METALLOINVEST Global high value-added iron ore producer

Transcription

1 METALLOINVEST Global high value-added iron ore producer Renaissance Capital 16th Annual 1:1 Investor Conference June 25-26, 2012

2 Disclaimer These materials contains certain forward-looking statements, particularly those relating to anticipated demand and consumption, global economic recovery, commodity prices, management aims and objectives, strategy, production, anticipated investment and the anticipated completion of previously announced transactions. Metalloinvest will not update these statements to reflect events and circumstances occurring after the date hereof. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that will or may occur in the future. Actual results may differ from those expressed in such statements depending on a variety of factors, including future levels of industry product supply, demand and pricing, operational problems, general economic conditions, political stability and economic growth in relevant areas of the world, changes in laws and governmental regulations, exchange rate fluctuations, development and use of new technology, changes in public expectations and other changes in business conditions, the actions of competitors, natural disasters and adverse weather conditions, wars and acts of terrorism or sabotage, other factors discussed elsewhere in this document, as well as many other risks affecting Metalloinvest and its operations. These materials does not constitute or form part of any advertisement of securities, any offer or invitation to sell or issue or any solicitation of any offer to purchase or subscribe for, any securities of Metalloinvest in any jurisdiction, nor shall they or any part of them nor the fact of their presentation, communication or distribution form the basis of, or be relied on in connection with, any contract or investment decision. No representation or warranty, express or implied, is given by Metalloinvest, its affiliates or any of their respective advisers, officers, employees or agents, as to the accuracy of the information or opinions or for any loss howsoever arising, directly or indirectly, from any use of these materials or their contents. Assumes the following RUB/USD FX rates: Daily average over the period: , , , End of the period: , , ,

3 Metalloinvest at a glance 2

4 Metalloinvest s key strengths World s 2 nd largest iron ore reserve base Best-in-class profitability metrics Top-5 global player and an uncontested regional champion Global leader in iron ore production cost efficiency Largest supplier of merchant HBI in the world Strategic location of assets in the European part of Russia 3

5 Top tier iron ore reserve base Cliffs Natural Resources 0.8 bn t Ferrexpo 1.5 bn t Metalloinvest 14.9 bn t c. 150 years ENRC 1.4 bn t - estimated reserve life based on 2011 iron ore mined production, CRU Vale 15.1 bn t c. 50 years Kumba 0.8 bn t Note: Proven and probable reserves on a JORC equivalent basis (1 July 2010 for Metalloinvest, others CRU, companies data, 2011) FMG 2.3 bn t c. 40 years BHP Billiton 3.3 bn t c. 20 years Rio Tinto 2.8 bn t c. 15 years 4

6 Leading position in high value-added iron ore products Iron ore production Pellets production mn t mn t Vale 45 Vale 323 Cliffs Natural Resources 36 Metalloinvest 22 Rio Tinto 192 LKAB 21 Metinvest 13 BHP Billiton 174 Merchant HBI production FMG 54 Metalloinvest 36% Metalloinvest 40 Other global producers Source: CRU, Company data, 2011 Note: Production figures for Vale and BHP Billiton include their share in Samarco (50/50 JV of Vale and BHP Billiton) Source: CRU, Midrex, Company data,

7 Strong financial performance Adjusted EBITDA USD bn Adjusted EBITDA breakdown by segment 2011 outer circle 2010 inner circle % 81% Adjusted EBITDA margin % 3% 1% 15% 2% 3% 18% % Mining Steel Trading Transportation and all other segments Note: Adjusted EBITDA includes discontinued operations Note: Transportation segment primary reflects Metalloinvesttrans, which was disposed in May 2012 (page 42) 6

8 Our Business 7

9 Regional leadership in iron ore Lebedinsky GOK The 1 st commercial iron ore producer in the CIS The 1 st producer of HBI in Europe and the CIS The best quality of iron ore products vs. regional peers Reserves Iron ore Pellets HBI 4.2 bn t 21.8 mn t 8.9 mn t 2.4 mn t OEMK OEMK employs advanced technology, including DRI and electric-arc smelting technology, allowing it to produce steel products without coking coal Low cost production 100% capacity utilization through the crisis Pellets DRI Crude steel 3.7 mn t 2.7 mn t 3.3 mn t Mikhailovsky GOK The largest iron ore deposit in the CIS RUSSIA The 2 nd largest producer of iron ore products in Russia (after Lebedinsky GOK) The pioneer in Russia in terms of flotation technology Reserves Iron ore Pellets 10.7 bn t 16.4 mn t 9.8 mn t Note: Proven and probable reserves as of 1 July Production volumes stand for 2011 Ural Steel Large Russian steel production facility in terms of merchant pig iron, niche steel and finished products output Self-sufficiency of electric power up to 50% Hot metal Crude steel 2.5 mn t 2.6 mn t 8

