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Cobre Del Mayo - Investor Presentation - August 2014

Cobre del Mayo operates the Piedras Verdes open-pit copper mine in Sonora, Mexico. It produces copper cathode and sells refractory and vein type ore. Since being acquired in 2009, production has increased from 543 tons per month to over 5,000 tons through optimization initiatives. With 1.7 million tons of mineral resources and a mine life of over 17 years, Cobre del Mayo has been transformed into a stable, low-cost copper producer with long-term potential. Key agreements with off-takers and a $100 million credit facility help ensure continued operations.

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1 COBRE DEL MAYO Investor Presentation August 2014 All amounts in USD million ($M) unless otherwise noted
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 Offering Memorandum. 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 Management Discussion and Analysis Report, 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: • 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 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 fluctuations in the market price for copper; • the impact of changes in the prices of raw materials, labor and our products; • 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 notes; and • changes in the taxation of our business. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Management Discussion and Analysis Report 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. 2 Disclaimer and Forward Looking Statements COBRE DEL MAYO 2
3 Index I. Company Overview II. Operational Environment III. Industry and Commodity Overview IV. Historical Financial Performance V. Conclusion VI. Annexes 4 16 18 23 26 28 COBRE DEL MAYO 3
I. Company Overview
Cobre del Mayo Snapshot § Cobre del Mayo is a Mexican mining company that operates the Piedras Verdes (PV) open-pit copper mine in 5 Sonora, Mexico § Began commercial production in 2006 and operations stopped during 4Q08 due to low copper prices § Purchased by Invecture in mid 2009 § Produces LME Grade A copper cathode and sells refractory and vein type ore for processing into concentrate § Third largest copper mine in Mexico as measured by production § Mineral resources of 1.7 M tons with estimated remaining mine life of 17+ years Piedras Verdes Advantaged Location and Access: Piedras Verdes Alamos Sonora Ciudad Obregon Private Airport P COBRE DEL MAYO 5 13 Huatabampo Chihuahua Sinaloa Navojoa Guaymas Baja California P C Deep Water Port Commercial Airport Railway Rail Station Major Highway C § All infrastructure is in place § Easily accessible by air, road, rail and ports § Extremely competitive transportation costs for off-takers given PV’s location and nearby infrastructure § Power: Connected to CFE grid to the mine owned and maintained substation with continuous capacity of 25 MW; CDM is CFE’s single largest customer in the area § Water: CDM holds 7 titled water concessions for ~3.9 Mm³/yr while the requirement for the operation of the PV Mine is ~2.0 Mm³/yr
6 Cobre del Mayo Highlights Reasonable leverage, very strong credit metrics by comparison with other B/B3 rated companies Very attractive yield/risk relationship vs. similarly rated mining companies Cash cost and production enhancement program initiated 2Q’14 with six low capex initiatives to be completed 1H15 Objective: LOM C1 cash cost of $1.65/lb, approximately 58th percentile of global industry cash cost curve (including by-products) Long life mine of over 17+ years Located in low risk mining friendly jurisdiction; high quality infrastructure; excellent environmental safety, community relations, and labor record COBRE DEL MAYO 6 10
7 Conversion of Piedras Verdes Mine to Stable Operation Key Initiatives Implemented Post Acquisition § Changed from contract mining to owner operation and purchased the former contractor’s equipment fleet § Purchased, re-engineered and installed a crushing, screening, conveying and stacking system § Conversion from truck dump Run of Mine (ROM) to a primarily crush-conveyor stacked heap leach § Undertook the successful re-characterization and modeling of alternative styles of mineralization styles to facilitate improved ore control and better Cu recovery § Developed new mining & processing plans and implemented an effective ore quality and grade control system § Implemented selective mining of high grade chalcocite ores and sale of ore to Kupari Metals Monthly Production Evolution (t) !6,000!! !5,000!! !4,000!! !3,000!! !2,000!! !1,000!! COBRE DEL MAYO 7 16 !543!! !%!!!! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Tons! 2009! 2010! 2011! 2012! 2013! 2014! 2,661! Acquisi'on*by* Invecture*
8 Stable Low Risk Operations and Processes Ore for Flotation § $272.7M in capex has been invested since 2009 with limited maintenance capex going forward, estimated at $13M/yr LOM § Ore processing method is chosen according to grade, mineralization, and leaching and flotation characteristics to provide the best overall economics using: (i) ROM heap leach (ii) Crushed ore heap leach (iii) Sale of ore for concentration COBRE DEL MAYO 8 16
