Presentation ppt english (29.11.2013)
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Transcript of Presentation ppt english (29.11.2013)
SUDESTE PORT
November | 2013
MMX
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DISCLAIMER
This presentation does not purport to contain all of the information that a prospective or current investor may require or desire concerning the matters
referred to herein. Each investor must conduct and rely upon his/her or its own evaluation of such matters, including the merits and risks of making an
investment decision. This presentation is not intended to be, nor shall it be construed as, a complete description of the facts, risks or consequences regarding
an investment involving the Sudeste Port. All potential investors should perform their own independent investigations regarding any such investment. All
potential investors should consult their own qualified advisors concerning such an investment and the suitability relating to an investor’s ability to sustain a
total financial loss of such investment. This presentation speaks as of the date upon which it is presented and the information presented herein may change
after the date hereof.
Other than to the extent required by applicable law, neither MMX Mineração e Metálicos S.A. (“MMX”) nor any other person (including the Investors) shall be
deemed to make any representation or warranty, express or implied, with respect to the information contained in this presentation. To the maximum extent
permitted by applicable law, MMX disclaims any and all liability resulting from the reliance by any person on the information contained in this presentation or
related to any material fact not included in this presentation regarding the Sudeste Port, the MMXM11 or PORT11 securities or any other matter referenced
herein.
EAV Delaware LLC and IWL Holdings (Luxembourg) S.a.r.l. (the “Investors”), affiliates of Mubadala and Trafigura, respectively, participated in the preparation
of this presentation. The Investors and their affiliates disclaim any liability with regards to this presentation.
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DISCLAIMER (Cont’d)
This presentation 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. No party undertakes to update the 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.
TABLE OF CONTENTS
2DEBT RESTRUCTURING
3PORT ECONOMICS
1ROYALTY BONDS
4GENERAL BONDHOLDER MEETING
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EXECUTIVE SUMMARY
MMXM11 amendment required to facilitate transaction closing
Secures completion of the Port, expected to start operations in Q3 2014 (first royalty cash flow expected in 2015)
Increases port capacity thereby enhancing Brazilian infrastructure and unlocking Minas Gerais production
Investors aligned with bond economics as they will hold 34% upon completion
Positive Impact from Investors’ Involvement:Positive Impact from Investors’ Involvement:
Transaction Update:Transaction Update:
Investors and MMX are working on completing CPs: closing expected in December, 2013
Master Amendment Agreement already executed with subordinated lenders
Commercial terms of the renegotiation of the senior debt agreed in principle: senior lenders have imposed new
cash waterfall requiring the amendment of MMXM11 terms
The debt restructuring and the indenture of PORT11 are still subject to BNDES board approval
1ROYALTY BONDS
MMXM11 / PORT11ECONOMICS
Price is expected to be the NPV of future
royalty cash flows resulting from the
completed port and Investors’ involvement
US$5 per tonne adjusted by PPI, recorded
since September 2010
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CURRENT MMXM11CURRENT MMXM11 AMENDED MMXM11 / PORT11AMENDED MMXM11 / PORT11
Bonds value significantly impaired if the
Port is not completed (current price
supported by the Investors’ involvement)
US$5 per tonne adjusted by PPI
No visibility on first royalty cash flow First royalty cash flow expected in 2015
Additional volumes and trading activity via Port could generate additional cash flowAdditional volumes and trading activity via Port could generate additional cash flow
Anticipated opportunities to lower OPEX under new managementAnticipated opportunities to lower OPEX under new management
POTENTIAL UPSIDE FOR HOLDERS OF AMENDED MMXM11 / PORT11
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INDENTURE
Item Current MMXM11 AMENDED MMXM11 / PORT11
Form Nominative, book-entry registered Nominative, book-entry registered, and convertible
Maturity Perpetual Perpetual
Termination AmountAppraisal report prepared by an independent first-tier financial institution chosen by Free-Float
Appraisal report prepared by an independent first-tier financial institution chosen by Free-Float
Trigger for Royalty Payment
Triggered when there is “Sufficient Gross Profit”No defined formula of Gross Profit
Triggered when Cash Available for Royalties>0Defined formula for calculation of Cash Available for RoyaltiesPossibility of annual review by PORT11 holders
Royalties(1) US$ 5 / ton adjusted by PPI US$ 5 / ton adjusted by PPI
PPI U.S Producer Price Index unspecified U.S Producer Price Index for Finished Goods
Reference Date for PPI adjustment
May 2011, as per MMX accounting records September 2010
Cumulativeness Yes Yes
Cash Sweep for Royalty Payment
No Yes for accrued and unpaid royalties
Default Interest (in case of Trigger)
1% per month 1% per month
Collateral The Securities are unsecured The Securities are unsecured
Mandatory Redemption Securities are not subject to mandatory redemption Securities are not subject to mandatory redemption
Note: (1) US$5.50 as of December 31, 2013. 9
AMENDED MMXM11 / PORT11 CASH WATERFALL
1- Port revenues + dividends from trading activities.2- PIS/COFINS (net of refunds), ISS and cash provisions for IRPJ and CSLL.3- EB refers to Eike Batista.