10 Product mix concentration on high value-added products Iron ore concentrate Pellets HBI / DRI Steel products Fe content: 65-70% Fe content: 63-66% Fe content: 90% (pure Steel products for: (oxide) (oxide) iron), direct scrap o Bridge substitute manufactures o Automobile Utilization: Iron & Steel Works (sinter plant) Utilization: Iron & Steel Works (Blast Furnace Utilization: mini-mills (EAF) / Iron & Steel manufactures o Pipes manufactures feed, no sintering Works (BOF) o Hardware industry required) Environment friendly products o Rolling-bearing industry 9 9

11 enable the Group to show strong production volumes 65-70% of iron ore is processed into Pellets and HBI/DRI mn t Q Iron ore Pellets HBI/DRI Crude steel 10

12 Flexibility in shipments among major iron ore markets Iron ore, pellets, HBI/DRI 2011 mn t Q % 52% 4% 35% 1% 24% 3% 25% 4% 18% Russia & CIS China S-E Asia Europe Middle East 11

13 Diversification and improvement of logistics Iron ore, pellets, HBI/DRI shipments to China Iron ore mining Steelmaking Railroads Ports mn t Q Overland stream % of total - 26% 29% 42% 36% Riga Ventspils Asia overland stream Marine stream % of total 100% 74% 71% 58% 64% Total Yuzhniy Odessa Novorossiysk Zabaikalsk Border crossing point Source: Company data Railroad shipments of iron ore increased as the result of railroad capacity release due to redirection of oil shipments after ESPO pipeline construction The Company enjoys the discount for railroad transportation to China for 4 th year in a row (reviewed on an annual basis) Railroad route to China offers significant savings on transportation costs Asia marine stream Diversification of transportation routes minimizes logistic risks and lowers exposure to volatile sea freight rates 12

14 Strategy 13

15 Strategy highlights Iron ore HVA production increase HBI/DRI & Pellets Maintain global leadership in HBI market Iron ore reserve base development Exposure to Emerging markets Focus on new customers & logistics Cost efficiency improvements Application of new technologies Production facility improvements & economy of scale Steel segment profitability growth Product mix widening & focus on niche markets Installation of new high-efficiency equipment M&A activity Financial investments in Metals & Mining industry Diversification of commodity portfolio Note: HVA means high value-added products 14

16 Medium term targets Production volumes, mn t Iron ore % Pellets % HBI/DRI % E 15

17 Key projects pipeline Coke-oven battery #6 at Ural Steel Pellet Plant #3 at MGOK HBI-2 plant modernization at LGOK HBI-3 plant at LGOK Iron ore production increase at LGOK Production optimization (brownfield) at OEMK Capacity Capacity Capacity Capacity Capacity Capacity 0.7 mta 5.0 mta 0.2 mta 1.8 mta 1.0 mta 0.5 mta of coke of pellets of HBI of HBI of iron ore of crude steel 16

18 Udokan copper deposit Location Project timeline RUSSIA Udokan Copper deposit acquisition EU 2010 Prefeasibility Study completion MENA CHINA JAPAN Jul Mineral resources assessment by SRK Consulting Sep Memorandum of intention with Russian Bank VEB regarding project financing Key highlights One of the largest undeveloped copper deposits globally Favourable location: close proximity to Chinese market Access to infrastructure: 30 km to Baikal-Amour Mainline Mineral Reserves (proven & probable): 0.8 bn 1.24%. Contained copper 9.88 mn t Mineral Resources (measured, indicated, inferred): 2.7 bn Contained copper 25.7 mn t Target production capacity 0.5 mn t per annum Oct Nov Dec Cooperation Agreement with Industrial and Commercial Bank of China (ICBC) Mineral reserves assessment by SRK Consulting Udokan pilot plant acquisition Bankable Feasibility Study 17

19 Investing in new cutting edge technologies Nautilus Minerals Inc. is the first company to commercially explore the seafloor for massive sulphide systems, a potential source of high grade copper, gold, zinc and silver. Nautilus is developing a production system using existing technologies adapted from the offshore oil and gas industry to enable the extraction of these high grade Seafloor Massive Sulphide systems on a commercial scale. Major Shareholders Metalloinvest 21.0% Anglo American plc 11.1% Mawarid Mining LLC 10.0% A new vision in mining 2.0% 7.0% ~ Copper grade, % Nautilus Minerals Inc. (6.80%) ~ 1.6% Udokan reserves (1.24%) 1.2% 1.0% 1.0% 1.0% 1.0% Udokan resources (0.95%) 0.8% 0.7% 0.7% 0.7% 0.6% 0.6% 0.4% Nautilus Minerals Avg grade (%Cu) of land based projects Inc. Source: Nautilus Minerals Inc., Company data 18

