Southern Copper Corporation Highlights. September 2008

Transcription

1 Southern Copper Corporation Highlights September

2 Safe Harbor Statement This presentation contains forward-looking statements, as defined by federal securities laws, with respect to our financial condition, results of operations and business, and our expectations or beliefs concerning future events. These statements include words such as, but not limited to, expect, anticipate, believe, intend, plan, seek, forecast, estimate, continue, may, will, would, could, likely, and similar expressions. These forward-looking statements reflect management s current expectations and assumptions regarding future events and operating and financial performance and are based on currently available information. However, actual results are subject to risks and uncertainties, which could cause actual results to differ materially from those contained in the forward-looking statements. Many risks and uncertainties are inherent in the copper industry. Others are more specific to our operations. Additional information about risks and uncertainties that could affect our future results are contained in our SEC filings, including our reports on Forms 8-K, 10-Q, and 10-K and a registration statement on Form S-3 relating to our proposed public offering of common stock. 1

3 I. Introduction 2

4 Management Presenters Presenters Genaro Guerrero Raúl Jacob Title Executive VP and CFO Manager of Financial Planning & IR 3

5 Corporate Structure 75.1% Public Float 24.9% % % SCC Peru Branch Minera México 4

6 Strong Metal Market Copper Increased demand driven by China & BRIC s. Supply constraints and cost increases. Molybdenum 92% of world reserves and production capacity are concentrated in: Mexico, Peru, USA, China, and Chile. Demand largely driven by special steel alloys consumption. $4.5 $4.0 $3.5 $3.0 $2.5 $2.0 $1.5 $1.0 $0.5 $0.0 LME Copper Cash Price vs. Inventories es 1,600,000 1,400,000 1,200,000 1,000, , , , ,000 0 $45 $40 $35 $30 $25 $20 $15 $10 $5 $0 Molybdenum Prices Registered inventories in tons 3 month price US$ per ton FOB North America price US$ per lb 5

7 Southern Copper Strengths Long life reserves and exploration projects Excellent organic growth projects Low cost fully integrated t operations Experienced management team Strong financial performance / investment grade Outstanding dividend history Strong copper & molybdenum fundamentals 6

8 II. Overview of Operations 7

9 Company Overview Copper Reserves 1 : 49.1 mmt For the LTM June 2008 Copper Production: 518 kt Sales: $ 5,862 M EBITDA: $ 3,548 M Cash Cost: $ / lb. Mexico El Arco Cananea Peru Buenavista San Martin La Caridad Santa Eulalia Santa Barbara Taxco Charcas San Luis Potosi Angangueo #2 copper company by reserves 2 #7 copper producer 3 #8 copper smelter 3 Tantahuatay Key Mines Smelters and Refineries Projects Source: Company Filings Notes: 1 Copper contained in reserves based on US$1.20 per pound of copper as of December 31, Based on available companies reports 3 CRU Los Chancas Tia Maria Cuajone Ilo Toquepala 8

10 Long Life Reserves First largest copper reserves of any publicly traded company Long-life reserves with strong capacity expansion plans Main Copper Reserves SCC Copper Reserves 60 Copper Reserv ves (Mt) Codelco 49.1 SCC 42.1 FCX 25.6 BHP Billiton 22.9 Anglo American 17.3 Rio Tinto 16.5 Xstrata 12.1 CVRD-Inco 10.2 Antofagasta erves (Mt) Copp per Contained in res % % SEC Copper prices ($/lb) Source Annual Rep. 10K 10K 20F Annual Rep. 20F Reserve Rep. Annual Rep. Annual Rep. Period 06/12/31 07/12/31 07/12/31 07/06/30 07/12/31 07/12/31 07/06/30 07/12/31 07/12/31 Cu Price N/A $1.20 $1.20 $2.00 N/A $2.31 N/A N/A N/A 9

11 Low Cost Operations (US$/lb) Cash Costs per pound of Copper Produced Net of By-Products Low Cost Drivers 0.6 Management focus on cost efficiency LTM 2008 Operating Cash Cost per Pound of Copper Produced Significant low cost SX-EW production (3) High quality reserves Strong by-product credits molybdenum (19% of revenues) zinc (5% of revenues) silver (4% of revenues) gold & others (3% of revenues) sulphuric acid (2% of revenues) Cost Structure (US$/lb) LTM 2008 Labor 16% Other 11% Maintenance 17% Operating Materials 16% Energy 27% Fuel 13% LTM as of June 30,

12 Geographic and Product Diversification 1H08 SCC Revenue by Product 1H08 SCC Revenue by Market Other 1% Zinc 5% Sulfuric Acid Silver 2% 4% Asia 5% Peru 3% Europe 24% Molybdenum Molybdenum 19% United 19% States Mexico 26% Copper 69% 23% Other Latin American 19% 11

