1

PRESENTATION TO THE MARKET2Q11

August, 2011

AGENDAOPENINGSECTORINDUSTRYCORPORATERESULTSFINANCIAL AND RISK MANAGEMENTOUTLOOK

2

DIAS D’ÁVILA - BA SANTO ANDRÉ – SP(UTINGA)

SERRA - ESSANTO ANDRÉ – SP(CAPUAVA)3

OPENING

44

New Times and Challenges ...

• From now on, Paranapanema will experience a new phase given the conclusion of an important financial, tax and corporate restructuring process, the company has achieved:

financial strength focus on profitability focus on quality focus on technology  Strategy:1. Investment focused on: gains of scale and competitiveness•  Strong organic growth cycle from 2009 (cathod and Bus Bar expansion)•  Investment Plan approved for the  Border of Directors with longer maturity terms •  Capex 2010-2013 will be of  R$702 million assigned to: 20% expansion in refined copper production capacity  Expansion of over 50% in the production of semi-manufactured copper products (tubes and rolled products)•  Copper recycling:  improvement of concentrate and scrap mix , aiming at changing from a ratio of 83%/17% in 2010 to 

70%/30% by 2012• Precious metals plant (gold and silver)2. Projects: studies in progress for:•  Mineral rights:  In 2011, studies will be conducted on Paranapanema’s 105 mineral rights registered with DNPM, which 

includes  tin  ore,  copper,  chrome,  lead,  tin  alloy,  molybdenum,  gold,  silver,  nickel,  titanium  and  zinc  reserves,  among others,  aiming  at  checking  the  size  of  reserves  and  exploration  possibilities  in  the  States  of  Amapá,  Pará,  Roraima, Rondônia and Rio Grande do Sul.

• Sell off non-operating assets: Grounds, farms and properties, etc.

55

New Times and Challenges ...

3. Disposal of assets not related to our core business4. Strategy and targets:•  Successful achievement of market share target in the domestic market: 67%•  Search for gains of scale and competitiveness , with reduction of fixed costs •  Focus on profitability.5. Strategic partnerships:•  Strategic partnerships being analyzed for the development of research studies related to:  Reduction of costs Guarantee of long term supplies  More competitive prices  6. Organizational restructuring: corporate governance •  New organizational structure with creation and improvement of management committees approved 

by the board of directors. 7. Outlook•  Period from 2010 to 2016 expected to be extremely promising,  especially on the domestic market•   Expected growth  in GDP and sectors demanding copper products,  supported by sports events and 

PAC government project, which will leverage our business. 

6

Copper Demand Drivers and per capita consumption

6

Correlated to …  GDP growth   Global consumption   Growth of emerging countries  

Increase in investment infrastructure

Real estate and civil construction markets

Emergent countries ‘ growth above the global average

Increase in the use of clean energy(solar, wind and ethanol)

Transportation and automotive sectors

• The Brazilian economy will grow at an accelerated pace  that  may  exceed  5%,  but  in  a  sustainable manner.

•  Copper production chain has reported consumption growth from 1% to 2% above the Brazilian growth average. 

•  Local and foreign direct investment in Brazil, which ceased to be “the country of future” to be “the country of present”.

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27.023.3

17.3 16.1 15.9

10.0 8.3 8.0 7.5 7.0 5.5 5.5 5.1 3.7 3.1 2.6 2.2

Per capita Copper Consumption in 2010 (Kg/inhabitant)

7

SECTOR – Copper Segment Players in the Brazilian copper chain Global copper production indicators Global indicators of refined copper production Refined copper industry in Brazil Prospective Demand for Refined Copper

8

Players in the Brazilian Copper Chain

8

Brazilian Copper ChainSectors

Number of Companies

 Revenues in 2009 

(US$ million)

Share %

Mining 3 1,444 22%

Refining 3 1,300 20%

Rolling companies - Semi-manufactured

5 799 12%

Rolling companies - Rods 17 1,138 17%

Wires and Cables 210 1,877 29%

Total 238 6,558 100%

Sources: Sindicel and ABC•  Small number of players at the beginning of the Brazilian copper chain•  Brazilian copper concentrate production is sufficient to meet demand from refiners•  Wires and cables sector includes multinational and family companies •  Only 2 companies are listed on the BM&FBovespa stock exchange (Vale and Paranapanema) •  “Wires and cables” is the largest sub-sector in Brazil’s copper chain

9

Players in the Brazilian Copper Chain

9

Important national and global companies are present in the country, such as:

Sources: Sindicel and ABC

• Mineração Caraíba• Vale• Yamana Gold

MINING

• Cecil• Paranapanema (formerly

Eluma)• Ibrame• Termomecânica

PROVIDERS OF ROLLED SERVICES

FOR SEMI-MANUFACTU

RED PRODUCTS

• Paranapanema (formerly Caraíba Metais)

• Mineração Caraíba• Vale

REFINING

• There are 17 companies installed in the country, 11 of which are also manufacturers of wires and cables.

PROVIDERS OF ROLLED SERVICES

FOR COPPER WIRE RODS

•The segment includes more than 200 small, midsize and large Brazilian companies, as well as multinationals such as: Draka-Telcon, Furukawa, General Cable, Nexans and Prysmian.

WIRES AND CABLES

1010

Global Copper Indicators

• The world production of copper concentrate increased at an average rate of 1.7% p.y.; • The global demand for copper concentrate by refining companies (smelters) rose 1.8% p.y. on average; • The global demand for refined copper grew 2% p.y. on average; and• The world consumption of refined copper increased at an average rate of 2.7% p.y. 

Source: Brook Hunt Sep/10Since 2008 ...

15,7

45

16,0

41

16,2

31

14,2

39

14,1

39

14,6

88

1,506 1,902 1,543

2008 2009 2010

Copper Concentrate Production and Consumption (kt)

Copper Mines Production Demand from Primary RefinersCopper Surplus (deficit)

18,3

36

18,3

55

19,0

67

17,9

85

17,4

92

19,3

03

351 863

(236)

2008 2009 2010

Refined Copper Production and Consumption (kt)

Refined Copper Production Refined Copper Consumption

Copper Surplus (deficit) on the Market

11

Global Refined Copper Indicators

11

• Recovery of cathode premiums vs. copper prices on LME – London Metal Exchange,  expected    for  2011, compared with 2010

• The Treatment Charge (TC) and the Refining Charge (RC)  correspond  to  the  deduction  of  the  discount allowed by miners to refiners on the metal prices on LME

• Average copper prices have been highly volatile   (offer  and  demand  plus  hedge  funds),  having 

increased at an average rate of  46% in 2010 against  2009

• The shutdown/interruption of activities  of smelters in China and  India  favored  the  increase  in TC/RC on the sport market in the second half of 2010

• Prices of refined copper by-products (gold,  silver and sulphuric acid) are also relevant indicators

Source: Brook Hunt - Dec/10, Cru Monitor and LME

115

80

80

100

249 33

2

255 31

0

6,956

5,150

7,535

9,913

2008 2009 2010 2011E

Copper Refiners Indicator

Gross Premium on Cathodes (US$/t) TC/RC (US$/t) Average Copper Price (US$/t)

5,933

7,642 7,712

7,188

7,796

8,443

7,680

3,905

3,428

4,663 5,859

6,648

7,232 7,027 7,243

8,637

9,651 9,152

2.11

1.98 1.92

1.791.74

1.66 1.67

2.282.31

2.07

1.87

1.74

1.801.791.75

1.701.67

1.60

1.55

1.75

1.95

2.15

2.35

-

5,000

10,000

R$

Aver

age

dolla

r US$

/t

Metal Price (LME) x Average Dollar

COPPER Average dollarSources: BACEN and LME

1212

Supply of and Demand for Refined Copper in Brazil

Paranapanema’s strategic actions: Domestic market expansion from 42%(2009) to 60% (2010); Expansion in sales of products with higher value added, such as rods and stretched copper wires; Expansion in installed capacity from 240,000 t/year to ~280,000 t/year until 2013 at Bahia’s unit; CAPEX of ~R$ 702 million in refined copper expansion from 2010 to 2013;   Logistic services to clients, reducing delivery terms, financial costs and transportation management 

risks  with  the  creation  of  CDPC  –  Copper  Products  Distribution  Center  in  Itatiaia,  State  of  Rio  de Janeiro;

Intermodal logistics: cabotage, road and rail transportation.

Apparent Consumption of Refined Copper in Brazil

Products (Thousand t) 2008 2009 2010Change 2010/09

CAGR 2008-10

Refined Copper Production 230.0 227.0 220.0 -3.1% -2.2%Changes in inventories 1.0 (17.0) (4.0) -76.5% NSRefined Copper Imports 251.0 204.0 252.0 23.5% 0.2%Refined Copper Exports (93.0) (89.0) (45.0) -49.4% -30.4%Apparent Consumption in Brazil 389.0 325.0 423.0 30.2% 4.3%Population (Millions) 184.0 186.2 191.0 2.6% 1.9%Per capita Consumption (kg/inhabitant) 2.1 1.7 2.2 26.9% 2.3%Sources: Sindicel - Sindicato da Indústria de Condutores Elétricos, Trefilação e Laminação de Metais Não Ferrosos

do Estado de São Paulo ; ABC - Associação Brasileira do Cobre; MDIC/Secex; IBGE (Evaluated Population).

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SECTOR – Copper Segment Importance of Eluma brand in the segment of semi-manufactured

products Distribution of revenues from semi-manufactured products Outlooks on the consumption of semi-manufactured products

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Eluma Brand: Breakdown of Revenues by Segment

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• Diversification as competitive advantage• Entry in the segment of copper wires and bus bars as from 2009• Semi-manufactured products rose 37% in revenues and 21% in volume in 2010 over 2009

Clothing5%

Automotive11%

Civil Construction

28%

Consumer Electronics

11%

Military Materials

4%

Mechanic and Metallurgy

8%

Others 1%

Refrigeration16%

Resale16%

Net Revenue by Segment 2009

Clothing6%

Automotive10%

Civil Construction

27%

Consumer Electronics

14%

Military Materials

2%

Mechanic and Metallurgy

11%

Others 3%

Refrigeration12%

Resale15%

Net Revenue by Segment 2010

15

•  Favorable Brazilian and global economic outlook for 2009-2016;•  Estimates on demographic trends in Brazil:

• Housing investments:

    

    

 15

Outlooks for Semi-manufactured Copper products

2009 2016 CAGR* p.y.

Population (in millions of inhabitants) 190 209.3 1.2%

# of households (in millions) 57.7 71.4 2.7%

Source: ABRAMAT / FGV - Dec/09

From 2009 to 2016 (In billions of Reais) Annual average  % of GDP

Investments 227.1 6.3%

New housing 147.8 4.1%

Source: ABRAMAT / FGV - Dec/09

*CAGR: Compound average growth rate

16

INDUSTRY – PRIMARY COPPER BUSINESS Copper Production Chain Production Capacity – State of Bahia Production Flow Chart Main Production Cost Pointers Investments in 2010 and 2011/2013 - Opportunities

17

Copper Production Chain

17

Relevant presence in the Copper Division: 98% of total revenuesRelevant presence in the Copper Division: 98% of total revenues

MINING

•Copper extraction from mines;

•Copper ore contents between (0.5% and 2%);

•Processed at the mine, it is transformed into copper concentrate with about 30% of copper, 30% of sulphur, in addition to gold, silver and other elements.

•75% equity purchased on the foreign market (Chile).

FOUNDRY AND REFINING

•Copper concentrate is processed in the foundry, resulting in 99.5% pure anode.

•The electrolytic refining process transforms anodes into 99.99% pure cathodes (purity  needed to obtain optimal electrical features).

PRODUCTION OF DE SEMI-MANUFACTURED COPPER PRODUCTS AND COPPER ALLOYS

• SEMI-MANUFACTURED PRODUCTS

• Continuous lamination process; 

• Products: laminates, bars, wires, seamless tubes and stretched copper wires and copper alloys  (fed by cathodes and scrap);

• Copper alloys + zinc = brass; 

• Copper alloys + tin = bronze.

• MANUFACTURED PRODUCTS

• Products with highest added value ;

• Tubes, connections and “hidrolar” used in civil construction. 

LOGISTICS

•Distribution of Paranapanema  and Eluma copper products through the CDPC(Copper Products Distribution Center) – Itatiaia – State of Rio de Janeiro,  to the Southeast, South and Mid-West Regions;

•Next to major clients;• Fast delivery .

Suppliers

1818

Production Capacity – Dias D’Ávila Unit

Electrolytic Copper ........................ 240,000 t/year

Wire Rods .......................................220,000 t/year

Drawn Wire …................................... 18,000 t/year

Sulphuric Acid .................................570,000 t/year

Oleum ................................................70,000 t/year

Oxygen – Free Rods ......................... …6,000 t/year

Gold*..............................................    2,000 kg/year            2,400 kg/year

Silver*.............................................. 32,000 kg/year            33,500 kg/year

Ferrous Granulated**..................................360,000 t/year * Typical values contained in anode slimes

** Materials used in the segments of cement production, paving and metal structure blasting.

19

Metallurgy Process Flow Chart

19

RECEPTION AND STORAGE OF CONCENTRATE

EXTERNAL SCRAP

ANODES

ELETROLYTIC REFINIG

FOUNDRY

GASESSULPHURIC ACID

PLANT

NICKEL SULPHATE PLANT

FERROUS GRANULATED

DECOPPERIZED SLUDGE

COPPER WIRE RODS

OXYFREE RODS

CATHODES

WIRES

SULPHURIC ACID

ACID 45%

IMPURE NICKEL SULPHATE

OLEUM

UPCAST ROLLED DRAWN

Chile: 70–75%Portugal: 4–6%Brasil: 20–25%

2020

Investments – CAPEX

Investments in 2010: R$51 million88% to Copper segment:•52% to Dias D’Ávila’s unit , R$ 26.7 million, focused on the recovery and tool up of principal equipments and small-scale technical stoppage 

•36% to São Paulo’s units (Tubes  expansion project – Cast & Roll) and Espírito Santo’s unit R$18.4 million

•12% to the Fertilizers segment• Investments from 2011 to 2013• Expansion/modernization  of  refined  copper  production  capacity  to  230  kt  to  280  kt  per year by 2013 – Dias D’Ávila’s unit amount of R$290 million

•New precious metals refining plant: R$28 million• Increase in external scrap processing capacity.• Increasing capacity and technological improvement  of semi-manufactured copperSeamless tubes of 18 up to 36 kt p.y.: R$ 72 million of 2010-12Cold rolling of 28 up to 55 kt p.y.: R$ 142 millionHot rolling of 60 up to 200 kt p.y.: R$ 170 million•Co-generation installation with capacity for 10 MW (uses the heat from boilers)

21

Capital Budget Proposal to 2011 - 2013

21

I. Capital Budget to 2011 - 2013 (revised in June)Investment and maintenance projects R$ million Expected

2011 2012 2013 Total completionI. Projects for expansion of refined copper and technological improvement 129 189 0 318·  Update and expansion of refined copper plant 120 170 0 290 up to Dec, 2013 Installed capacity : 230 to 280 kt per year·  Precious metals refined plant 9 19 0 28 up to Dec, 2012

II. Projects for expansion of copper semi-manufactured 103 153 153 409·   Expansion of seamless copper tubes plant 63 9 0 72 up to June, 2012 Installed Capacity: 18 to 36 kt per year

·   Expansion of rolled copper plant - Phase 1 25 0 0 25 up to Dec, 2013·   Expansion of rolled copper plant (cold rolling process) - Phase 2 5 75 62 142 up to Dec, 2013 Installed capacity: 28 to 55 kt per year

·   Expansion of rolled copper plant (hot rolling process) - Phase 2 10 69 91 170 up to Dec, 2013 Installed capacity: 60 to 200 kt per yearTotal of CAPEX Plan 232 342 153 727

III.  Other projects and maintenance 60 87 81 228Total (I + II + III) 292 429 234 955

II. Funds to sustain the CAPEXMain funds R$ million

2011 2012 2013 Total

·   Own funds earned of operating activities and sell of non-operating assets 75 107 59 241

·   Reinvestiments of own funds (retained earnings) 12 NA NA 12

·   Third-party funding 205 322 176 702Total of funds 292 429 234 955NA: not available

Schedule of disbursement forecast

Installed capacity : production of 2,400 Kg gold ingots per year, 33,500 Kg per year of silver ingots ; in addiction to other metals: platinum and selenium

SECTOR – Fertilizers Segment CIBRAFERTIL Paranapanema’s fertilizers business Simple Superphosphate market in the State of Bahia, Northeast

Region and Brazil Outlook for the Fertilizers sector

23

Fertilizers producing company (SSP in powder or granulate, and NPK) 

BusinessFertilizers productionLocation: 1 plant in the Camaçari Petrochemical Complex (State of Bahia) Logistic advantages (distances)Salvador: 45 KmParanapanema: 5 KmPort of Aratu(State of Bahia): 25 KmPetrobrás Fafen: 2 KmPrincipal Clients: 20 KmTotal Area : 108,336 m²Total Built Area:  17,834 m² 

ProductionSuperphosphate PlantInstalled Capacity: 50  t/hour ~300,000 t /yearProduct:  SIMPLE  SUPERPHOSPHATE (SSP) 18% P2O5 and NPK/NP

Raw materials Phosphate  rock with 30% to 32% 

of  P2O5,  imported  through  the Port  of  Aratu,  from  countries such  Israel,  Togo,  Egypt  and   Algeria

98%  Sulphuric  Acid: Paranapanema,  through  the         acid pipeline 

TradingTrading policy Industrial  sales  of  Simple 

Superphosphate    to  be  used  as raw  material  in  fertilizers mixtures;  reselling by mixers and resellers;  and

Direct  sales  to  farmers  from  the western  region  of  the  State  of Bahia,  southern  region  of  the State  of    Piauí  and  State  of Maranhão.

Principal clients: Farmers: 38%Heringer: 23%Fertipar: 20%Yara: 5%Mosaic: 5%Other : 9%

Fertilizers Division

23

Strategic role in the integration with Paranapanema due to the use of the sulphuric acid generated from the metallurgic process.

24

• The Brazilian production of SSP should reach ~ 7 million t/year in 2020;• The Northeast Region (important agricultural area) will rise from a share of 11% in national 

production in 2010 to 13.5% in 2020, according to estimates;•  Cibrafértil expands its market share in the Northeast Region, of 30.7% in 2010 to 31.3% in 2020 

without  assigning large investments.   

SSP Production Growth Estimates

24

Sources: Ministry of Agriculture and Cibrafértil

0

1000

2000

3000

4000

5000

6000

7000

8000

0

100

200

300

400

500

600

700

800

900

1000

2006 2007 2008 2009 2010* 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020

tho

usa

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ns.

Cib

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/No

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east

th

ou

san

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on

s.

SIMPLE SUPERPHOSPHATE *Until Oct, 2010 and Forecast

Northeast Region CIBRAFERTIL Brazil

2525

Outlook for the Fertilizers Sector

New outlook from 2011 on• Process of consolidation in the sector through several acquisitions that have occurred 

in the sector, such as mines and production plants of Bunge; Fosfertil, Yara and Mosaic 

(all acquired by the Valle that created the Valle Fertilizers);

• Recovery  of  the  sector  in  2011,  both  in  volumes  and  prices,  getting  closer  to  the 

production record reported in 2007; 

• Agricultural sector with growth in GDP over the first half of 2011;

• GDP growth is expected to stabilize around 4% per year in 2011 and 2012;

• Brazil  like  large  exporter  and  producer  of  agricultural  commodities  such  as  cotton, 

sugarcane,  soybeans,  corn,  coffee and meat benefited  for  increase of  global demand 

and population and shortage of farmlands in several countries;

• Estimative fertilizers consumption in Brazil boomed 6% for the 2011 based on harvest  

grains trends 2010/11 and 2011/12.

OPENING

SECTOR

INDUSTRY

CORPORATE

RESULTS

FINANCIAL AND RISK MANAGEMENT

OUTLOOK

27

Recent History

27

2828

Shareholding Structure

Shareholding Structure

Consolidated position of Paranapanema S.A. as of October 31, 2010.

Principal Shareholders

23.96%

17.23%

11.81%EWZ LLC

8.61%Treasury0.01%

Market38.38%

Common Shares319,176,942 (100,00%)

Reference Date: 2011-06-30

2929

Corporate Governance• Share Trading and Relevant Disclosure Policies• Review of the Code of Ethics and Conduct • Creation and restructuring of Advisory Committees to the Board of Directors     Audit Committee     Finance, Risk and Contingency Committee  Compensation and Management Committee• 100% of common shares with 100% Tag Along• Review of the by-laws, aiming at adjusting to the new regulations of the Novo Mercado of BM&FBovespa• Engagement of consulting services for implementation of  internal controls based on SoX principles.  

Capital Markets• Engagement of Market Maker since January 2010• Improved liquidity  with the inclusion of the SmallCap and IBRx100 indices since the first 4-month period of 

2010 • Growth of 126% in the volume of securities traded until October 31, 2010 against the daily average in 2009• Increase of 122% in the financial volume in the same period• Business volume tripled in 2010 against 2009

Corporate Governance and Capital Market

3030

Sustainability and Recognitions

• Adhesion to the Global Compact of the United Nations in June 2008• Sustainability Report based on GRI (Global Reporting Initiative) methodology• Awards (2009-2010) Paranapanema was among the five finalists of IR Magazine in the category “Greatest Developments in Investor Relations (RI)”;

Bahia’s  unit  (Caraíba  brand)  received  two  Top  Social  ADVB  2009  awards  granted  by  the  Brazilian Association of Sales and Marketing Managers;

Eluma brand received the Rui Otake Award granted by Revenda magazine to the best product for the civil construction sector; 4th “Mérito Lojista” Award as one of the best suppliers of civil construction materials; and the ANAMACO award, as best manufacturer of copper tubes and connections. 

• CertificationsISO  9001 – Dias D’Ávila unit (State of Bahia); Utinga and Capuava units (State of São Paulo) and Serra unit (State of Espírito Santo);

ISO 14001 – Dias D’Ávila unit (State of Bahia)  and Serra unit (State of Espírito Santo);ISO 14001 – implementation in progress at the Santo André unit – UTINGA (State of São Paulo)  

Concerns about the quality of products and sustainability... Environment, Community, Clients, Suppliers, Employees and Investors

31

• 103th in the ranking of the 1000 top brazilian companies in 2010

• 5th  top company in net  income among the top brazilian companies  in the 

Steel and Metallurgy sector

• 5th top company in the ranking of the 50 top in the Northeast of Brazil

• The top Steel and Metallurgy industry in the Northeast of Brazil

Highlights

31

Source: Revista Valor 1000 – August, 2011

OPENING

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INDUSTRY

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RESULTS

FINANCIAL AND RISK MANAGEMENT

OUTLOOK

3333

Sales Volume by Segment and Net Revenues

• Copper Segment has 98% of revenues and fertilizers 2% with total growth of 3% in volume sales

• Net Revenue rose 76.6% in 2Q11 in comparison of 2Q10 and 52.3% in 6M11 against 6M10

2Q10 1Q11 2Q11 6M10 6M11

52 56 69

115 125

43 16

47 67 63

Sales Volume by Segment (t)

Copper Fertilizer 2Q10R 1Q11 2Q11 6M10 6M11

629 961 1,110

1,360

2,071

Net Revenue (R$ thousand)

34

2Q10R 1Q11 2Q11 6M10 6M11

629 961 1,110

1,360

2,071

Net Revenue (R$ thousand)

34

Copper Segment Volume

• New and higher added value products

• Decrease  of  10%  in  the  volume  of  semi-manufactured  copper  products  in  6M11 because of downturn of the industrial sector

• Refined  copper  volume  was  increased  16%  in 6M11 from 6M10

• The  highlight was  on  cathodes  sales  up  42%  and by-products  (sulphuric  acid)  of metallurgy  copper from 14%  in 6M11 compared to  the same period last year

2Q10 1Q11 2Q11 6M10 6M11

34 41

54

81 94

Sales Volume of Refined Copper (t)

35

2Q10R 1Q11 2Q11 6M10 6M11

70% 62% 54% 62% 57%

30% 38% 46% 38% 43%

Consolidated Net Revenue by Market (%)

Domestic Market Foreign Market

• Consolidated Net Revenue of R$ 1.1 billion grows 77% in 2Q11 over 2Q10 and 52% in 6M11 over 6M10

• Positive expansion of the foreign market in 2Q11 and 6M11

• Domestic  market  revenues  increased  36%  in  the 2Q11; 41% in 6M11 against 6M10

• Well-done  strategy  focused  on  domestic  market and  observing  the  gradual  growth  of  the  foreign market  whose  volume  increased  by  66%  in  6M11 and 241% in 2Q11 over the same period last year

35

Share of Revenues by Market

2Q10R 1Q11 2Q11 6M10 6M11

440 593 598844

1,191189368 512

516

880

Consolidated Net Revenue by Market (R$ million)

Domestic Market Foreign Market

3636

Gross Profit

• Reduction of Gross profit of $ 18.4 million in 2Q11 because of increase COGS

• Gross profit of $ 68 million in 6M11, affected by lower margins in 2Q11

2Q10R 1Q11 2Q11 6M10 6M11

60 49

18

109

68

Gross Profit (Loss) - R$ million

3737

EBITDA

• EBITDA of R$44 million with a margin lower than in 6M10 from 2.1% of net revenue on account of worst operating performance.

2Q10R 1Q11 2Q11 6M10 6M11

56 44

9

94

54

Adjusted EBITDA (R$ million)

2Q10R 1Q11 2Q11 6M10 6M11

53

36

8

82

44

EBITDA (R$ million)

3838

Net Income

• Net  income  of  R$  7.2  million,  reflecting  increased  sales  of  products  with  lower  added  value  and increased COGS in 6M11

• Shareholders’ equity of R$ 1.7 billion, R$ 5.32 per share in June, 30

• Total assets of R$ 3.6 billion

2Q10R 1Q11 2Q11 6M10 6M11

47 31

(24)

73

7

Net Income (Loss) - R$ million

2Q10R 1Q11 2Q11 6M10 6M11

50 39

(22)

85

17

Adjusted Net Income (Loss) - R$ million

39

OPENING

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OUTLOOK

4040

Risk Management Concept

To define business and

risk management

objectives

Identification and

measurement of risks

To define hedge

objectives and limits

To design and implement

hedge strategies

Performance monitoring

and measurement

4141

Objectives of Integrated Risk Management – Enterprise Risk Management (ERM)

Value to Shareholders

Ensure Revenues

Optimization of Operating Costs

Efficiency of Assets

Meeting expectations

•  Profitability•  Default

•  Contractual obligations

• Cash flow • Compliance/  Regulations

Strategic Risks: Governance, Business Model

Operating Risks: Processes, Personnel, IT, Environment

Financial Risks: Market, Liquidity, Credit

Regulatory Risks: Legal, Tax

4242

Paranapanema Market Risks

Foundry and Refining(Caraíba)

Mining/Scrap

Semi-Manufactured(Eluma)

EBITDACathodes

CathodesPremium (US$)

TC/RC(US$)

CopperPrice

(LME andUS$)

Costs(R$)

EBITDA PMA

Product Premium

(US$)

Sale of Products

Costs(R$)

EBITDAProduct

CopperPrice

(LME andUS$)

CopperPrice

(LME e US$)

Cathode Sales

MPAcquisition

Chart not in scale

time

43

Liquidity Indicators

43

• Capital and Liquidity management keeping  better capital structure to suport the business;• Greater need for working capital for raw materials acquisitions;

Parananapanema S.A. - Consolidated (R$ thousand) 12/31/2010 3/31/2011 Change 6/30/2011 ChangeLoans and financing 763,168 830,873 8.9% 731,045 -12.0%Short term 507,468         569,155         12.2% 492,870         -13.4%Long term 255,700         261,718         2.4% 238,175         -9.0%

Derivative Financial Instruments payable 12,164            1,360             -88.8% 12,762           NS

Available funds (583,319) (367,013) -37.1% (508,859) 38.6%Cash and cash equivalents (126,828)        (32,566)         -74.3% (47,409)         45.6%Financial investments (456,491)        (334,447)       -26.7% (461,450)       38.0%

Derivative Financial Instruments receivable (14,065)          (9,514)            -32.4% (5,847)            -38.5%

(=) Net debt (cash) 177,948 455,706 156.1% 229,101 -49.7%#DIV/0!Shareholders’ equity 1,771,399      1,802,610     1.8% 1,719,948     -4.6%

Shareholders’ equity + net debt 1,949,347      2,258,316     15.8% 1,949,049     -13.7%

Leverage ratio 9.13% 20.18% 121.10% 11.75% -41.7%

Embedded Derivative Financial Instruments payable 130,448         20,410           -84.4% -100.0%(-)Embedded Derivative Financial Instruments receivable -                  (2,434)            0.0% (25,445)         NS(=)Embedded Derivatives in Net debt (cash) 308,396 473,682 53.6% 203,656 -57.0%

Shareholders’ equity + net debt 2,079,795      2,276,292     9.4% 1,923,604     -15.5%

Embedded Derivatives in leverage ratio 14.83% 20.81% 10.59%

44

OPENING

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OUTLOOK

4545

Potential Growth Accelerators

*PAC = Growth Acceleration Program of the federal government Source: Federal Government website

2007 2008 2009

Oil findings in the pre-salt layer

Creation of PAC*1Brazil chosen to host the

2014 FIFA World Cup

Brazil chosen to host the 2016 Olympic

Games

2010

Creation of PAC*2

2007/2010 2011/2014 >2014

28.0

497

317

36

34

23

10

PAC 1 PAC 2 Pre-Salt (PAC 2) Sports

556.0

361.0

Amounts in US$ billions

4646

Growth Acceleration Program

Logistics (highways, railways, ports, airports and waterways) US$31 billion

Energy (Power generation and transmission; production, exploration and transportation of oil, natural gas and renewable fuels)

US$153 billion

Social and Urban (sanitation, housing, subways, urban trains, “Luz para Todos” program and water resources)

US$95 billion

PAC 1 – Investments of US$179 billion – Strong assignment of funds to the economy

Source: Federal Government website

• Investments will stimulate the demand for copper in coming years.• CARAÍBA and ELUMA brands are well positioned to compete on the market...• ... due to the expansion in the capacity to offer high quality products, with adequate profitability.

4747

Potential Growth Accelerators

Period from 2011 to 2014 US$497 billion

Sanitation US$32 billion

Health, day care centers and schools US$13 billion

Housing US$154 billion

Water and “Luz para Todos” electricity program US$17 billion

Transportation US$58 billion

Energy US$223 billion

Period from 2014 on US$319 billion

Transportation US$2.5 billion

Energy US$316.5 billion

PAC 2 – Investments of US$816 billion

Sectors with increased growth potential regarding copper consumptionSource: Federal Government website

4848

Investments related to Sports Events

Brazil will host four major sports events.

2011 – The Army Olympics, in Rio de Janeiro

2014 – FIFA World Cup

2016 – Olympic Games

These important events will result in additional investments of US$33.0 billion.

Source: FGV / Abramat – Dec/09

This requires investments in infrastructure, which will result in copper consumption

2011 2012 2013 2014 2015 2016

2.5

4.2

10.0

6.67.3

2.4

Investments related to the FIFA World Cup and the Olympic Games (US$ billions)

49

• Brazilian macroeconomic outlook favorable in 2010-2016, with GDP growth of ~5% p.a.• Positive Outlook for the demand of copper products • Relevant factors for the Brazilian copper chain due to:

 Investments in infrastructure

     Investments in electricity and clean energy

     Investments in civil construction 

     Gap between housing demand and supply

      2014 FIFA World Cup in Brazil

      2016 Olympic Games in Brazil  • Brazil offers excellent investment opportunities • Growth estimates for BRIC countries • Demand from Asia and other emerging markets, rising above the global average •  Strategic actions planned by the Company to increase profitability (strategic partnerships and copper recycling)

• Opportunity sources: mining rights and sale of non-operating assets

    

 49

Final Considerations