SOUTHERN COPPER Company Overview & Highlights

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Transcription:

SOUTHERN COPPER Company Overview & Highlights May 2018 1

Presenter: Raul Jacob Vice President, Finance, Treasurer & CFO Southern Copper Corporation 2

Corporate Structure 3

Remarkable Year 2017 and 1Q 2018 for SCC Heading towards a new production record of one million tons in 2019 (+17% YoY) with the entrance of the new Toquepala concentrator in 2H18. One of highest margin of major copper producers: US$0.92 cash cost per pound in 2017. Best-in-class low cost operations, coupled with a large, high-quality reserve base in investment grade jurisdictions. Net income for 1Q18 was $470.7 million, 50% higher than 1Q17 net income of $314.4 million. 1Q18 adjusted EBITDA was $939.4 million, 30.1% higher than 1Q17. Margin increased to 51.0% from 45.6% in 1Q17. Cash cost per pound continued improving during 1Q17; reaching $0.79. Nine cents lower than the cash cost for the 1Q17. 4

Source: CRU Global growth pushes refined copper demand ahead, increasing posibilities of market structural deficit 5

COPPER MARKET TO DEMAND OVER 5 M TONS OF NEW PRODUCTION by 2035 COPPER: Market entering into a deficit by 2020 OUR TRACK RECORD (000 tons) +88% 901 SCCO 2 nd GENERATION OF PROJECTS (000 tons) +96% 1,770 479 901 Toquepala Exp 100K Tia Maria 120K Los Chancas 130K Michiquillay 225K El Arco 190K El Pilar 35K Pilares-Caridad 35K Other 58K 2010 2018 E 2018 E 2017+New Projects 6

SCC Zinc Production (000 MT) ZINC: strong market for refined zinc creates oportunities to enhance shareholders value 233 238% 69 2017 2021 Buenavista Zinc Concentrator = 116K IMMSA = 117K (with San Martin recovery) 7

Industry cost leader with fully integrated operations and unparallel organic growth projects Largest copper reserves of the industry, recently enhanced with the Michiquillay acquisition in Peru Southern Copper Strengths Good long-term copper & by-product fundamentals Strong balance sheet & financial performance Experienced Management Team 8

Company Overview 9

#1 Copper Mining Company in Mexico, #1 in Peru, Copper Reserves 1 : 70.6 mmt 2017 Cash Cost $ 0.916/lb. Company Overview 2018 Estimates (@ $3.23 x Lb of Cu): Copper Production: 901 kt Sales: $ 7.6 B EBITDA: $ 4.3 B 56% 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, 2017 2 Based on available companies reports 3 Wood Mackenzie Limited 2014 Fully integrated low-cost operations in Investment Grade countries. 10

Copper Reserves as Reported 80 70 70.6 Copper Reserves (Mt) 60 50 40 30 20 47.8 47.4 43.6 28.2 23.5 22.9 10 World s Largest Copper Reserves 0 100 SCC 94 Codelco Freeport BHP Billiton Mine Life Glencore Xstrata Rio Tinto Anglo American 80 63 60 40 40 30 28 28 26 20 20 0 SCC 2015 SCC after expansion Anglo American Rio Tinto Freeport BHP Billiton Codelco Xstrata 11

2017 Revenue by Product Molybdenum 5% Silver 4% Zinc 5% Other 3% Copper 83% Geographic Footprint & Product Diversification 2017 Revenue by Market Mexico 30% United States 10% Asia 37% Peru 6% Europe 9% Other American 8% 12

In 2017, we concluded our $3.5 billion investment program in Mexico and all of the projects of this program are in full operation. For 2H18 we are incorporating our new Toquepala concentrator, increasing Company production capacity to a new record of 1 million tons. Delivering growth thru our high quality project pipeline We have a project portfolio in Peru with a total capex of $2.9 billion, of which $1.7 billion have already being invested. 13

Cash Cost per Pound of Copper Produced Net of By-Products 1.1 1.00 1.07 1.11 (US$/lb) 0.9 0.95 0.92 0.79 0.7 Low Cost Operations 2013 2014 2015 2016 2017 1Q18 Fully integrated low cost operations World class assets Significant SX-EW production Strong by-product credits Management focus on cost efficiency 14

Copper Industry Cost Curve 400 Worldwide Cost Leader: C1+Sust Cash Cost (c/lb Cu) 350 300 250 200 150 100 Freeport McM Glencore Industry Average 145.0 c/lb Teck SCCO AMC Vale BHP CODELCO Anglo American First KGHM ASARCO Antofagasta Cerro Verde 50 0 0 10000 20000 30000 40000 Cumulative Production (Paid Mlbs Cu) Source: WoodMackenzie 2018 15

(US$ MM) 2015 2016 2017 2018 E Financial Summary Copper Price (LME) US$ per pound 2.50 2.21 2.80 3.23 Income Statement: Net Revenues $5,046 $5,380 $6,655 $7,607 EBITDA 1,945 2,212 3,292 4,263 EBITDA Margin 38% 41% 49% 56% U.S. Income Tax Reform Adjustment (743) Net Income 736 777 729 2,078 Dividends paid per share 0.34 0.18 0.59 0.60 Balance Sheet Statement: Cash, Equivalents & Short Term Investments $878 $597 $1,055 $2,385 Total Assets 12,593 13,277 13,771 15,716 Total Debt 5,952 5,954 5,957 5,957 Total Liabilities 7,294 7,406 7,621 7,714 Total Shareholders' Equity 5,263 5,832 6,108 7,954 Cash Flow Statement: Capital Expenditures $1,150 $1,119 $1,024 $1,643 Free Cash Flow 1 (270) (195) 953 1,564 Dividends paid to common shareholders 271 139 456 232 Total Debt / EBITDA 3.1x 2.7x 1.8x 1.4x 1 Free Cash Flow defined as net cash from operating activities less capital expenditures. 16

Solid Financial Performance Top Tier Margins and Conservative Leverage for Increased Financial Flexibility 2017 EBITDA Margin (%) 2017 Total Debt / EBITDA (x) Amortization Schedule BHP 54% Antofagasta 1.2x 2020 $400 Antofagasta 53% Rio Tinto 0.8x 2022 $300 2025 $500 SCC 49% SCC 1.9x 2028 $51 Rio Tinto 47% BHP 1.5x 2035 $1,000 Freeport 35% Freeport 2.6x 2040 $1,100 Anglo American 34% Anglo American 1.6x 2042 $1,200 First Quantum 34% First Quantum 5.7x 2045 $1,500 17

Delivered Board Approved Succesfully Completed & Robust Pipeline We have delivered a strong organic growth with our finished proyects, more than 330 Ktons but growth does not finish here... we are aiming to reach a target of copper production of more than 1.2M for 2021 and more than 1.5M in the next 10 years. 2013-2017 Buenavista, Sonora, Mexico Molybdenum Plant 3Q13 - $38M /2K Tons Mo SX/EW III 4Q14 - $525M 120K Tons Cu Concentrator Plant 1Q16 - $1,400M 188K Tons Cu / 2.6K Tons Mo Cuajone, Moquegua, Peru Variable cut-off Grade + HPGR/2H13 - $158M 22K Tons Cu / 0.7K Tons Mo Pipeline (pending approval) El Arco, Baja California, Mexico Concentrator & SX/EW $2,800M 190K Tons Cu 105K Oz Au Los Chancas, Apurimac, Peru $2,800M 130K Tons Cu 7.5k Tons Mo 2018-2019 Toquepala, Tacna, Peru Concentrator Expansion 2Q18 - $1,200M 100K Tons Cu / 3.1K Tons Mo Tia Maria, Arequipa, Peru SX/EW 2Q20- $1,400M 120K Tons Cu El Pilar, Sonora, Mexico 1Q20 - $256M 35K Tons Cu Pilares Caridad, Sonora, Mexico Concentrator 2018 $159M 35K Tons Cu Buenavista, Sonora, Mexico Zinc Concentrator $413M 20K Tons Cu + 100K Tons Zn Empalme, Sonora, Mexico Copper Smelter $870M 300K Tons Cu Cont. Los Chalchihuites, Mexico $140M 26K Cu Michiquillay, Peru $2,500M 225K Cu

SCCO is the Premier Copper Play World class assets in investment grade countries #1 in reserves of any company with various exploration prospects Second generation growth plan to create shareholders value through a pipeline of new projects: - Copper from 0.9M to 1.8M (+102%) - Zinc from 69K to 233K (+238%) - Reducing cash cost after by products from $0.92 (2017) to $0.76 (2017 + New Projects) Fully integrated low cost operations Outstanding dividend history Experienced management with proven track record SCC EBITDA and % Margin (in US$ millions) $7,724 $2,945 $2,728 49% 47% $1,945 $2,212 38% 41% $3,292 $4,263 49% 56% 58% 2013 2014 2015 2016 2017 2018 E 2017+New Projects EBITDA EBITDA Margin Cu price $3.32 $3.11 $2.50 $2.21 $2.80 $3.23 $3.00 19

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. Safe Harbour Statement 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 forward-looking 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. 20