mmx corporate presentation - september 2011
TRANSCRIPT
MMX: Creating choices in seaborne iron ore supply
September, 2011
Disclaimer
This presentation relating to MMX Mineração e Metálicos S.A. (“MMX”) includes “forward-looking statements”, as that term is defined in the Private Securities Litigation Reform Act of 1995, in Section 27A of the Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. All statements other than statements of historical facts are statements that could be deemed forward-looking statements and are often characterized by the use of words such as “projects”, “expects”, “anticipates”, “intends”, “plans”, “believes”, “estimates”, “may”, “will”, or “intends”, or by discussions or comments about our objectives, strategy, plans or intentions and results of operations. Forward-looking statements include projections regarding our operating capacity, operating expenditures, capital expenditures and start-up dates.
By their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. The risk exists that these statements may not be fulfilled or, even if they are fulfilled, the results or developments described in such statements may not be indicative of results or developments in future periods. We caution participants of this presentation not to place undue reliance on these forward-looking statements as a number of factors could cause future results to differ materially from these statements.
Forward-looking statements may be influenced in particular by factors such as the ability to obtain all required regulatory approvals on a timely basis or at all, exploration for mineral resources and reserves, difficulty in converting geological resources into mineral reserves, and changes in economic, political and regulatory conditions. We caution that the foregoing list is not exhaustive. When relying on forward-looking statements to make decisions, investors should carefully consider these factors as well as other uncertainties and events. to make decisions, investors should carefully consider these factors as well as other uncertainties and events.
MMX does not undertake to update our forward-looking statements unless required by law. This presentation is neither an offer to sell (which can only be made pursuant to definitive offering documents) nor a solicitation of an offer to buy any securities in the United States, or any other jurisdiction. The securities referred to herein have not been registered in any jurisdiction, and in particular, will not be registered under the U.S. Securities Act of 1933, as amended, or any applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from such registration requirements.
This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without MMX’s prior written consent.
A Unique Story
A Unique Story
Ingredients for a successful iron ore business
Strong Resource Strong Resource Strong Resource Strong Resource BaseBaseBaseBase
3.1 billion tons of mineral resources certified by SRK, and further mineral potential of up to 1.4 billion tons
GuaranteedGuaranteedGuaranteedGuaranteedLogisticsLogisticsLogisticsLogistics
100% owned Sudeste Superport at 50 Mtpy, expandable to 100 Mtpy, providesgateway to seaborne markets.
Competitive Cost Competitive Cost Competitive Cost Competitive Cost StructureStructureStructureStructure
Integrated infrastructure, with the existing MRS railway providing an efficient link between mine and port
4
Secured Secured Secured Secured OfftakeOfftakeOfftakeOfftake
Operational Operational Operational Operational Track RecordTrack RecordTrack RecordTrack Record
BaseBaseBaseBase potential of up to 1.4 billion tons
62% of future production already committed through long-term contracts.
Experienced management team with brownfield start-up expertise.Current production rate of 10 Mtpy (Serra Azul and Corumbá sites)
Solid Financial Solid Financial Solid Financial Solid Financial Position Position Position Position
Strong balance sheet and project fundamentals to attract competitive fundingCurrent operations provide strong FCF
The only one of its kind
Location MapLocation MapLocation MapLocation Map
• Production committed to important global
consumers – China and South Korea – through
long-term contracts.
• Brownfield start up
• Expanding beyond 50 million tpy in Brazil and
Chile, through fully integrated systems: own
deep water Chinamax enabled superports and
MMX UniquenessMMX UniquenessMMX UniquenessMMX Uniqueness
deep water Chinamax enabled superports and
pipelines.
• Unique port location and strong balance sheet
leverage significant value creation through
consolidation of stranded iron ore resources in
the Southeast of Brazil.
• Strong cash generation.
• Proven track record delivering value to
shareholders
Corumbá SystemCorumbá SystemCorumbá SystemCorumbá System
Chile SystemChile SystemChile SystemChile System
Sudeste SystemSudeste SystemSudeste SystemSudeste System
5
MMXM3: Solid controlling shareholders Highest levels of Corporate Governance
StructureStructureStructureStructure
Bom Sucesso under basic engineering studies
MMX Corumbá MMX Corumbá MMX Corumbá MMX Corumbá MineraçãoMineraçãoMineraçãoMineração
MMX MMX MMX MMX
SudesteSudesteSudesteSudeste
Minera MMX Minera MMX Minera MMX Minera MMX
do Chiledo Chiledo Chiledo Chile
SuperportoSuperportoSuperportoSuperporto
Sudeste Sudeste Sudeste Sudeste
28%28%28%28%Free Float
30% 30% 30% 30% EBX Brasil S/A
14%14%14%14%
42%42%42%42%
Acionista Controlador
16%16%16%16%
70%70%70%70% 100%100%100%100% 100%100%100%100% 99%99%99%99%
Corporate Governance
•• Novo Mercado
• Stringent corporate governance standards
• Single-class of common shares with unrestricted voting rights
• Shareholders have 100% tag-along rights, preemptive rights
• Independent Board Members
• Related-Parties Transaction Disclosure
• Audit Committee
• MMX Policies
• Disclosure and use of information
• Corporate Governance
• Monitoring of Securities Trading
Bom Sucesso under basic engineering studies
Corumbá System started-up in 2005 (Mining)
Assets acquired by MMX (AVG: dec-07; Minerminas: jan-08)
6
100%100%100%100% 100%100%100%100%
SerraSerraSerraSerra
AzulAzulAzulAzul
Bom Bom Bom Bom
SucessoSucessoSucessoSucesso
Senior Management Team More than 135 years of iron ore experience
� 16 years in the mining industry at Vale , Rio Tinto and Caemi
� Former equity research director of Credit Suisse from 2005 until 2009,
responsible for coverage of mining and steel companies in Latin America
Roger DowneyRoger DowneyRoger DowneyRoger DowneyChief Executive and IR Officer
� More than 40 years of experience in the mining sector
� Held senior executive positions in companies such as Vale, S.A Mineração da
Trindade (SAMITRI), Ferteco Mineração, GIIC (Vale subsidiary) and AVG
Chequer H. B. Chequer H. B. Chequer H. B. Chequer H. B. HabibHabibHabibHabibChief Commercial Officer
� Approximately 25 years of experience in the mining sector
� Held senior executive and board positions in companies such as Vale ,Caemi
Group and MRS Logística
Guilherme F. Guilherme F. Guilherme F. Guilherme F. EscalhãoEscalhãoEscalhãoEscalhãoChief Financial Officer
Trindade (SAMITRI), Ferteco Mineração, GIIC (Vale subsidiary) and AVG
Mineração
Luciano C. Ferreira Luciano C. Ferreira Luciano C. Ferreira Luciano C. Ferreira Chief Port Operations Officer
� More than 25 years of experience in mining, port and steel sectors
� Held senior executive positions in companies such as Caemi, Vale and
Companhia Siderúrgica Pecém
AntônioAntônioAntônioAntônio A. Schettino A. Schettino A. Schettino A. Schettino FróesFróesFróesFróesChief Operations and ProjectDevelopment and ImplementationOfficer
� Around 30 years of experience in the mining sector
� Held senior executive positions in companies such as Caemi, Odebrecht, CSN
and Votorantim Siderurgia
7
Financial highlights
Sales (Sales (Sales (Sales (millionmillionmillionmillion tons)tons)tons)tons)EBITDA (R$ EBITDA (R$ EBITDA (R$ EBITDA (R$ millionmillionmillionmillion))))
1.3 1.3 1.3
0.5 0.3 0.8
0,0
1,0
2,0
3,0
2Q10 1Q11 2Q11
MI ME
55,2
39,7
73,1
0
30
60
90
2Q10 1Q11 2Q11
G&AG&AG&AG&A / Gross / Gross / Gross / Gross RevenueRevenueRevenueRevenue (%)(%)(%)(%)Net Net Net Net ProfitProfitProfitProfit (R$ (R$ (R$ (R$ millionmillionmillionmillion))))
8
2Q10 1Q11 2Q11
(38.5)
63.8 89.6
-50
0
50
100
2Q10 1Q11 2Q11
13%13%13%13%15%15%15%15%
9%9%9%9%
0%
5%
10%
15%
2Q10 1Q11 2Q11
2Q10 1Q11 2Q11
Sudeste SystemSerra Azul & Bom Sucesso
MMX Sudeste: Integrated logistics link brownfieldstart up to seaborne markets
Iron ore production connected to Sudeste Superport by MRS Railway
10
Serra Azul
Growth through consolidation while leveraging existing infrastructure
11
Serra Azul
• Competitive production costs and integrated logistics
• High-quality iron ore to supply the seaborne market
• 65% of production already secured by long-term contracts
• Consolidation opportunities and synergies drive additional
value creation
• Significant growth potential through geographic expansion
HighlightsHighlightsHighlightsHighlights
Execution UpdateExecution UpdateExecution UpdateExecution Update
• Preliminary License in August 2011
• SRK resources audit update: 1.7 billion tons plus a potential
457 million tons
• Drilling performed: 31 thousand meters
• Equipment procurement underway
• Basic engineering phase complete
Current Sinter Feed QualityCurrent Sinter Feed QualityCurrent Sinter Feed QualityCurrent Sinter Feed Quality
Fe: 64.5% P: 0.06%
SiO2: 4.5% Mn: 0.02%
AL2O3: 1.20% H2O: 8.5%
Fe: 67.0% P: 0.03%
SiO2: 3.5% Mn: 0.05%
AL2O3: 0.5%
Future Pellet Feed QualityFuture Pellet Feed QualityFuture Pellet Feed QualityFuture Pellet Feed Quality
Serra Azul
12
Serra Azul
Friable Itabirite
Compact Itabirite
Geological Section
13
Serra Azul
Pau de Vinho
Pit
New Plant, Long distancebelt conveyor, transmission line andwater pipelines, Stockyard and LoadingTerminal
Serra Azul Expansion Project
14
Serra Azul
ProductionProductionProductionProduction CapacityCapacityCapacityCapacity ((((MtpyMtpyMtpyMtpy) *) *) *) *CAPEX (R$ CAPEX (R$ CAPEX (R$ CAPEX (R$ BillionBillionBillionBillion))))
1.2
1.8
21.721.721.721.7
25.325.325.325.3 25.325.325.325.3 25.325.325.325.324242424 24242424
* Time adjusted
0.4
0.6
2011 2012 2013 2014
8.78.78.78.7 8.78.78.78.7 8.78.78.78.7
0.60.60.60.6 1.31.31.31.3 1.31.31.31.3
1.31.31.31.3 1.31.31.31.3 1.31.31.31.3 1.31.31.31.3
20.420.420.420.424242424 24242424 24242424
24242424 242424249.39.39.39.3 10101010 10101010
Current Capacity GVA Expansion
15
Usiminas Agreement
Sudeste Sudeste Sudeste Sudeste SuperportSuperportSuperportSuperport HandlingHandlingHandlingHandlingPau de Vinho Pau de Vinho Pau de Vinho Pau de Vinho JointJointJointJoint MiningMiningMiningMining
• SRK resources audit : 810 million tons plus a
potential 75 million tons
• Pau de Vinho target production: 8 Mtpy
• Significant synergies with current mining
operations at Serra Azul
• Handling fee: USD 12.63/ton adjusted by US-
PPI
• Volumes:
• 2012 = 3 Mtpy
• 2013 = 4 Mtpy
• 13.5% of production at Pau de Vinho will be
delivered to Usiminas
• MMX will be responsible for the licensing,
CAPEX and operation for 30 years
• 2013 = 4 Mtpy
• 2014 = 8 Mtpy
• 2015 = 12 Mtpy
• 2016 = 12 Mtpy
• 80% Take-or-Pay
• Usiminas can renew the contract for 1 to 5
years
16
MinerivestMinerivestMinerivestMinerivest DealDealDealDealHighlights
Sudeste Sudeste Sudeste Sudeste SuperportSuperportSuperportSuperport HandlingHandlingHandlingHandlingIronIronIronIron Ore Ore Ore Ore PurchasePurchasePurchasePurchase
• Price: USD 64.00/dry ton (63.5% Fe content)
• Readjustment in proportion to the change in
the price of iron ore in the seaborne market
(relative to the 2Q11)
• Price: USD 19.77/ton (tariff net of taxes: USD
16.95/ton)
• Readjustment in proportion to the change in
the price of iron ore in the seaborne market(relative to the 2Q11)
• Price floor: USD 30/dry ton
• Volumes: up to 5 Mtpa valid for 10 years from
the start of operations at the Sudeste Superport
(50% of Minerinvest production)
• Delivered to a railroad terminal on MRS
• 40% of the annual volume will be sold to a large
European steel producer at market price.
the price of iron ore in the seaborne market
(relative to the 2Q11)
• Price floor: USD 15.90/ton (tariff net of taxes:
USD 13.63/ton)
• Volumes: up to 5 Mtpa valid for 10 years from
the start of operations at the Sudeste Superport
(50% of Minerinvest production)
• 80% Take-or-Pay
17
MinerivestMinerivestMinerivestMinerivest DealDealDealDealMining rights at the Iron Ore Quadrangle: quality resources, mining traditionand proximity to MRS railway
Minerinvest Iron Ore mining rights location
18
Bom Sucesso
HighlightsHighlightsHighlightsHighlights
•• High-quality iron ore with high magnetite content
to supply the seaborne market
• Production target: 10 Mtpy
• 65% of production already committed through
long-term contracts
Execution UpdateExecution UpdateExecution UpdateExecution UpdateExecution UpdateExecution UpdateExecution UpdateExecution Update
•• Conceptual engineering
• EIA RIMA filed in November, 2010
• SRK resources audit update: 365 million tons plus
a potential of 741 million tons
• Public Hearing: June 2011
Expected Quality Expected Quality Expected Quality Expected Quality –––– OuroOuroOuroOuro PretoPretoPretoPreto pilot plant test pilot plant test pilot plant test pilot plant test workworkworkwork
Fe: 67.2% P: 0.033%
SiO2: 2.5% PPC: 0.6%
AL2O3: 0.5% FeO: 8.8% Bom Sucesso Unit
19
Bom Sucesso
ProductionProductionProductionProduction CapacityCapacityCapacityCapacity ((((MtpyMtpyMtpyMtpy) *) *) *) *CAPEX (R$ CAPEX (R$ CAPEX (R$ CAPEX (R$ MillionMillionMillionMillion))))
6,56,56,56,5
9,89,89,89,8 10101010
1,424
* Time adjusted
2015 2016 2017...
5 38
2010 2011 2012-2016
20
Sudeste Superport
•• 50 mtpy capacity, expandable to 100 mtpy
• Capesizes handling
• Loading: 2 ship loaders of 25 Mtpy each
• Fully funded (BNDES)
• Start-up forecast: 3Q12
• 100% of equipment already ordered
HighlightsHighlightsHighlightsHighlights
• 100% of equipment already ordered
• Licensing for 100 Mtpy underway
Execution UpdateExecution UpdateExecution UpdateExecution Update
•• Fully licensed to 50 Mtpy
• Navy Approval to 100 Mtpy
• Tunnel: 95% meters already done as of August
30th
• Tunnel: average speed of excavation: 7 meters
per daySudeste Superport
21
Sudeste Superport
AdministrativeAdministrativeAdministrativeAdministrativeBuildingsBuildingsBuildingsBuildings IronIronIronIron Ore Ore Ore Ore YardYardYardYard El. 32El. 32El. 32El. 32 IronIronIronIron Ore Ore Ore Ore YardYardYardYard El. 06El. 06El. 06El. 06
RailRailRailRail LoopLoopLoopLoopRailcarRailcarRailcarRailcar DumperDumperDumperDumper
TheTheTheThe onlyonlyonlyonly bulkbulkbulkbulk terminal in terminal in terminal in terminal in thethethethe SepetibaSepetibaSepetibaSepetiba BayBayBayBay to to to to receivereceivereceivereceive a a a a licenselicenselicenselicense sincesincesincesince CSNCSNCSNCSN ´́́́s s s s ironironironiron ore terminalore terminalore terminalore terminal
22
Sudeste Superport
FundingFundingFundingFunding: BNDES FINAME : BNDES FINAME : BNDES FINAME : BNDES FINAME ---- PSI PSI PSI PSI CAPEX (R$ CAPEX (R$ CAPEX (R$ CAPEX (R$ MillionMillionMillionMillion))))
• Total Amount: R$ 407.1 mm
• Interest Rate per Year: 4.50%
• Amortization: 8 years
• Grace Period: 2 years
1.282
FundingFundingFundingFunding: BNDES FINEM : BNDES FINEM : BNDES FINEM : BNDES FINEM
• Total Amount: R$ 805.1 mm
• Interest Rate per Year: TJLP + 2.18%
• Amortization: 10 years
• Grace Period: 2 years86
40 63
286
2007 2008 2009 2010 2011/2012
23
Chile
Chile
Project HighlightsProject HighlightsProject HighlightsProject Highlights
•• One of the lowest cost additions to seaborne
supply
• High-quality iron ore with magnetite content to
supply the seaborne market
• Production target: 10 Mtpy
• 50% of production already committed through
long-term contracts
•• 460 Mt of iron ore potential already secured
Execution UpdateExecution UpdateExecution UpdateExecution Update
•• Punta Cachos Port fully licensed
• Drilling performed: 19 thousand meters
• Water permits
Expected Quality: Preliminary tests in Expected Quality: Preliminary tests in Expected Quality: Preliminary tests in Expected Quality: Preliminary tests in OuroOuroOuroOuro PretoPretoPretoPreto
Fe: 67.50% SiO2: 2.5%
Al2O3: 0.85% P: 0.015% Chile
25
Chile
Punta Punta Punta Punta CachosCachosCachosCachos PortPortPortPort
• EBX has 240,000 ha property in the Atacama region
• Fully Licensed Port
• Deep water port – 28 meter draft: Chinamax vessels
• Water availability with permits
• MPX Thermal Power Plant
BERTH N° 1 – COAL
BERTH N° 2 – IRON ORE
BERTH N° 3 – COPPER
26
Corumbá
Corumbá
HighlightsHighlightsHighlightsHighlights
• Unique high quality lump
• Current Capacity: 2.1 Mtpy
• Long-term contracts signed with local and
international barge operators
• 77% of production already committed through
long-term contracts
• SRK audit resources report: 192 million tons
plus a potential of an additional 123 million
tons
Chile
28
Iron ore volume growth by System
Estimated Production Capacity (Mtpy)
35.3
30
35
40Chile Corumbá Sudeste
1.3*
Pau de Vinho + Minerinvest + Consolidation provides further volume potential
0
10
2.1 2.1
8.7
0
5
10
15
20
25
2011 2016E
34
29
Investor RelationsRoger Downey – CEO & IROCamila Anker– IR Manager
Rafaela Gunzburger – AnalystBeatriz Yoshinaga - Assistant
Tel. + 55 21 2555-6197/ [email protected]