concession area unexplored Evolution of reserves and resources (mm mt) 1 2 Reserves Resources Significant untapped potential Breakdown of concession area by type of activity Production 12% No activity 76% Exploration 12% Average reserve and resource life (years) Total: ~315,000 hectares of concessions Reserves Reserves and Resources Source: Company filings 1 Ore reserve and mineral resource estimated following the intent of international definitions as established by the JORC 2 Includes measured, indicated and inferred 3 Estimates based on 2011 production, except for 2006 (2009 production), and excluding inferred resources 31 37

8 World-class operating standards and strong labor / community relations Commitment to world-class operating standards and international oversight Attractive labor relations situation Mining Unit ISO (Environmental Management) OHSAS (Operational Safety) Yauli Since 2003 Since 2004 Workforce by Type of Employee Direct Payroll 27% Annual labor agreements with direct payroll workers Chungar Since 2001 Since 2004 Cerro de Pasco Since 2001 Since 2004 Contractors 73% No material labor strikes in the last five years Over 11,200 workers Focus on corporate social responsibility, with over 60 years operating closely with surrounding communities Major local employer Demand for local products and services Sponsor of community development programs Infrastructure support 80 agreements with local communities 8 Source: Company filings

9 Glencore BHP Billiton Anglo American New Boliden Votorantim Volcan Hongda Group Chihong Zinc & Germanium Yunnan Metallurgical Group Zhongjin Lingnan Metals Southern Copper (ex SPCC) Kazzink Industrias Penoles China State Enterprise Kazakhmys Sumitomo Corp Among the lowest cost producers in the industry First quartile, low-cost zinc producer 2 C1 cash cost (C1)(c/lb) Zinc Mine, Composite, C1 Cash Cost Grouped by company and ranked by cash cost Hindustan Zinc Teck Xstrata AG Minmetals 0 First quartile Second quartile Third quartile Fourth quartile 0 4,406 8,812 13,218 17,624 Source: Wood Mackenzie and company filings Paid metal (mm lbs) 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 ² Companies in orange have over 75mm lbs of paid metal Historical cash cost (C1) Zinc (c/lb) Volcan Industry Historical cash cost (C1) Silver (US$/Oz)¹ Volcan Industry N.A. 9 (25) M 2011 (18) (12) (20) (15) M 2011

10 Strong financial and operating position Revenues (US$mm) EBITDA (US$mm) and EBITDA margin (%) ,212 39% % % % Net income (US$mm) Source: Company filings 1 As from January 1, 2011, employees profit sharing is presented before operating profit. EBITDA 2011 has been calculated including the impact of the employees profit sharing before operating margin 10

11 Sustained cashflow generation Cashflow breakdown (US$mm) Net cash provided by operating activities Net cash used in investing activities (242) (143) (217) (327) Net cash (used in) provided by financing activities 109 (174) (126) (124) Dividends (82) (56) (76) (121) Increase in cash and cash equivalents 41 (60) Cash and cash equivalents (ending balance) Interest coverage x 396.3x 226.2x 56.9x Source: Company filings 1 Interest coverage pro forma with bonds = 18.6x 11

12 Growth Perspectives: Summary ILLUSTRATIVE E 2 (2011 Prices) Au 4% Ag 48% Zn 42% Ag 49% Zn 24% Cu 18% Pb 5% Cu 3% Pb 7% Sales (2011 prices) 1 US$1,212 mm US$2,103 mm 12 1 Average prices 2011: Zn 2,200 US$/mt, Pb 2,402 US$/mt, Cu 8,820 US$/mt, Ag US$/oz & Au1570 US$/oz 2 Adding projects in pipeline

13 Energy projects Investment in energy supply Mining projects Key Growth Projects Project Additional production Timing Investment value (US$mm) Oxides (Ag) mm oz Q Pyrites (Ag) mm oz Q Silver Alpamarca Rio Pallanga (Ag) mm oz Q Chungar (Ag) mm oz Q Copper Rondoní (Cu) 40,000 50,000 mt Q Project Timing Investment value (US$mm) Chancay 60MW Generation plant Paragsha II Transmission Line ~37.9mm Oz of silver and ~54,000 mt of copper production by 2015, an increase of 95% and 1,190% respectively vs production 13