13 Expansion Projects Tía María SX EW / Copper LBE for Operations: 4Q Annual Copper Production: 120 ktpy Estimated Capex: $934 M Toquepala Concentrator Expansion LBE for Operations: 2011 Annual Production: Copper = 100 ktpy; Moly = 3.1 ktpy Estimated Capex: $600 M Cuajone Concentrator Expansion LBE for Operations: 2011 Annual Production: Copper = 50 ktpy Moly = 0.7 ktpy Estimated Capex: $374 M Ilo Metallurgical Operations Expansion Additional Concentrates from Cuajone & Toquepala, 445 ktpy Smelter expansion from 1.2 MTPY to 1.8 MTPY Copper Anode production: 325 ktpy to 490 ktpy Copper Cathode production: From 280 ktpy to 360 ktpy Estimated Capex: $200 M Additional Copper Production : 270 ktpy; Capex : $2.1B LBE : Last Best Estimate 12

14 Other Expansion Projects El Arco (SX EW + Concentrator) LBE for Operations: 2013 Annual Copper Production: SX-EW = 35 ktpy; Conc.= 155 ktpy Annual Gold Production= 81 kozpy Estimated Capex: $1,800 M Los Chancas (SX EW + Concentrator) LBE for Operations: 2013 Annual Copper Production: SX-EW = 20 ktpy Conc.= 80 ktpy Annual Moly= 4.7 ktpy Estimated Capex: $1,200 M Angangueo LBE for Operations: 2012 Capacity 2000 tpd (Cu, Zn, Ag). Annual Copper Production: 16 ktpy Estimated Capex: $145 M Additional Copper Production : 306 ktpy; Capex : $1.9B Source: SCC LBE : Last Best Estimate 13

15 III. Financial Overview 14

16 SCC Financial Summary (US$ MM) LTM Copper Price (LME) US$ per pound Income Statement: Net Revenues $4,089 $5,460 $6,086 $5,862 EBITDA 2, , , ,548 EBITDA Margin 57% 61% 62% 61% Interest Expense Net Income 1,400 2,038 2,216 2,052 Balance Sheet Statement: Cash & Equivalents $876 $1,023 $1,409 $1,150 Total Assets 5,688 6,376 6,581 6,405 Total Debt 1 1,172 1,528 1,450 1,295 Total Liabilities 2, , , ,339 Total Shareholders' Equity 3,326 3,667 3,848 4,050 Cash Flow Statement: Capital Expenditures 2 $471 $456 $316 $318 Free Cash Flow 3 1, , , ,096 Key Credit Ratios Net Debt / EBITDA 0.1x 0.2x 0.01x 0.04x EBITDA / Interest Expense Includes short-term and long-term debt including current portion 2 Includes capitalized stripping costs until Free Cash Flow defined as net cash from operating activities less capital expenditures 4 LTM as of June 30,

17 Solid Financial Performance Among the highest EBITDA margins and strongest leverage ratios in the metals & mining industry 2007 EBITDA Margin (%) Net Debt/ 2007 EBITDA (x) Antofagasta 72% Antofagasta -0.7x SCC 62% SCC -0.02x BHP Billiton 51% BHP Billiton 0.4x FCX 46% Anglo American 0.5x Anglo American 44% FCX 0.7x Rio Tinto 42% Xstrata 1.0x CVRD - Inco 41% CVRD - Inco 2.7x Xt Xstratat 39% Rio Tinto 3.2x Source: SCC; Company Reports 16

18 Focus on Total Return to Investors Disciplined approach to creating shareholder value Current Dividend Yield 1 (%) 3-Year Share Price Performance 1 (%) Anglo American 6.4% SCC 397% SCC 6.3% CVRD 378% Antofagasta 3.4% Rio Tinto 303% BHP Billiton 1.3% Xstrata 270% Freeport 1.3% BHP Billiton 211% In 2007, SCC paid CVRD 1.2% US$2 Billion Freeport 209% US$ 2.27 per share Rio Tinto 1.1% Anglo American 201% Xstrata 0.4% Antofagasta 170% 0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0% 0% 100% 200% 300% 400% 500% Source: Bloomberg; Company Filings Note: 1 Regular and special dividends declared over last twelve months by record date divided by current share price as of June 30, 2008 (SCC = US$35.54) 1 As of June 30,

19 Capital Expenditure Forecast (US$M) = US$2,108M Board approved Peruvian projects US$ 480M in Other Equipment Replacement Investments $107 $1,200 $199 $1,000 $800 $600 $400 $1,070 $1,085 $200 $0 $450 $316 $247 $ A 2008E 2009E 2010E E 2012E Source: SCC 18

20 SCC Debt Amortization Schedule Millions of USD as of June 30, 2008 SCC is evaluating the best financing option for its projects. $1,000 $200 $5 $10 $10 $10 $10 $10 $ Mitsui Yankee Bonds 10 & 30 year Bonds 19