-
-
-
-
-
-
MAINTENANCE CAPEX
REVENUES1
APPLICABLE TAXES2
CASH OPERATING EXPENSES
CASH FLOW FOR SENIOR DEBT PAYMENT
INTEREST / AMORT. SENIOR DEBT
CASH AVAILABLE FOR ROYALTIES
ROYALTIES, EXCL. EB3 DEFERRED ROYALTIES
CASH FLOW FOR SUBORDINATED DEBT PAYMENT
CASH PROVISIONS FOR CONTINGENCIES AND OTHER OBLIGATIONS
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CASH COST FROM OPERATIONS
-
-
SERVICE RESERVE ACCOUNT FOR BNDES AND CESCE DEBT
AMENDED MMXM11 / PORT11 ATTRIBUTES
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Royalties will be senior in payment to any subordinated debt, dividends, share repurchase and cash distribution to equity
holders, and junior to Senior Debt. Thus, PortCo cannot distribute dividends while there is still accrued royalties to be paid
Royalties will be senior in payment to any subordinated debt, dividends, share repurchase and cash distribution to equity
holders, and junior to Senior Debt. Thus, PortCo cannot distribute dividends while there is still accrued royalties to be paid
For the purpose of the calculation of “Cash Available for Royalties”, no senior debt other than the current debt facilities
will be considered. PortCo shall have the ability to refinance the BNDES debt
For the purpose of the calculation of “Cash Available for Royalties”, no senior debt other than the current debt facilities
will be considered. PortCo shall have the ability to refinance the BNDES debt
Port operated as a profit centerPort operated as a profit center
All Southeast Brazilian iron ore trading activities of shareholders to be conducted via the PortAll Southeast Brazilian iron ore trading activities of shareholders to be conducted via the Port
The PortCo governance structure among MMX and Investors contemplates:The PortCo governance structure among MMX and Investors contemplates:
Key AttributesKey Attributes
Related party transactions are subject to arm’s length terms, and, depending on the size of the transaction,
fairness opinions may be sought by non related party shareholders
Related party transactions are subject to arm’s length terms, and, depending on the size of the transaction,
fairness opinions may be sought by non related party shareholders
4 EB’s right to receive payments deferred until 2018 (except if there is excess cash available)EB’s right to receive payments deferred until 2018 (except if there is excess cash available)
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EXCHANGE OFFER TRANSACTION
FLOW TO HOLDERS OF PORT11(100% OF FREE FLOAT ACCEPT EXCHANGE OFFER)
FLOW TO HOLDERS OF PORT11(100% OF FREE FLOAT ACCEPT EXCHANGE OFFER)EXCHANGE OFFEREXCHANGE OFFER
PORT11MMXM11
EB / Investors Free Float
FIP-IE
67%
PORT11 SECURITY
33%
PortCo
$$$$
$$
$$
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Creation of a FIP-IE to hold the PORT11 securitiesCreation of a FIP-IE to hold the PORT11 securities
Launch of an exchange offer (post-deal closing) so that MMXM11
holders can migrate to PORT11, through quotas of the FIP-IE
Launch of an exchange offer (post-deal closing) so that MMXM11
holders can migrate to PORT11, through quotas of the FIP-IE
MMX, Trafigura and Mubadala are analyzing and will keep investors
informed about alternative structure for investors not currently
allowed to hold FIP-IE quotas, whereby an affiliate of the Port would
become listed and issue PORT11 or equivalent securities
Intent is to provide MMXM11 holdout investors with same economics
as PORT11 holders
In any case, for MMXM11 holders that continue to hold MMXM11,
PortCo will grant a guarantee of the PORT11 royalty payments that
will apply in the event of MMX bankruptcy
In case of any increased tax cost of the holdout structure, such
increased cost will be split among all holders of PORT11
MMX, Trafigura and Mubadala are analyzing and will keep investors
informed about alternative structure for investors not currently
allowed to hold FIP-IE quotas, whereby an affiliate of the Port would