14 Cerro de Pasco Silver Oxides 14 Operations expected to start in 2013 Environmental Impact Assessment (EIA) approved, concession beneficiation / construction permits imminent Basic Engineering complete, equipment is being purchased Reserves in stockpiles & mineral in situ of 9 mm mt Plant capacity of 2,500 tpd, annual production of 3 mm to 5 mm oz of Ag Initial life-of-mine estimate of 10 years Projected CAPEX of US$ 90 mm for a plant designed to be expandable to 4,000 tpd

15 Cerro de Pasco Silver Pyrites Reserves & Resouces Stockpiles: 20.4 mm mt of 5.4 oz/mt of Ag Low mining cost In situ: 107 mm mt of resources, potential Cu-Ag mineral in the West wall of the Raul Rojas pit Two parallel projects Flotation (San Expedito Plant): 2,000 tpd, 1.2 mm oz produced in 2011 Leaching or Ultrafine Grinding: Industrial testing to define optimum metallurgical process Tests underway by SGS in Canada Expected Production between 3-6 mm oz Ag per year; plant capacity of 4,000 tpd CAPEX (estimated) US$ 90 US$ 105 mm Testing & engineering during Construction during

16 Alpamarca Río Pallanga Alpamarca Plant Operations expected to start 3Q 2013 Government approvals: Environmental Impact Assessment, beneficiation concession & construction permits Basic Engineering 70% advanced, equipment being purchased Plant capacity 2,000 tpd with possibility of expansion to 3,000 tpd Annual Ag production: mm oz Estimated CAPEX : US$ 90 mm 16 Alpamarca Mine: Open pit, reserves of 4.2 mm mt, resources of 8.9 mm mt Projected production: 1,500 tpd processed at the Alpamarca plant Río Pallanga: Underground mine located 10 km from the Alpamarca plant, 1.1 mm mt of resources; average Ag grade of 10 oz/mt Projected production: 500 tpd, processed at the Alpamarca plant Drilling limited to 400 vertical meters with potential to be increased

17 Chungar Expansion 17 Plant expansion scheduled for completion November Estimated CAPEX of US$ 10 mm Increase plant capacity by 25%, from 4,200 tpd to 5,200 tpd Authorization of expansion of beneficiation concession imminent. Civil engineering work initiated (earthworks) and key equipment is being purchased Additional annual contribution of 1.5 to 2.0 mm oz of Ag, approximately 10% of annual production Cost reduction projected to be 15% because of increased tonnage and more efficient mining method

18 Rondoní Development Plan 2012: Conceptual Engineering by Ausenco during ,000 meters of diamond drillings performed as of December Resources as of December 2011: 60 mm mt; Cu equivalent grades: 0.60% (30 mm in 2010) Depth Geophysics confirmed resource potencial in Acejar Semi-detailed Environmental Impact Assessment (EIA) approved Exploration work to determine continuity of mineralization and to confirm resources in Acejar (2 kms away from Rondoní) Planned investment of US$ 27 mm in thousand meter diamond drilling program, including 30 thousand meters in Acejar Contract for Pre-feasibility studies by AMEC and activities to obtain EIA Resource potential between mm mt, estimated annual production between 40,000 50,000 mt of Cu metal contained, estimated CAPEX of US$ 350 mm ,863 m in 2008; 8,322 m in 2009; 22,225 m in 2010 and 62,209 m in 2011

19 Other Growth Initiatives: Hydroelectric projects Capacity # Capacity # Capacity Hydroelectric MW MW Power Consumption MW % MW % Total Consumption Auto - Generation Purchaser from SEIN Cents Cents Cost US$/kWh US$/kWh Hydroelectric Generation Purchaser from SEIN Sistema Eléctrico Interconectado Nacional Growth potential: - 3 additional hydroelectric projects, 240 MW capacity Chancay 2 20 MW Chancay 3 40 MW Belo Horizonte 180 MW 19

20 Stock Market Highlights Class A shares: Number of shares: 1,362,307,564 With voting rights Class B shares Number of shares: 2,037,653,026 5% premium on dividends 2010 dividends: March: US$ 52.6 mm November: US$ 26.1 mm 2011 dividends: April: US$ 54.2 mm October: US$ 63.5 mm 2012 dividends: April: US$ ,2 mm Stock Exchanges: Lima Madrid Santiago 1 Approved in Annual Shareholders Meeting in March, Exchange Rate: