2. COBRE DEL MAYO 2
Disclaimer and Forward Looking Statements
The information contained herein has been prepared to assist interested parties in making their own evaluation of the Company and does not purport to be all inclusive or to contain
all of the information that a prospective purchaser may desire. You should refer to the information in the Preliminary Offering Circular before making any investment decision to
purchase the offered Notes.
Forward Looking Statements
This Investor Presentation and other communication with investors include forward-looking statements. These forward- looking statements include, without limitation, statements
regarding our future financial position and results of operations, our strategy, plans, objectives, goals and targets, future developments in the markets in which we participate or are
seeking to participate or anticipated regulatory changes in the markets in which we operate or intend to operate. In some cases, forward-looking statements can be identified by
terminology such as “aim,” “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “forecast,” “guidance,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should” or
“will” or the negative of such terms or other comparable terminology.
By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We
caution potential investors that forward-looking statements are not guarantees of future performance and are based on numerous assumptions and that our actual results of
operations, financial condition and liquidity may differ materially from (and be more negative than) those made in, or suggested by, the forward-looking statements contained in this
Investor Presentation. In addition, even if our results of operations, financial condition and liquidity and the development of the industry in which we operate, are consistent with the
forward-looking statements contained in this Investor Presentation, those results or developments may not be indicative of results or developments in subsequent periods.
Important factors that could cause these differences include, but are not limited to:
In light of these risks, uncertainties and assumptions, the forward-looking events described in this Investor Presentation may not occur. We undertake no obligation to update or
revise any forward-looking statement, whether as a result of new information or future events or developments.
• risks related to our liquidity;
• risks related to the price of copper;
• risks related to our competitive position;
• risks related to our strategy and expectations about growth in demand for copper
and business operations, financial condition and results of operations;
• risks related to our operations, including the quality of our ore body, our ability to
predict the nature, metallurgy, mineralization and alteration of the ore body and the
effectiveness of our heap leaching process;
• risks relating to the operation by Kupari of its flotation plant;
• risks related to the revocation, expropriation or termination of our mining
concessions or our water concessions or of the agreements pursuant to which we
explore or exploit mining concessions belonging to third parties;
• the inability to be compensated fairly in the event of termination of our mining
concessions or our water concessions;
• the impact of changes in the prices of raw materials, labor, services, sulfuric acid,
components and other inputs;
• our relationship with unions and our ability to negotiate collective bargaining
agreements;
• the availability of materials and equipment;
• our access to funding sources, and the cost of the funding;
• changes in regulatory, administrative or economic conditions affecting the mining
industry, including government interpretations and policies;
• the application and enforcement of environmental laws and regulations;
• risks related to Mexico’s social, political or economic environment;
• the impact of changes in the end uses of our products;
• fluctuations in the value of the U.S. dollar against the Mexican peso;
• risks associated with market demand for and liquidity of the new notes; and
• changes in the taxation of our business.
3. COBRE DEL MAYO 3
Cobre del Mayo Snapshot
§ Cobre del Mayo (“CDM”, the “Company”) is a Mexican mining company that operates the Piedras Verdes open-pit copper mine
(“PV Mine”) in Sonora, Mexico that began commercial production in 2006
§ Purchased by Invecture in mid 2009
§ In 2009, CDM changed from contract mining to owner operation and purchased the former contractor’s equipment fleet
§ In 2011, CDM purchased, re-engineered and installed a crushing, screening, conveying and stacking system
§ During 2012, a flotation circuit operated by Kupari Metals S.A. (“Kupari”) with capacity of ~5,600 tons per day (“tpd”) was built and
in April 2013 copper concentrate production began
§ During 2014, 40% of the common shares of Kupari were contributed by its shareholders to CDM, it accounts for its participation
using the equity method
§ During 1H15, CDM built a Fines Classification System with capacity of 6,500 tpd to process crusher fines into coarser leachable ore
and finer floatable ore
§ Currently CDM produces LME Grade A copper cathode and sells refractory and vein type ore for processing into concentrate to
Kupari
Piedras Verdes Advantaged Location and Access:
§ Easily accessible by air, road, rail and ports
§ Competitive transportation costs for off-takers given PV’s location
and nearby infrastructure
§ Power: Connected to CFE (Federal Electricity Commission) grid
to the mine owned and maintained substation with continuous
capacity of 25 MW
§ Water: CDM holds 7 titled water concessions for ~3.9 Mm³/yr
while the requirement for the operation of the PV Mine is ~3.0
Mm³/yr
4. COBRE DEL MAYO 4
PV Mine Operations and Processes Diagram
§ Ore processing method is chosen according to grade, mineralization, and leaching and flotation characteristics to provide the best
overall allocation using:
— Run of Mine (“ROM”) ore for leach and Crushed ore for leach and SX/EW produce copper cathode. Installed capacity of 87 tpd
— Ore for Flotation sold to Kupari: Kupari’s flotation plant current installed capacity of ~5.6 ktpd + ~1.7 ktpd of high clay slimes
from the Fines Classification System
§ $316.9 M have been invested in capex since 2009 with limited sustaining capex going forward of ~$14.4 M/yr LOM
(Sold to Kupari)
(Sold to Kupari)
5. COBRE DEL MAYO 5
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
Mar-14
Jun-14
Sep-14
Dec-14
Mar-15
Jun-15
Sep-15
Dec-15
Mar-16
$/lb
$53.5 $50.2 $45.4 $43.1 $46.0 $30.4 $23.9
$7.4
$8.8
$6.4
$3.4
$3.0
$1.3
$3.0
$0
$10
$20
$30
$40
$50
$60
$70
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15
$M
Cathode Sales ($M) Sales of Ore ($M)
55.9% decline in sales
Decline in Cu Prices Has Significantly Impacted CDM’s Sales
§ From April 1, 2014 to March 31, 2016, Cu price has declined 26.8%, and reached a 7-year low of $1.96/lb on January 15, 2016
§ As of 4Q15, sales declined $33.7 M or 55.9% to $26.8 M compared with $60.8 M of 2Q14
— $24.7 M are attributable to the sole effect of the decline in copper prices
1. Pursuant to the agreement between Kupari Metals and Cobre del Mayo, the amount payable to the Company is dependent, among other variables, on the grade of the ore sold by Cobre del Mayo
and on the grade of the concentrate produced by Kupari Metals.
Sales: Cathode & Ore to Kupari1Daily Closing Copper Price ($/lb)
6. COBRE DEL MAYO 6
$1.97 $2.30 $2.59 $2.40 $2.40 $2.69 $2.24 $2.44
$0.00
$1.00
$2.00
$3.00
$4.00
2Q14 3Q14 4Q14 1Q15 2Q15 3Q15 4Q15 FY15
$/lb
C1 Cash Cost ($/lb) Cu Price ($/lb)
CDM’s Cost Reduction Strategies Have Translated Into Significant Reductions in C1 Cash Costs
• As a result, during 4Q15, despite the 17.4% decline in Cu cathode produced, and the decline of 43.9% in sales of ore per pound
(equivalent to $0.20/lb of Cu cathode produced), production costs declined $0.54/lb compared with 4Q14
* Comprised of the portion of administrative expenses that correspond to production costs, including environmental, insurance and safety costs
** Excluding Royalties & External Exploration
Main Achievements (4Q15 vs 4Q14):
Mining Costs: YoY $0.29/lb decline is mainly attributable to:
• Blasting Costs: Cost per ton mined declined 33.9% (from $0.18/t to $0.12/t)
• Drilling Costs: Cost per ton mined declined 39.7% (from $0.13/t to $0.08/t)
• Labour Costs: declined 28.5% (in MXN) due to layoffs started during 3Q15
• Diesel: Cost per ton mined declined 10% attributable to higher MXN/USD
exchange rate (from $0.44/t to $0.40/t)
Processing Costs: YoY $0.19/lb decline is mainly attributable to:
• Sulphuric Acid Cost: Cost per pound of Cu produced declined 11%
(from $0.24/lb to $0.22/lb)
• Energy Costs: 31.6% reduction of CFE tariff
(from MXN1.40/kWh to MXN1.06/kWh)
• Diluent Cost: 28.5% reduction in unit costs (from $1.64/kg to $1.18/kg)
$/lb 4Q15 4Q14 Change
M lbsof Cu Produced 11.46 13.87 -17.4%
Mine cost $1.32 $1.61 ($0.29)
Crushing cost $0.22 $0.23 ($0.01)
High Grade System $0.08 $0.07 $0.00
Processing cost $0.52 $0.71 ($0.19)
Other production costs* $0.21 $0.23 ($0.03)
G&A** $0.15 $0.19 ($0.03)
- Credit for Sale of Ore
for Concentrate
($0.26) ($0.46) $0.20
C1 Cash Cost $2.24 $2.59 ($0.34)
% Change -13.3%
Historical CDM C1 Cash Cost vs. Cu Price
7. COBRE DEL MAYO 7
Updated 43 – 101 Reserves and Resources completed in 4Q15
§ Updated 43-101 Reserve & Resource Report released in November 01, 2015 (published December 12, 2015)
§ Optimizing both copper cathode (CDM) and copper concentrate (Kupari) production of the Piedras Verdes deposit (“PV Operations”)
§ Reserves of 846 kt of copper contained in ore with a mine life of 14 years
Summary Mineral Reserves and Resources
Ore (kt) Grade (TCu%) Contained Cu (t)
Proven 174,500 0.30 524,000
Probable 117,310 0.28 328,000
Total Proven and Probable 291,810 0.29 846,000
Waste 551,320
Strip Ratio 1.90x
Ore (kt) Grade (TCu%) Contained Cu (t)
Measured 215,980 0.29 626,000
Indicated 236,810 0.27 639,000
Measured and Indicated 452,790 0.28 1,266,000
Inferred 5,200 0.26 1,400
Estimated Reserves
Estimated Resources
§ PV Operations Highlights:
— Average production from 2016 to 2026 of 38.7 kt/yr (of
copper cathode and copper contained in concentrate),
declining gradually as mining ends in 2030 and until leach
out period is completed
— LOM C1 Cash Costs for the PV Operations of $ 1.78/lb
(excluding royalties)
— Sustaining LOM Capital Costs for the PV Operations of
$212 M
— Unleveraged Net Present Value at 12% discount rate of
$183 M for PV Operations
§ CDM Operations Highlights:
— Average copper cathode production from 2016 to 2026 of
28.5 kt/yr declining gradually throughout 2034
— Average ore for concentrate sold to Kupari from 2016 to
2026 of 2,055 kt/yr at an average grade of 0.52% TCu
— LOM C1 cash cost (including by-product credits from the
sales of ore to Kupari Metals) of $1.77/lb
— Unleveraged Net Present Value at a 12% discount rate of
$110 M
8. COBRE DEL MAYO 8
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$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$7.00
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
US$/lb Cu
Year
W War 1 W War 2
Depletion of larger, cheaper,
high grade copper deposits
Copper SX/EW
technology
changes Copper
price curve
Old high
grade mining
and smelting
technology
Costs fall
due to new
Flotation
technology
Costs rising
as large
mines
depleting and
Chindia
demand
3 4 6 3 3 6 4 7
Lower Copper Price Cycles (DuraDon in Years) Spot copper price as of March 09, 2016 for year 2016
Historical Copper Prices & Incentive Price of Copper
Source: Wood Mackenzie
c/lb
Paid Metal (M lbs)
Adjusted
incen<ve price
$3.30/lb
§ According to Wood Mackenzie, the incentive price1 (“IP”)
required to justify investments in the expansion of
existing mines and the construction of new ones is
estimated at $3.30/lb ($7,275/t)
— IP considers the required Cu price to achieve a
specified rate of return on expansion capex(1)
— We have adjusted the IP downward by $0.20/lb from
$3.50/lb ($7,716/t) to reflect the decline in oil driven
input prices since 2Q14 and the USD strength
§ Although short term copper prices are unpredictable, we
believe that long term prices must be driven by the
increase over time of the IP (necessary to justify the
investment in new production to maintain global output)
Incentive Prices for Major Projects
1. Analysis based on long term price required to give a 12.0% risk adjusted IRR on a pre-tax 100% equity basis.
Historical Copper Price $/lb in Constant October 2015 USD
§ We are four years into a bear market for copper. Down
cycles have never lasted longer that seven years and
are more typically 4 to 6 years
§ We have a 14 year mine life which we expect to extend
with further exploration. This will probably provide us
with two up cycles for copper. We will carefully consider
the possibility of longer term copper price hedging
when these occur
10. COBRE DEL MAYO 10
$2.59 $2.40 $2.40 $2.69 $2.25
$0.09
$0.11 $0.10
$0.19
$0.25
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
4Q14 1Q15 2Q15 3Q15 4Q15
$/lb
CDM C1 CC 40% KM Contribution
$12.6 $14.3 $10.0
($2.7) ($5.0)
$1.7
$1.7
$2.4
$2.3 $3.5
($10)
($5)
$0
$5
$10
$15
$20
4Q14 1Q15 2Q15 3Q15 4Q15
$M
CDM EBITDA 40% KM Contribution
Kupari Acquisition
§ During 4Q14, Cobre del Mayo acquired 40% of the common stock of Kupari Holdings, which owns the flotation plant adjacent to the
Piedras Verdes Mine. As a result, Cobre del Mayo now accounts for its 40% participation in Kupari Holdings by using the equity
method
§ Cobre del Mayo’s participation in Kupari Holdings:
— Simplifies and optimizes ore allocation among processes
— Facilitates process improvements that involve both heap leaching and flotation
— Diversifies operational risk across two processes and products
— Provides for close cooperation to the joint development of projects and joint process optimization
Adjusted 4Q15 C1 Cash CostAdjusted 4Q15 EBITDA
11. COBRE DEL MAYO 11
$78.2 $197.7 $238.2 $252.0 $225.9 $154.3
$3.28
$3.91
$3.57
$3.31 $3.21
$2.69
$0.00
$1.00
$2.00
$3.00
$4.00
$5.00
$6.00
$0
$50
$100
$150
$200
$250
$300
FY10 FY11 FY12 FY13 FY14 FY15
$/lb
$M
Total CDM Sales ($M) Cu Price ($/lb)
$3.63 $2.69 $2.08 $1.99 $2.22 $2.44
29.8
62.6
84.1 83.3
75.5
66.7
0
10
20
30
40
50
60
70
80
90
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
FY10 FY11 FY12 FY13 FY14 FY15
tpd
$/lb
Cu Price ($/lb) Cathode Production (tpd)
$87.3 $135.6 $141.1 $160.0 $166.2 $141.5
$0
$50
$100
$150
$200
FY10 FY11 FY12 FY13 FY14 FY15
$M
29.8
62.6
84.1 83.3
75.5
66.7
36.7
45.4
36.7
0
20
40
60
80
100
FY10 FY11 FY12 FY13 FY14 FY15
tpd
Cathode Production (tpd) Copper Contained in Ore Sold (tpd)
Summary of Historical Financials
Cathode Produced & Copper Contained in Ore Sold
Operating Costs1 C1 Cash Costs
1. Operating cost exclude: Depreciation & amortization, change in Cu process inventory, ARO amortization, external exploration expenditure, and royalties
Total Sales and Realized Cu Price