become listed and issue PORT11 or equivalent securities
Intent is to provide MMXM11 holdout investors with same economics
as PORT11 holders
In any case, for MMXM11 holders that continue to hold MMXM11,
PortCo will grant a guarantee of the PORT11 royalty payments that
will apply in the event of MMX bankruptcy
In case of any increased tax cost of the holdout structure, such
increased cost will be split among all holders of PORT11
FIP-IE BENEFITS
GovernanceGovernance
FIP-IE will comply with governance requirements provided for by
article 1, paragraph 8, of Law 11,478/2007, as amended
FIP-IE will comply with governance requirements provided for by
article 1, paragraph 8, of Law 11,478/2007, as amended
FIP-IE manager to represent all bond holders in any PORT11 related
matter
FIP-IE manager to represent all bond holders in any PORT11 related
matter
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STRONG AND COMMITTED PARTNERS
TRAFIGURATRAFIGURAMUBADALAMUBADALA
Investment and development company wholly owned by
the Government of Abu Dhabi, United Arab Emirates
C. $55bn of AuM
Strong long-term credit rating: Aa3/AA/AA
3rd largest physical oil trader and 2nd largest non-ferrous
metals trader
Turnover of $120bn, profits in excess of $1bn, $41bn
financial lines available
Stable, resilient and profitable business model based on
physical arbitrage, supported by industrial assets ($4.6bn
book value)
Large portfolio of hard commodities assets
Owner of one of the largest single-site aluminium smelters
in the world (EMAL)
Recently signed a merger between EMAL and DUBAL
Recent acquisition of mining assets in Africa
Portfolio of oil & gas assets via Mubadala Petroleum
Leading position in physical trading market with:
– 103 mn Metric tonnes of oil and oil products and
– 35 mn Metric tonnes of non-ferrous and bulk traded in
2012
STRONG
FINANCIAL
PARTNERS
STRONG
FINANCIAL
PARTNERS
COMMODITY
KNOWLEDGE
COMMODITY
KNOWLEDGE
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2DEBT RESTRUCTURING
REQUIRED DEBT RESTRUCTURING
Debt restructuring of Port required by senior lenders and fundamental to Investors’
investment proposition
− Under pre-restructuring case, Port company would be unable to meet debt
amortization requirements
Anticipated that additional US$550mn of CAPEX will be required to make Port operational
Completion of Port requires:
− Successful debt restructuring
− Equity injection by the Investors, together with the release of committed and undrawn
debt (BNDES)
Trading subsidiary should resort to trade finance lines in the course of its operations16
� Approximately US$1.1 bn will be held on PortCo at the closing
� Existing mine debt is transferred to PortCo and will be subordinated to Senior Lenders and PORT11 holders
� BNDES restructuring commercially agreed in principle. Board approval expected by the first week of December
SUMMARY UPDATE ON DEBT RENEGOTIATION
� Master Amendment Agreement signed with subordinated lenders (i.e. Itaú and Bradesco)
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Additional 2 year grace period
Final maturity extended to 2029
Additional US$242 mn to finance company CAPEX, already contracted with BNDES and Bradesco
Additional 2 year grace period
Final maturity extended to 2023
Additional US$67 mn to finance company CAPEX
New maturity extended to June 2029
New grace period: June 2018
ANTICIPATED DEBT RESTRUCTURING
Port Debt ProfilePort Debt Profile
BNDESBNDES
Other Senior LendersOther Senior Lenders
Other debtOther debt
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3PORT ECONOMICS
SIGNIFICANT POTENTIALFOR THE SUDESTE PORT
Targeted production capacities:
� Comisa: up to 24.0 mtpy
� Gerdau: 18.0 mtpy
� Ferrous: 15.0 mtpy
� MUSA: 12.0 mtpy
� Somisa: 9.5 mtpy
� Serra Azul: 7.0 mtpy
� Pau de Vinho: 6.0 mtpy
� Arcelor Mittal: 3.2 mtpy
� Minerita: 3.2 mtpy
Source: Brasil Mineral Magazine 2013 and company estimates.
MMX
With Vale and CSN Ports running close to full capacity, Sudeste Port is the only alternative for many mining companies
Existing take-or-pay agreement with Sudeste Port
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PORT ECONOMICS:KEY ASSUMPTIONS
CAPEX� Total expansion CAPEX of US$ 550 mn
Depreciation
� Current PP&E (US$1,682 mn) and future CAPEX: 15 year depreciation period
Port Costs
� Costs are split between Fixed and Variable
� Total fixed costs increases depending on the minimum volume of the Port (from US$9.5 mn (2.5m tonnes) to US$37.9 mn (50m tonnes)
� Variable costs (per tonne) decreases depending on the minimum volume of the port (from US$3.4 per tonne (2.5m tonnes) to US$1.1 per tonne (50m tonnes)
Trading Costs
� Acquisition costs at 45 % of FOB prices
� Cost from mine to Road of 6.6 US$/t
� Cost of rail transportation of 12.2 US$/t
Working Capital
� Receivables (Port and Trading): 30 days
� Payables (Trading): 30 days
� Inventories (Trading): 20 days
Volumes
� MMX Mines (~7Mt until 2018), Major Miners (~22Mt in 2016 growing to 35Mt in 2019) and Small Miners (5-10Mt)
Tariffs
� Blended tariff: ~15 US$/t (gross of PIS/ COFINS, assuming sales mix of 2017)(1)
Royalties
� Payment occurs only when Cash Available for Royalties is positive (Revenues(2) - Applicable Taxes(3) - Cash Cost From Operation - Maintenance CAPEX - Cash Operating Expenses - Interest / Amort. Senior Debt -Service Reserve Account For BNDES And Cesce Debt -Cash Provisions For Contingencies And Other Obligations)
� Total of US$5.00(1) per tonne
Source: Company estimates.(1) Price shall be adjusted annually in accordance with the variation of the PPI recorded since September, 2010.(2) Port revenues + dividends from trading activities
21(3) PIS/COFINS (net of refunds), ISS and cash provisions for IRPJ and CSLL.
PORT ECONOMICS: PROJECTED FINANCIALS
The Issuer will commit to minimum TOP volumes for PORT11 over the 2013-2016 period
For the avoidance of doubt, royalties due for 2013 under MMXM11 will be accrued in PORT11
In $m, except if stated otherwise 2013E 2014E 2015E 2016E
Projected volumes (mt) 4.0 22.0 33.0
Minimum TOP volumes (mt) 31.9 36.8 36.8
P&L
Net revenues 43 271 441
Gross Profit 18 187 342
EBITDA (245) (21) 131
Cash-Flow
Cash flow available for debt service (345) 129 296
Debt drawdown 289 20 15
Debt repayments (13) (76) (155)
Dividends from Trading Co - 12 20
Royalties
Royalties due 170 200 204
Royalties accrued (end of period) 71 240 263 200
Royalties paid to all bondholders except EB (1) - (117) (177)
Net cash flow (69) (32) -
(1) EB's right to receive payment deferred until 2018 (except if there is excess cash available)22
4GENERAL BONDHOLDER MEETING
EXPECTED TIMELINE
Board of Directors’ Meeting of MMX
� Approve the merger of Porto Sudeste S.A. into MMX
Call notice of the General Shareholders’ Meeting of MMX
� Approve the merger of Porto Sudeste S.A. into MMX
Call notice of the General Meeting of MMXM11 Securities Holders
� Approve the amendment to the MMXM11 indenture.
General Shareholders’ Meeting of MMX
General Shareholders’ Meeting of Porto Sudeste S.A.
ClosingGeneral Meeting of MMXM11 Securities Holders
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CONCLUSION
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Secures completion of the Port, expected to start operations in Q3 2014 (first royalty cash flow expected in 2015)
Increases port capacity thereby enhancing Brazilian infrastructure and unlocking Minas Gerais production
Investors aligned with bond economics as they will hold 34% upon completion
Positive Impact from Investors’ Involvement:Positive Impact from Investors’ Involvement:
Transaction Update:Transaction Update:
Investors and MMX are working on completing CPs: closing expected in December, 2013
Master Amendment Agreement already executed with subordinated lenders
Commercial terms of the renegotiation of the senior debt agreed in principle: senior lenders have imposed new
cash waterfall requiring the amendment of MMXM11 terms
The debt restructuring and the indenture of PORT11 are still subject to BNDES board approval
MMXM11 amendment required to facilitate transaction closing
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