20 Corporate Governance & Transparency 19

21 Board of Directors renewal Three independent directors out of 12 members were appointed to the Board in 2011 Ken Costa Independent Director Vadim Levin Independent Director Chairman of Lazard International. Previously worked at UBS Investment bank at senior management positions 1976 joined SG Warburg & Co Ltd and remained with its successor firms SBC Warburg and UBS Warburg 1976 obtained the Masters of Law Degree and the Certificate in Theology at Queens' College, Cambridge PhD in Economics First deputy CEO - Chairman of the Management Board at VTB Bank First deputy CEO and a member of Board of Directors at Vnesheconombank Occupied several management positions in Bank Imperial Worked as associate professor at St-Petersburg University of Economics & Finance Nikolay Krylov Independent Director 2005 Head of the Russian practice at Winston & Strawn LLP 2000 joined Winston & Strawn LLP, an international law firm worked at Paul, Weiss, Rifkind, Wharton & Garrison LLP and Cadwalader, Wickersham & Taft LLP, New York-based international law firms 1994 Doctor of Law and received a J.D. from Yale Law School 20

22 Organizational structure General Meeting of Shareholders Chairman Farhad Moshiri Board of Directors 3 of 12 members are independent directors CEO Eduard Potapov Audit, finance and budgeting committee Head Nikolay Krylov (independent director) Members Vadim Levin (independent director), Pavel Mitrofanov Strategy committee Head Ken Costa (independent director) Members Eduard Potapov, Nazim Efendiev Management - the main reporting lines 21

23 Transparency developments 1. IR department establishment 2. Regular disclosures Operating results quarterly Financial results & conference-call semiannually 3. Conferences and meetings with investors Nov JP Morgan EM Credit Conference Jan Troika-Sberbank The Russia Forum Feb Capital Markets Day, Moscow May 2012 Non-Deal Road Show, Asia 4. Corporate web-site improvements 5. Initiation of coverage by fixed income analysts J.P. Morgan Mitsubishi UFJ Securities Societe Generale UBS Troika Dialog VTB Capital 22

24 Financials 23

25 Summary USD mn Change Key financials USD bn Revenue 9,919 7, % Gross profit 5,433 3, % Adjusted EBITDA 3,873 2, % Adjusted EBITDA margin 38.7% 35.8% +2.9 ppt 7.2 Net Income 1,432 1, % Capex % Short-term debt 1,117 1, % Total Debt 5,598 4, % Total Debt / Adjusted EBITDA 1.45x 1.60x -9.4% Cash & equivalents 1, x Net Debt 4,432 3, % Revenue 0.8 EBITDA Net Debt / Adjusted EBITDA 1.14x 1.54x -26.0% Notes: Adjusted EBITDA is calculated as described in Note 6 to Metalloinvest s FY 2011 Financial statements Net Income is defined as Profit for the period (includes discontinued operations) Capex means purchase of property, plant and equipment and intangible assets 24

26 Metalloinvest is Free Cash Flow Positive USD mn ,000 3,500 3,000 2,500 2,000 2,588 (397) (299) (259) 3,873 (383) (669) 100 (776) (30) 2,115 1,500 1, (412) (307) (274) 16 (392) (60) 1,181 Adjusted EBITDA 2009 Interest Taxes Chg. in NWC Capex Other FCF 2009 Adjusted EBITDA 2010 Interest Taxes Chg. in NWC Capex Other FCF 2010 Adjusted EBITDA 2011 Interest Taxes Chg. in NWC Capex and acquisition of assets* Other FCF 2011 * Purchase of LebGOK-DSF, Dorstroymaterialy and other assets Notes: FCF is defined as cash flow from operations plus cash from asset disposals and interest income received, less purchases of property, plant and equipment, less intangible assets and acquisitions of subsidiaries; Norilsk Nickel stake is an available-for-sale financial asset and is not accounted for in FCF calculations 25

27 Debt profile Maturity schedule Breakdown by source Q USD bn 16% PXF Q2 12 Q % 55% Eurobonds Sberbank Q % Others Breakdown by currency 3% % USD RUR Total Debt: USD 5.6 bn % EUR Note: Debt Profile is represented as of December 31,