Mine Plan & Resource Evolution (Total Cu, Mt) Summary of Estimated Mineral Reserves and Resources 9 17+ Year Mine Life § Since the acquisition of CDM by Invecture, Management has increased total mineral resources by % 110to over 685 Mt and CDM’s mine life has extended from less than 9 years to over 17 years § Management has significantly increased mineral resource estimates based on successful exploration and drilling programs § Overall pit shape used to define the minable resources is based on a $2.50/lb copper price § 157 additional drill holes will be included in a new model to be completed in Q3, with a new reserve estimate in 4Q. The following table will be updated at that time. Current expectations are that relative to the table below, there will be a small decrease in ROM ore and an offsetting increase in Crush and Flotation Feed Ore Estimated Reserves Resources 1,731 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 COBRE DEL MAYO 9 18 Ore (kt) Grade (%) Total Cu (t) Ore to ROM 232,292 0.149 345,890 Ore to Crushing 190,487 0.307 584,180 Ore for Concentrate 54,999 0.567 311,587 Proven & Probable 477,778 0.260 1,241,657 Waste 418,540 Strip Ratio 0.90 x Ore (kt) Grade (%) Total Cu (t) Measured 210,738 0.264 557,000 Indicated 326,205 0.243 793,404 Total M + I 536,943 0.251 1,350,404 Inferred 147,658 0.246 362,368 Total Resource 684,601 0.250 1,731,042 1,242 0 Mar. '08 Dec. '09 Dec. '11 Sep. '12 / Current Reserves Resources
10 Cobre del Mayo Today § The PV Mine has been transformed into a high quality copper producing asset — Since January 2012, PV has been operating at an average of 82.5 tpd of copper cathode — LTM 2Q14 sales totaled $236.9 M • Cathode production of 28,834 t generating $207.2 M of sales • Copper contained in ore totaled 16,066 t generating $29.7 M of sales — LTM 2Q14 EBITDA of $77.2M — Strong credit metrics1: • Leverage is 2.38x Net Debt / LTM EBITDA (2Q14) • Capitalization is 55.0% Debt / Total Capitalization (2Q14) — Strip Ratio has declined from 3.2x in FY 2012 to 2.2x during 2Q14 Cu Cathode Production2 and Total Sales EBITDA and EBITDA Margin 33% 33% $125 $100 $75 $50 $25 30.7 30.4 28.8 $26.8 $29.7 10.9 22.8 $300 $250 $200 $150 $100 $50 36 30 24 18 12 6 1. Considering total debt of $240.5M (weighted average interest rate of 10.35%) and $21.2M of Cash and Equivalents 2. Does not include copper contained in ore sold for concentrate 44% 37% 33% 50% 40% 30% 20% 10% COBRE DEL MAYO 10 13 $26.0 $65.6 $105.7 $92.0 $77.2 0% $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM % $M EBITDA ($M) EBITDA Margin (%) $78.2 $197.7 $238.2 $225.2 $207.2 $0 0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $M kt Cathode Sales ($M) Sales of Ore ($M) Cathode Production (kt)
cathode production (expires Dec14) — Cathode sold FOB at the mine and paid twice per week against holding certificates process to select a purchaser for 100% of the copper cathode. In previous processes, contracts usually have lengths of 6 to 18 months and we have received proposals from 4 to 6 different trading companies 11 Relevant Agreements and Risk Containment Copper Cathode § Trafigura and CDM have entered into a 18-month agreement for 100% of CDM’s § Future Bidding Process: Close to termination date CDM will conduct a competitive Ore for Concentrate § CDM committed to sell copper ore to KM and KM to purchase and process it — Purchase Price of Ore: Purchase of the ore is a function of the copper recovered and the current LME copper price with certain freight, handling and operating charges — Term: Initial fixed term of 10 years and provides for renewals — Volume: Since April, 2013, CDM has sold an average of 4,982 tpd with 48 tpd of copper contained COBRE DEL MAYO 11 24 Mining Concessions § We have the exclusive right to explore and exploit 31 mining concessions with an initial term of 50 years which terminate on various dates between 2043 and 2062 — 26 mining concessions owned by Minerales Frontera Cobre del Mayo (“MFCDM”)1 — 5 mining concessions owned by Grupo Rexgo. The right to exploit these concessions is governed by a contract subject to arbitration § Royalties: MFCDM and Grupo Rexgo charge a 3.0% over net sales royalty to CDM for the copper extracted from those concessions § Land Ownership: CDM owns all of the land at is mine in addition to a reserve for leach pad expansion and waste dumps Notes: 1. Minerales Frontera Cobre del Mayo SA de CV is a Restricted Company for purposes of the Indenture according to the Supplemental Indenture dated February 6, 2014.
12 Relevant Agreements and Risk Containment (cont’d) COBRE DEL MAYO 12 24 Insurance Policy § Insurance policy coverage for commercial loss/operational stoppage — Policy underwritten by Royal & SunAlliance with general coverage up to $200 M $100 M Committed Credit Line § $100 M undrawn, unsecured committed credit line with Banco Azteca to reduce refinancing risk § Available through 2021, subject to financial ratio covenants § Rate: Libor + 6.50% Mining Tax § Mexican government implemented a special duty on mining concessions roughly equivalent to 7.5% of EBITDA starting January, 2014 § As roughly 95% of CDM ore is derived from Grupo Rexgo mining concessions, tax is payable by the concession holder in respect to its EBITDA Hedging Arrangement § 12 month forward sale agreement from July 2014 to June 2015 — 600 t per month @ a fixed price of $6,870/t (approx. $3.11/lb) — Cash settlement, no margin § 8 month forward sale agreement from August 2014 to March 2015 — 1,800 t per month @ a fixed price of $7,130/t (approx. $3.23/lb) — Cash settlement, no margin Labor / Environmental § Safety, environmental compliance and labor relations are key areas of focus § Since Invecture’s acquisition, CDM has had a solid safety track record — Lowest premium for “Riesgo de Trabajo” (worker risk) as classified by IMSS, demonstrating high safety standards § Approx. 406 of our 940 employees are represented by the Confederación de Trabajadores de Mexico (“CTM”) — No work stoppages in the history of CDM § Certified as a Socially Responsible company by the Mexican Center for Philanthropy (Centro Mexicano para la Filantropía) and certified as a Clean Industry by the Mexican Federal Attorney for Environmental Protection (Procuraduría Federal de Protección al Ambiente), the enforcement arm of the Mexican environmental ministry
13 Competitive and Stable Cash Cost Cobre del Mayo Historical C1 Cash Cost $3.63 $2.69 $2.08 $1.99 $1.98 $4.00 $3.00 $2.00 $1.00 $0.00 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $/lb § Cobre del Mayo C1 cash costs are currently in the industry’s third quartile 4Q 2013 Estimated Global Copper C1 Cash Cost Curve1 COBRE DEL MAYO 13 16 1. Source: Wood Mackenzie <$1.36/lb <$2.33/lb <$4.00/lb C1 Cash Cost + Sustaining CDM LTM $2.23 <$1.82/lb C1 Cash Cost: CDM LTM $1.98
Capex / EBITDA per yr $2.5M / $6.0M Project Benefit Timing • Increase Cu contained in 4Q14 concentrate by 3.5 tpd $0.1M / $2.0M 4Q14 $2.0M / $1.5M 14 Significant Combined Opportunity for Low Capex to Achieve Significant Cash Cost Reduction Crusher Fines Classification (Cathode production increase) • Improved recovery from highly altered fines • Improved ROM recovery by eliminating fines • Increase Cu cathode production by between 5 - 7 tpd 4Q14 Flotation of Classifier Slimes (Concentrate production increase) Upgrade High Grade Ore Crushing (Cathode production increase) • Finer crushing of ore will increase Cu cathode production by 2 tpd by leaching more crushed ore with better kinetics Description • Separates 65% of coarse leachable fines from 35% high clay fines (slimes) for 2.5 to 4.0 ktpd of ore at 0.40% TCu grade at 80% recovery • An additional bank of flotation cells will recover Cu from classifier slimes • A 75% recovery is expected on 1.0 to 1.5 ktpd ore at 0.50% TCu • 60 mesh material will produce 4 tpd of additional Cu in concentrate • This flotation concentrate will be upgraded in the existing cleaner circuit • Increase throughput from 2.0 ktpd to 4.0 ktpd and reduce p80 to 3/8 inch with estimated 8% recovery improvement COBRE DEL MAYO 14
Capex / EBITDA per yr • Reduce unit electricity consumption by 12% ($0.9M/yr) • Elimination of the use of cobalt sulphate ($0.9M/yr) • Increase in effective nameplate capacity to 105 tpd • Increase Cu cathode production by 0.7 tpd ($1.0M/yr) • Additional sulphuric acid generation of 90 tpd ($4.0M/yr) 4Q14 to 2Q15 $3.0M / $1.8M 4Q14 <$1.0M / $3.5M • Decrease Opex of $3.4M/yr 4Q14 $2.0M / $3.4M 15 Significant Combined Opportunity for Low Capex to Achieve Significant Cash Cost Reduction (cont’d) Project Benefit Timing Replace SXEW Lead Anodes with Titanium Anodes (Increase nameplate capacity & reduce opex) Heap Leaching Cleaner Tails (Cathode production increase & acid production) Reduction of Waste Haul Distance (Reduce Opex) Description • Gradually replace lead anodes with titanium anodes to increase name plate capacity • Cu and pyrite in cleaner tails from flotation plant will be leached • Purchase of 400 Ha of adjacent land east of PV for additional waste dumps Note: * The engineering, analysis and investment cases for each individual project reflect preliminary estimates which will vary when the respective projects are in stable operation ** Calculations were made considering a copper price of $3.20/lb COBRE DEL MAYO 15
II. Operational Environment
17 Stable Operating Environment in Mexico1 § Mexico is an economic leader in Latin America and is the world’s 14th largest economy by GDP (2014E and 2015E real GDP growth of 3.4% and 3.8%, respectively — High degree of political stability — OECD/WTO country and member of 12 free trade agreements, including NAFTA — Mexican Peso has long history of one of the ten most traded global currencies § As a result of mining-supportive governmental policies, stability, OECD tax regime and abundance of resources, Mexico has attracted extensive investment from international mining companies — Over 850 mining companies operate in Mexico; 287 of which have foreign investment, and currently operate 82 producing projects within Mexico — ~40% of mine production and ~70% of investments in exploration are undertaken by foreign investors § Mexico is recognized as a mining friendly jurisdiction — Largest producer of silver globally (18% of global production) — 3rd largest producer of copper in Latin America (2013E production of 480kt) § Sonora is among the most prolific mining areas and one of the safest states in Mexico Others,'27%' Coahuila,'8%' San'Luis' Potosí,'5%' COBRE DEL MAYO 17 26 Total Mining Production in Mexico2 Sonora,'27%' Zacatecas,' 24%' Chihuahua,' 13%' 2014 Copper Production in Mexico3 Sonora,'79%' Zacatecas,' 10%' Others,'6%' Sources: 1 IMF, Brook Hunt, World Bank, U.S. Geological Survey 2 Secretariat of the Economy, 2012 3 National Institute of Statistics & Geography
III. Industry and Commodity Overview
§ The market has consistently underestimated the copper price when forecasting long term prices § Actual copper prices have been much higher due to continuing shortfalls in supply. Delays in new projects, supply Jefferies LLC/ August 2013 Actual Copper Price Broker Consensus (as forecast during Q4 of year indicated) 19 Copper Price Forecasts Over Time interruption and declining production from existing mines have been the main drivers Copper Historical Price vs. Forecasts 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 -- 2014 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 COBRE DEL MAYO 19 18 Source: Broker Research 1. With the exception of 2014’s forecast which is as of 13 August 2014 2010 2009 2008 Actual 2009 LT 2010 LT 2008 LT 2007 LT 2006 LT 2005 LT 2004 LT 2003 LT 2002 LT 2001 LT 2000 LT 2011 LT 2011 2012 2014 LT: $2.98 / lb 2012 LT 2013 LT 2013 Long Term Price (as forecast during Q4 of year indicated) (1)
§ Investment in large projects is very capital intensive § The incentive price required to justify investments in the expansion of existing mines and the construction of new § Although short term copper prices are unpredictable, the following graph shows that long term copper must trade Source: Wood Mackenzie 1. Analysis based on long term price required to give a 12.0% risk adjusted IRR on a pre-tax 100% equity basis. Jefferies LLC/ August 2013 20 Incentive Price Drives the Value of Copper ones is estimated at $3.50/lb ($7,716/t) — Incentive price considers required Cu price to achieve specified rate of return on expansion capex(1) above $3.50/lb for global mine copper supply to be maintained Incentive Prices for Major Projects COBRE DEL MAYO 20 18 c / lb Paid Metal (M lbs)
Jefferies LLC/ August 2013 21 Cu Pricing Considerations § Copper has traded in the market at a premium to the 90th percentile of the C1 cash cost curve — C1 cash cost as estimated by Wood Mackenzie C1 90th Percentile Costs1 vs. Cu Price $1.67 $3.42 $4.00 $3.61 $3.32 $3.08 $1.11 $1.62 $2.57 $2.55 $2.39 $2.93 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2005 2010 2011 2012 2013 2Q14 LTM $/lb C1 Cash Cost 90th Percentile ($/lb) Average Cu Price ($/lb) Source: Wood Mackenzie, LME 1. 90th percentile as estimated by Wood Mackenzie. LME prices for 2013 4Q. May, 2014. COBRE DEL MAYO 21
22 Cobre del Mayo Sensitivity to Variations in Copper Price § We expect the PV Mine to continue to generate positive EBITDA should there be a commodity price disruption Sales / EBITDA Sensitivity to Changes in Copper Price1 Sales(/(EBITDA(Sensitivity(to(Changes(in(Copper(Price1 Realized(Cu(Price 2Q14(Sales 2Q14(EBITDA ($/lb) ($M) ($M) +)$0.50 $76.3 $36.5 +)$0.40 $73.2 $33.4 +)$0.30 $70.1 $30.3 +)$0.20 $67.0 $27.2 +)$0.10 $63.9 $24.1 $3.21 $60.8 $21.0 4)$0.10 $57.7 $17.9 4)$0.20 $54.6 $14.8 4)$0.30 $51.5 $11.6 4)$0.40 $48.4 $8.5 4)$0.50 $45.3 $5.4 Changes(in(Copper(Price COBRE DEL MAYO 22 24 1. Assumes historical 1Q14 performance and excludes hedging 2. Base average sale price of CDM Copper product 2(
IV. Historical Financial Performance
24 Summary Historical Financials Total Sales and Cathode Produced & Copper Contained in Ore Sold Realized Cu Price $3.31 $3.21 $26.8 $3.28 $3.91 $3.57 $300 $225 $150 $75 Operating Costs1 C1 Cash Costs 100 80 60 40 20 $180 $160 $140 $120 $100 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $M $3.63 $2.69 $2.08 $1.99 $1.98 $80 $60 $40 $20 $1.50 $1.00 $0.50 1. Operating cost exclude: Depreciation & amortization, change in Cu process inventory, ARO amortization, and royalties $29.7 $4.00 $3.00 $2.00 $1.00 90 80 70 60 50 40 30 20 10 COBRE DEL MAYO 24 34 29.8 62.6 84.1 83.3 79.0 36.7 44.0 0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM tpd Cathode Production (tpd) Copper contained in ore sold (tpd) $78.2 $197.7 $238.2 $225.2 $207.2 $0.00 $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $/lb $M Cathode Sales ($M) Sales of Ore ($M) Cu Price ($/lb) $87.3 $135.6 $141.1 $160.0 $160.2 $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM 30 63 84 83 79 0 $0.00 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM tpd $/lb C1 Cash Cost ($/lb) Cathode Production (tpd)
25 Summary Historical Financials (cont’d) EBITDA and EBITDA Margin 33% 33% 44% 37% $26.0 $65.6 $105.7 $92.0 $77.2 50% 40% 30% 20% 10% $125 $100 $75 $50 $25 $80 $70 $60 $50 $40 $30 $20 $10 $100 $80 $60 $40 $20 $0 -$20 -$40 COBRE DEL MAYO 25 35 Capital Expenditures(1) EBITDA less Capex 33% 0% $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM % $M EBITDA ($M) EBITDA Margin (%) $75.7 $16.1 $31.4 $41.6 $47.3 $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $M -$49.7 $49.5 $74.3 $50.4 $29.9 -$60 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $M (1) Capital expenditures encompass the acquisition of property, land and equipment. The acquisition of six CAT 789 trucks in 1Q14 did not have any significant impact on the cash flow.
V. Conclusion
27 § Operating mine without new project development risk § Favorable logistics and infrastructure § Good labour relations § Long life of mine of 16+ years § Implementing low capex program to achieve a significant reduction in C1 cash costs § $100M undrawn, unsecured committed line with Banco Azteca substantially reduces refinancing risk § Reasonable leverage, very strong credit metrics by comparison with other B/B3 rated companies Attractive Yield/Risk Profile vs. Peers: COBREM bonds yield substantially wide of any Company Ticker Rating YTM1 Cobre del Mayo COBREM 10¾ Comparable Issuers: (15Nov18) B3/B 9.7% Hudbay HBMCN 9½ (1Oct20) B3/B 8.1% Taseko Mines TKOCN 7¾ (15Apr19) B3/B 7.6% Thompson Creek TCMCN 9¾ (1Dec17) B1/B 5.4% Conclusion Thompson Creek TCMCN 7⅜ (1Jun18) Caa2/CCC- 7.3% Thompson Creek TCMCN 12½ (1May19) Caa2/CCC- 9.0% COBRE DEL MAYO 27 16 Source: Bloomberg 1. As of August 29, 2014 reasonable comparable
VI. Annexes
29 Annex 1: Corporate Structure Invecture Group, S.A. de C.V. (Mexico) 100% COBRE DEL MAYO 29 8 Represents the guarantors of the notes offered hereby Lawrie Associates (United Kingdom) Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Servicios Corporativos del Mayo, S.A. de C.V. (Mexico) Mayoson, S.A. de C.V. (Mexico) Compañía Minera Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Minerales Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Servicios Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Cobre del Mayo, S.A. de C.V. (Mexico) Frontera Copper Corporation (Mexico) 100% 100% 71.2% 28.8% Preferred Shares $11.7 million ISSUER

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Cobre Del Mayo - Investor Presentation - August 2014

  • 1.
    1 COBRE DELMAYO Investor Presentation August 2014 All amounts in USD million ($M) unless otherwise noted
  • 2.
    The information containedherein 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 Offering Memorandum. 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 Management Discussion and Analysis Report, 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: • 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 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 fluctuations in the market price for copper; • the impact of changes in the prices of raw materials, labor and our products; • 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 notes; and • changes in the taxation of our business. In light of these risks, uncertainties and assumptions, the forward-looking events described in this Management Discussion and Analysis Report 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. 2 Disclaimer and Forward Looking Statements COBRE DEL MAYO 2
  • 3.
    3 Index I.Company Overview II. Operational Environment III. Industry and Commodity Overview IV. Historical Financial Performance V. Conclusion VI. Annexes 4 16 18 23 26 28 COBRE DEL MAYO 3
  • 4.
  • 5.
    Cobre del MayoSnapshot § Cobre del Mayo is a Mexican mining company that operates the Piedras Verdes (PV) open-pit copper mine in 5 Sonora, Mexico § Began commercial production in 2006 and operations stopped during 4Q08 due to low copper prices § Purchased by Invecture in mid 2009 § Produces LME Grade A copper cathode and sells refractory and vein type ore for processing into concentrate § Third largest copper mine in Mexico as measured by production § Mineral resources of 1.7 M tons with estimated remaining mine life of 17+ years Piedras Verdes Advantaged Location and Access: Piedras Verdes Alamos Sonora Ciudad Obregon Private Airport P COBRE DEL MAYO 5 13 Huatabampo Chihuahua Sinaloa Navojoa Guaymas Baja California P C Deep Water Port Commercial Airport Railway Rail Station Major Highway C § All infrastructure is in place § Easily accessible by air, road, rail and ports § Extremely competitive transportation costs for off-takers given PV’s location and nearby infrastructure § Power: Connected to CFE grid to the mine owned and maintained substation with continuous capacity of 25 MW; CDM is CFE’s single largest customer in the area § Water: CDM holds 7 titled water concessions for ~3.9 Mm³/yr while the requirement for the operation of the PV Mine is ~2.0 Mm³/yr
  • 6.
    6 Cobre delMayo Highlights Reasonable leverage, very strong credit metrics by comparison with other B/B3 rated companies Very attractive yield/risk relationship vs. similarly rated mining companies Cash cost and production enhancement program initiated 2Q’14 with six low capex initiatives to be completed 1H15 Objective: LOM C1 cash cost of $1.65/lb, approximately 58th percentile of global industry cash cost curve (including by-products) Long life mine of over 17+ years Located in low risk mining friendly jurisdiction; high quality infrastructure; excellent environmental safety, community relations, and labor record COBRE DEL MAYO 6 10
  • 7.
    7 Conversion ofPiedras Verdes Mine to Stable Operation Key Initiatives Implemented Post Acquisition § Changed from contract mining to owner operation and purchased the former contractor’s equipment fleet § Purchased, re-engineered and installed a crushing, screening, conveying and stacking system § Conversion from truck dump Run of Mine (ROM) to a primarily crush-conveyor stacked heap leach § Undertook the successful re-characterization and modeling of alternative styles of mineralization styles to facilitate improved ore control and better Cu recovery § Developed new mining & processing plans and implemented an effective ore quality and grade control system § Implemented selective mining of high grade chalcocite ores and sale of ore to Kupari Metals Monthly Production Evolution (t) !6,000!! !5,000!! !4,000!! !3,000!! !2,000!! !1,000!! COBRE DEL MAYO 7 16 !543!! !%!!!! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Jul! Aug! Sep! Oct! Nov! Dec! Jan! Feb! Mar! Apr! May! Jun! Tons! 2009! 2010! 2011! 2012! 2013! 2014! 2,661! Acquisi'on*by* Invecture*
  • 8.
    8 Stable LowRisk Operations and Processes Ore for Flotation § $272.7M in capex has been invested since 2009 with limited maintenance capex going forward, estimated at $13M/yr LOM § Ore processing method is chosen according to grade, mineralization, and leaching and flotation characteristics to provide the best overall economics using: (i) ROM heap leach (ii) Crushed ore heap leach (iii) Sale of ore for concentration COBRE DEL MAYO 8 16
  • 9.
    Mine Plan &Resource Evolution (Total Cu, Mt) Summary of Estimated Mineral Reserves and Resources 9 17+ Year Mine Life § Since the acquisition of CDM by Invecture, Management has increased total mineral resources by % 110to over 685 Mt and CDM’s mine life has extended from less than 9 years to over 17 years § Management has significantly increased mineral resource estimates based on successful exploration and drilling programs § Overall pit shape used to define the minable resources is based on a $2.50/lb copper price § 157 additional drill holes will be included in a new model to be completed in Q3, with a new reserve estimate in 4Q. The following table will be updated at that time. Current expectations are that relative to the table below, there will be a small decrease in ROM ore and an offsetting increase in Crush and Flotation Feed Ore Estimated Reserves Resources 1,731 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 COBRE DEL MAYO 9 18 Ore (kt) Grade (%) Total Cu (t) Ore to ROM 232,292 0.149 345,890 Ore to Crushing 190,487 0.307 584,180 Ore for Concentrate 54,999 0.567 311,587 Proven & Probable 477,778 0.260 1,241,657 Waste 418,540 Strip Ratio 0.90 x Ore (kt) Grade (%) Total Cu (t) Measured 210,738 0.264 557,000 Indicated 326,205 0.243 793,404 Total M + I 536,943 0.251 1,350,404 Inferred 147,658 0.246 362,368 Total Resource 684,601 0.250 1,731,042 1,242 0 Mar. '08 Dec. '09 Dec. '11 Sep. '12 / Current Reserves Resources
  • 10.
    10 Cobre delMayo Today § The PV Mine has been transformed into a high quality copper producing asset — Since January 2012, PV has been operating at an average of 82.5 tpd of copper cathode — LTM 2Q14 sales totaled $236.9 M • Cathode production of 28,834 t generating $207.2 M of sales • Copper contained in ore totaled 16,066 t generating $29.7 M of sales — LTM 2Q14 EBITDA of $77.2M — Strong credit metrics1: • Leverage is 2.38x Net Debt / LTM EBITDA (2Q14) • Capitalization is 55.0% Debt / Total Capitalization (2Q14) — Strip Ratio has declined from 3.2x in FY 2012 to 2.2x during 2Q14 Cu Cathode Production2 and Total Sales EBITDA and EBITDA Margin 33% 33% $125 $100 $75 $50 $25 30.7 30.4 28.8 $26.8 $29.7 10.9 22.8 $300 $250 $200 $150 $100 $50 36 30 24 18 12 6 1. Considering total debt of $240.5M (weighted average interest rate of 10.35%) and $21.2M of Cash and Equivalents 2. Does not include copper contained in ore sold for concentrate 44% 37% 33% 50% 40% 30% 20% 10% COBRE DEL MAYO 10 13 $26.0 $65.6 $105.7 $92.0 $77.2 0% $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM % $M EBITDA ($M) EBITDA Margin (%) $78.2 $197.7 $238.2 $225.2 $207.2 $0 0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $M kt Cathode Sales ($M) Sales of Ore ($M) Cathode Production (kt)
  • 11.
    cathode production (expiresDec14) — Cathode sold FOB at the mine and paid twice per week against holding certificates process to select a purchaser for 100% of the copper cathode. In previous processes, contracts usually have lengths of 6 to 18 months and we have received proposals from 4 to 6 different trading companies 11 Relevant Agreements and Risk Containment Copper Cathode § Trafigura and CDM have entered into a 18-month agreement for 100% of CDM’s § Future Bidding Process: Close to termination date CDM will conduct a competitive Ore for Concentrate § CDM committed to sell copper ore to KM and KM to purchase and process it — Purchase Price of Ore: Purchase of the ore is a function of the copper recovered and the current LME copper price with certain freight, handling and operating charges — Term: Initial fixed term of 10 years and provides for renewals — Volume: Since April, 2013, CDM has sold an average of 4,982 tpd with 48 tpd of copper contained COBRE DEL MAYO 11 24 Mining Concessions § We have the exclusive right to explore and exploit 31 mining concessions with an initial term of 50 years which terminate on various dates between 2043 and 2062 — 26 mining concessions owned by Minerales Frontera Cobre del Mayo (“MFCDM”)1 — 5 mining concessions owned by Grupo Rexgo. The right to exploit these concessions is governed by a contract subject to arbitration § Royalties: MFCDM and Grupo Rexgo charge a 3.0% over net sales royalty to CDM for the copper extracted from those concessions § Land Ownership: CDM owns all of the land at is mine in addition to a reserve for leach pad expansion and waste dumps Notes: 1. Minerales Frontera Cobre del Mayo SA de CV is a Restricted Company for purposes of the Indenture according to the Supplemental Indenture dated February 6, 2014.
  • 12.
    12 Relevant Agreementsand Risk Containment (cont’d) COBRE DEL MAYO 12 24 Insurance Policy § Insurance policy coverage for commercial loss/operational stoppage — Policy underwritten by Royal & SunAlliance with general coverage up to $200 M $100 M Committed Credit Line § $100 M undrawn, unsecured committed credit line with Banco Azteca to reduce refinancing risk § Available through 2021, subject to financial ratio covenants § Rate: Libor + 6.50% Mining Tax § Mexican government implemented a special duty on mining concessions roughly equivalent to 7.5% of EBITDA starting January, 2014 § As roughly 95% of CDM ore is derived from Grupo Rexgo mining concessions, tax is payable by the concession holder in respect to its EBITDA Hedging Arrangement § 12 month forward sale agreement from July 2014 to June 2015 — 600 t per month @ a fixed price of $6,870/t (approx. $3.11/lb) — Cash settlement, no margin § 8 month forward sale agreement from August 2014 to March 2015 — 1,800 t per month @ a fixed price of $7,130/t (approx. $3.23/lb) — Cash settlement, no margin Labor / Environmental § Safety, environmental compliance and labor relations are key areas of focus § Since Invecture’s acquisition, CDM has had a solid safety track record — Lowest premium for “Riesgo de Trabajo” (worker risk) as classified by IMSS, demonstrating high safety standards § Approx. 406 of our 940 employees are represented by the Confederación de Trabajadores de Mexico (“CTM”) — No work stoppages in the history of CDM § Certified as a Socially Responsible company by the Mexican Center for Philanthropy (Centro Mexicano para la Filantropía) and certified as a Clean Industry by the Mexican Federal Attorney for Environmental Protection (Procuraduría Federal de Protección al Ambiente), the enforcement arm of the Mexican environmental ministry
  • 13.
    13 Competitive andStable Cash Cost Cobre del Mayo Historical C1 Cash Cost $3.63 $2.69 $2.08 $1.99 $1.98 $4.00 $3.00 $2.00 $1.00 $0.00 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $/lb § Cobre del Mayo C1 cash costs are currently in the industry’s third quartile 4Q 2013 Estimated Global Copper C1 Cash Cost Curve1 COBRE DEL MAYO 13 16 1. Source: Wood Mackenzie <$1.36/lb <$2.33/lb <$4.00/lb C1 Cash Cost + Sustaining CDM LTM $2.23 <$1.82/lb C1 Cash Cost: CDM LTM $1.98
  • 14.
    Capex / EBITDA per yr $2.5M / $6.0M Project Benefit Timing • Increase Cu contained in 4Q14 concentrate by 3.5 tpd $0.1M / $2.0M 4Q14 $2.0M / $1.5M 14 Significant Combined Opportunity for Low Capex to Achieve Significant Cash Cost Reduction Crusher Fines Classification (Cathode production increase) • Improved recovery from highly altered fines • Improved ROM recovery by eliminating fines • Increase Cu cathode production by between 5 - 7 tpd 4Q14 Flotation of Classifier Slimes (Concentrate production increase) Upgrade High Grade Ore Crushing (Cathode production increase) • Finer crushing of ore will increase Cu cathode production by 2 tpd by leaching more crushed ore with better kinetics Description • Separates 65% of coarse leachable fines from 35% high clay fines (slimes) for 2.5 to 4.0 ktpd of ore at 0.40% TCu grade at 80% recovery • An additional bank of flotation cells will recover Cu from classifier slimes • A 75% recovery is expected on 1.0 to 1.5 ktpd ore at 0.50% TCu • 60 mesh material will produce 4 tpd of additional Cu in concentrate • This flotation concentrate will be upgraded in the existing cleaner circuit • Increase throughput from 2.0 ktpd to 4.0 ktpd and reduce p80 to 3/8 inch with estimated 8% recovery improvement COBRE DEL MAYO 14
  • 15.
    Capex / EBITDA per yr • Reduce unit electricity consumption by 12% ($0.9M/yr) • Elimination of the use of cobalt sulphate ($0.9M/yr) • Increase in effective nameplate capacity to 105 tpd • Increase Cu cathode production by 0.7 tpd ($1.0M/yr) • Additional sulphuric acid generation of 90 tpd ($4.0M/yr) 4Q14 to 2Q15 $3.0M / $1.8M 4Q14 <$1.0M / $3.5M • Decrease Opex of $3.4M/yr 4Q14 $2.0M / $3.4M 15 Significant Combined Opportunity for Low Capex to Achieve Significant Cash Cost Reduction (cont’d) Project Benefit Timing Replace SXEW Lead Anodes with Titanium Anodes (Increase nameplate capacity & reduce opex) Heap Leaching Cleaner Tails (Cathode production increase & acid production) Reduction of Waste Haul Distance (Reduce Opex) Description • Gradually replace lead anodes with titanium anodes to increase name plate capacity • Cu and pyrite in cleaner tails from flotation plant will be leached • Purchase of 400 Ha of adjacent land east of PV for additional waste dumps Note: * The engineering, analysis and investment cases for each individual project reflect preliminary estimates which will vary when the respective projects are in stable operation ** Calculations were made considering a copper price of $3.20/lb COBRE DEL MAYO 15
  • 16.
  • 17.
    17 Stable OperatingEnvironment in Mexico1 § Mexico is an economic leader in Latin America and is the world’s 14th largest economy by GDP (2014E and 2015E real GDP growth of 3.4% and 3.8%, respectively — High degree of political stability — OECD/WTO country and member of 12 free trade agreements, including NAFTA — Mexican Peso has long history of one of the ten most traded global currencies § As a result of mining-supportive governmental policies, stability, OECD tax regime and abundance of resources, Mexico has attracted extensive investment from international mining companies — Over 850 mining companies operate in Mexico; 287 of which have foreign investment, and currently operate 82 producing projects within Mexico — ~40% of mine production and ~70% of investments in exploration are undertaken by foreign investors § Mexico is recognized as a mining friendly jurisdiction — Largest producer of silver globally (18% of global production) — 3rd largest producer of copper in Latin America (2013E production of 480kt) § Sonora is among the most prolific mining areas and one of the safest states in Mexico Others,'27%' Coahuila,'8%' San'Luis' Potosí,'5%' COBRE DEL MAYO 17 26 Total Mining Production in Mexico2 Sonora,'27%' Zacatecas,' 24%' Chihuahua,' 13%' 2014 Copper Production in Mexico3 Sonora,'79%' Zacatecas,' 10%' Others,'6%' Sources: 1 IMF, Brook Hunt, World Bank, U.S. Geological Survey 2 Secretariat of the Economy, 2012 3 National Institute of Statistics & Geography
  • 18.
    III. Industry andCommodity Overview
  • 19.
    § The markethas consistently underestimated the copper price when forecasting long term prices § Actual copper prices have been much higher due to continuing shortfalls in supply. Delays in new projects, supply Jefferies LLC/ August 2013 Actual Copper Price Broker Consensus (as forecast during Q4 of year indicated) 19 Copper Price Forecasts Over Time interruption and declining production from existing mines have been the main drivers Copper Historical Price vs. Forecasts 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 -- 2014 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 COBRE DEL MAYO 19 18 Source: Broker Research 1. With the exception of 2014’s forecast which is as of 13 August 2014 2010 2009 2008 Actual 2009 LT 2010 LT 2008 LT 2007 LT 2006 LT 2005 LT 2004 LT 2003 LT 2002 LT 2001 LT 2000 LT 2011 LT 2011 2012 2014 LT: $2.98 / lb 2012 LT 2013 LT 2013 Long Term Price (as forecast during Q4 of year indicated) (1)
  • 20.
    § Investment inlarge projects is very capital intensive § The incentive price required to justify investments in the expansion of existing mines and the construction of new § Although short term copper prices are unpredictable, the following graph shows that long term copper must trade Source: Wood Mackenzie 1. Analysis based on long term price required to give a 12.0% risk adjusted IRR on a pre-tax 100% equity basis. Jefferies LLC/ August 2013 20 Incentive Price Drives the Value of Copper ones is estimated at $3.50/lb ($7,716/t) — Incentive price considers required Cu price to achieve specified rate of return on expansion capex(1) above $3.50/lb for global mine copper supply to be maintained Incentive Prices for Major Projects COBRE DEL MAYO 20 18 c / lb Paid Metal (M lbs)
  • 21.
    Jefferies LLC/ August2013 21 Cu Pricing Considerations § Copper has traded in the market at a premium to the 90th percentile of the C1 cash cost curve — C1 cash cost as estimated by Wood Mackenzie C1 90th Percentile Costs1 vs. Cu Price $1.67 $3.42 $4.00 $3.61 $3.32 $3.08 $1.11 $1.62 $2.57 $2.55 $2.39 $2.93 $5.00 $4.00 $3.00 $2.00 $1.00 $0.00 2005 2010 2011 2012 2013 2Q14 LTM $/lb C1 Cash Cost 90th Percentile ($/lb) Average Cu Price ($/lb) Source: Wood Mackenzie, LME 1. 90th percentile as estimated by Wood Mackenzie. LME prices for 2013 4Q. May, 2014. COBRE DEL MAYO 21
  • 22.
    22 Cobre delMayo Sensitivity to Variations in Copper Price § We expect the PV Mine to continue to generate positive EBITDA should there be a commodity price disruption Sales / EBITDA Sensitivity to Changes in Copper Price1 Sales(/(EBITDA(Sensitivity(to(Changes(in(Copper(Price1 Realized(Cu(Price 2Q14(Sales 2Q14(EBITDA ($/lb) ($M) ($M) +)$0.50 $76.3 $36.5 +)$0.40 $73.2 $33.4 +)$0.30 $70.1 $30.3 +)$0.20 $67.0 $27.2 +)$0.10 $63.9 $24.1 $3.21 $60.8 $21.0 4)$0.10 $57.7 $17.9 4)$0.20 $54.6 $14.8 4)$0.30 $51.5 $11.6 4)$0.40 $48.4 $8.5 4)$0.50 $45.3 $5.4 Changes(in(Copper(Price COBRE DEL MAYO 22 24 1. Assumes historical 1Q14 performance and excludes hedging 2. Base average sale price of CDM Copper product 2(
  • 23.
  • 24.
    24 Summary HistoricalFinancials Total Sales and Cathode Produced & Copper Contained in Ore Sold Realized Cu Price $3.31 $3.21 $26.8 $3.28 $3.91 $3.57 $300 $225 $150 $75 Operating Costs1 C1 Cash Costs 100 80 60 40 20 $180 $160 $140 $120 $100 $4.50 $4.00 $3.50 $3.00 $2.50 $2.00 $M $3.63 $2.69 $2.08 $1.99 $1.98 $80 $60 $40 $20 $1.50 $1.00 $0.50 1. Operating cost exclude: Depreciation & amortization, change in Cu process inventory, ARO amortization, and royalties $29.7 $4.00 $3.00 $2.00 $1.00 90 80 70 60 50 40 30 20 10 COBRE DEL MAYO 24 34 29.8 62.6 84.1 83.3 79.0 36.7 44.0 0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM tpd Cathode Production (tpd) Copper contained in ore sold (tpd) $78.2 $197.7 $238.2 $225.2 $207.2 $0.00 $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $/lb $M Cathode Sales ($M) Sales of Ore ($M) Cu Price ($/lb) $87.3 $135.6 $141.1 $160.0 $160.2 $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM 30 63 84 83 79 0 $0.00 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM tpd $/lb C1 Cash Cost ($/lb) Cathode Production (tpd)
  • 25.
    25 Summary HistoricalFinancials (cont’d) EBITDA and EBITDA Margin 33% 33% 44% 37% $26.0 $65.6 $105.7 $92.0 $77.2 50% 40% 30% 20% 10% $125 $100 $75 $50 $25 $80 $70 $60 $50 $40 $30 $20 $10 $100 $80 $60 $40 $20 $0 -$20 -$40 COBRE DEL MAYO 25 35 Capital Expenditures(1) EBITDA less Capex 33% 0% $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM % $M EBITDA ($M) EBITDA Margin (%) $75.7 $16.1 $31.4 $41.6 $47.3 $0 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $M -$49.7 $49.5 $74.3 $50.4 $29.9 -$60 FY 2010 FY 2011 FY 2012 FY 2013 2Q14 LTM $M (1) Capital expenditures encompass the acquisition of property, land and equipment. The acquisition of six CAT 789 trucks in 1Q14 did not have any significant impact on the cash flow.
  • 26.
  • 27.
    27 § Operatingmine without new project development risk § Favorable logistics and infrastructure § Good labour relations § Long life of mine of 16+ years § Implementing low capex program to achieve a significant reduction in C1 cash costs § $100M undrawn, unsecured committed line with Banco Azteca substantially reduces refinancing risk § Reasonable leverage, very strong credit metrics by comparison with other B/B3 rated companies Attractive Yield/Risk Profile vs. Peers: COBREM bonds yield substantially wide of any Company Ticker Rating YTM1 Cobre del Mayo COBREM 10¾ Comparable Issuers: (15Nov18) B3/B 9.7% Hudbay HBMCN 9½ (1Oct20) B3/B 8.1% Taseko Mines TKOCN 7¾ (15Apr19) B3/B 7.6% Thompson Creek TCMCN 9¾ (1Dec17) B1/B 5.4% Conclusion Thompson Creek TCMCN 7⅜ (1Jun18) Caa2/CCC- 7.3% Thompson Creek TCMCN 12½ (1May19) Caa2/CCC- 9.0% COBRE DEL MAYO 27 16 Source: Bloomberg 1. As of August 29, 2014 reasonable comparable
  • 28.
  • 29.
    29 Annex 1:Corporate Structure Invecture Group, S.A. de C.V. (Mexico) 100% COBRE DEL MAYO 29 8 Represents the guarantors of the notes offered hereby Lawrie Associates (United Kingdom) Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Servicios Corporativos del Mayo, S.A. de C.V. (Mexico) Mayoson, S.A. de C.V. (Mexico) Compañía Minera Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Minerales Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Servicios Frontera Cobre del Mayo, S.A. de C.V. (Mexico) Cobre del Mayo, S.A. de C.V. (Mexico) Frontera Copper Corporation (Mexico) 100% 100% 71.2% 28.8% Preferred Shares $11.7 million ISSUER