28 Financial policy Prudent Debt Management Modest Dividends 1.0 x < Total Debt / EBITDA < 2.0 x Extension of average maturity Liability structure is consistent with cash inflows of the Company Historically modest (USD 267 mn in 2011; USD 211 mn in 2010; nil in 2009) Dividends are accrued after all the investment and financial targets of the Company are met (historical payout < 25%) Investments Cap of USD mn per annum Only high return investments Very conservative M&A policy Liquidity Sustaining of committed credit lines Availability of high-liquid instruments (Norilsk Nickel stake, etc.) 27

29 Summary 28

30 Metalloinvest s key strengths Top tier global iron ore producer #2 iron ore reserve base in the world #5 global iron ore player & regional champion Focus on high valueadded iron ore products #3 producer of pellets in the world #1 supplier of merchant HBI in the world Diversified customer base with focus on EM Direct sales to world s largest steel producers Development of logistics solutions Strong financial performance #1 cost curve ranking in pellets & HBI Best-in-class profitability metrics Record financial results in 2011, despite iron ore prices not being at their historical highs Source: CRU, Company data, Midrex 29

31 Appendix 30

32 Key milestones of Metalloinvest s history Metalloinvest Holding s shareholders acquire OEMK and LGOK LGOK commissions its first HBI production facility Metalloinvest Holding s shareholders acquire a 50% stake in Ural Steel OEMK commissions a new steel rolling mill 350 Metalloinvest Holding s shareholders increase their stake in Ural Steel to 100% and acquire 97% of shares in MGOK LGOK begins construction of its 2 nd HBI production facility Metalloinvest s assets (MGOK and Ural Steel) are consolidated with JSC Gazmetal (LGOK and OEMK) to form one holding group under the Metalloinvest brand 2007 The Group s operational HBI #2 at LGOK began production (capacity of 1.4 mt) 2008 Reconstruction of the steel making and rolling mills at Ural Steel is completed MGOK acquires the license to develop the Udokan copper field 2010 IMC confirmed the increase of iron ore JORC reserves from 13.8 bn t to14.9 bn t 2011 The Group s debut issue of USD 750,000, % guaranteed notes due The Group s debut issue of RUR 25,000,000, % ruble bonds due 2022 (put option in 2015) 31

33 Board of Directors Farhad Moshiri Chairman Eduard Potapov CEO METALLOINVEST Management Company LLC Andrey Varichev CEO METALLOINVEST Holding Company OAO Ken Costa Independent Director Nikolay Krylov Independent Director Vadim Levin Independent Director Pavel Mitrofanov Chief Financial Officer METALLOINVEST Management Company LLC Nazim Efendiev Chief Commercial Officer METALLOINVEST Management Company LLC Andrey Prosyanik Deputy CCO METALLOINVEST Management Company LLC Andrey Ugarov Ex-Chief Production Officer METALLOINVEST Management Company LLC Sergey Shuvalov Chief Legal Officer METALLOINVEST Management Company LLC Yuriy Nadeev Chief Security Officer METALLOINVEST Management Company LLC 32

34 Our business model M i n i n g S e g m e n t P r o d u c t i o n S a l e s HBI: 2.4 mn t External customers: 29 mn t Iron ore: 12.8 mn t Pellets: 13.6 mn t HBI: 2.2 mn t Other: 0.4 mn t Pellets: 18.7 mn t Iron Ore: 40.1 mn t Iron Ore products: 36.5 mn t S t e e l S e g m e n t Intragroup shipments: 7.5 mn t Iron ore: 5.6 mn t Pellets: 1.7 mn t HBI: 0.2 mn t Steelmaking: 5.8 mn t of crude steel External customers: 6.4 mn t DRI: 0.1 mn t Pig Iron: 1.1 mn t Steel Products: 5.2 mn t Data as of

35 Debut RUR bond issue Key parameters Date March 2012 Maturity 10 years Initial price range was set at % Investors placed 150 orders Order book was oversubscribed by 3 times Investor base Put option 3 years Amount RUR 25,000 mn Coupon rate 9.0% 18% 49% 27% 6% Asset Management Foreign banks Russian banks Hedge funds 34

36 Disposal of Metalloinvesttrans Target Metalloinvesttrans Fleet 8,256 wagons owned Price USD 540 mn Eduard Potapov, Chief Executive Officer of Metalloinvest, said: The sale of MIT will enable Metalloinvest to free up capital. As a result of the deal, Metalloinvest's subsidiaries will be provided with the integrated solution allowing them to use the railcar fleet of one of Russia's largest and most efficient railway operators. Apr. 27, 2012 Transportation agreement (safety of shipments) Long-term contract for transportation of the Company s products 35

37 Thank You! For any questions, please contact Investor Relations Department: Artem Lavrischev Head of Investor Relations T: +7 (495) , ext E: Olga Vanko Senior Specialist T: +7 (495) , ext E: