Supplier and Sourcing Strategy - Optimiza

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Commodity Sourcing Strategy Field Project: Copper

By: Chris Messer, Jenna Palek, Kevin Patterson,

Clara Penington, and Jake Sims

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Table of Contents

Executive Summary ............................................................................................................................................................... 3

Part I ....................................................................................................................................................................................... 5

Company: Description of Optimiza, S.A. .............................................................................................................................. 5

Strategy .............................................................................................................................................................................. 5

Commodity: Copper ........................................................................................................................................................... 6

Part II ..................................................................................................................................................................................... 7

Commodity Analysis .......................................................................................................................................................... 7

Part III .................................................................................................................................................................................... 9

Key Potential Suppliers ...................................................................................................................................................... 9

AngloAmerican .............................................................................................................................................................. 9

Freeport McMoRan ...................................................................................................................................................... 11

CODELCO ................................................................................................................................................................... 12

Part IV .................................................................................................................................................................................. 14

Recommendations ............................................................................................................................................................ 14

Alternative 1: Expedite/Improve Addition of Consulting Branch ................................................................................ 14

Alternative 2: Phase Out CODELCO, Phase in Anglo American and other non-Chilean Suppliers ............................ 14

Alternative 3: Create Recycling Incentive to Reuse Old Metals .................................................................................. 15

Recommended Alternative ........................................................................................................................................... 15

Exhibits ................................................................................................................................................................................ 17

Exhibit 1.1 ........................................................................................................................................................................ 17

Exhibit 1.2 ........................................................................................................................................................................ 20

Bibliography ........................................................................................................................................................................ 25

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Executive Summary

In this report, our team will cover the comprehensive research we did into the copper commodity on

behalf of the company Optimiza. We have structured our report in such a way that it can be interpreted and

used by anyone regardless of his or her prior knowledge of the commodity of copper or Optimiza. We begin

with an introduction to the company, followed by an evaluation of our commodity, then we evaluate two of

Optimiza’s existing suppliers as well as a third potential supplier, and finally we provide recommendations

based on our findings. We began our research by reviewing what exactly Optimiza does as a company and what

they hope to accomplish. By first obtaining an understanding of the company’s foundations and goals, we were

better able to direct and constrain our research to sourcing alternatives that would be most feasible for

Optimiza’s existing corporate and operational structure. Next, we took a look at the current commodity market

for copper. We took into account where the largest deposits of copper are located, how copper is mined, and the

common ore standards for copper, and the level of market competition in the copper industry. In addition to

exposing us to a number of potential suppliers, this research helped us to obtain a more holistic understanding

of our commodity, its relative volatility, and how market behavior will affect the future sourcing opportunities

for Copper.

In addition to the research on Optimiza and the copper commodity market, we researched three different

suppliers of copper, CODELCO—their current primary supplier, Anglo- American—one of their smaller

suppliers, and Freeport McMoRan—whom they are not currently buying from. In particular, we focused on

what unique qualities each company could offer Optimiza and how we anticipated the supplier being able to

accommodate Optimiza’s future growth. We paid special attention to the growth capabilities of these suppliers

and how efficiently we anticipated them being able to serve the quality requirements that Optimiza values most.

Optimiza is currently experiencing tremendous growth as a company; rather than focusing on ways to increase

short-term growth, we focused our recommendations on ways to make this growth sustainable and provide for

the maintenance of this growth well into the future.

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Our team had the unique opportunity to conduct an interview with Optimiza CEO, Roxana Vásquez.

Although Vásquez spoke limited English, we were able to conduct the interview via telephone in Spanish. This

gave us some direct insights not only into the founding of the company, but also the direction the company

wants to take in the future. At the conclusion of the interview, Optimiza’s CEO even expressed interest in

reviewing the conclusions of our sourcing research. It is our hope that the recommendations we have made will

be considered by Optimiza as we truly believe they can provide for sustainable and continued success for the

company.

Based on the data we have collected about Optimiza, their goals and requirements, the copper

commodity market, and different suppliers of copper, we were able to make some recommendations to

Optimiza. Our suggestions were developed with the intent of increasing Optimiza’s supply chain flexibility,

developing diverse and strong supplier relations, and creating a sustainable supply base in an increasingly

difficult commodity market, without significantly increasing costs. Although we believe all three of our final

recommendations will benefit Optimiza, in the interest of pursuing cost-saving measures while simultaneously

improving future operations we able to select one recommendation above the others that we believe would be

the best choice for Optimiza to make.

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Part I Company: Description of Optimiza, S.A.

Headquartered in the heart of the metropolitan center of Santiago, Chile, Optimiza is an engineering and development company led by CEO, Roxana Vásquez, and CFO, Hernán Vásquez. Optimiza’s corporate organizational structure divides its labor force is divided into special “task forces” that include Piping, Mechanics, Structures, Civil Works, Electricity, Instrumentation and Control, Architecture, Industrial, Security, Risk and Environment, Project Scheduling, Project Evaluation. At any given time, Optimiza employs between 70 and 80 workers and generates annual sales of $5 million. Additionally, the company has boasted an average annual growth rate of 35% for the past three years. .

Optimiza was founded in 2000 by three metallurgical civil engineers from the University of Concepción,

with the aim of developing a company able to offer project planning for international Chilean engineering and mineral processing plants. Optimiza has had a global scope from its conception and has always retained a focus on its international suppliers. The company's major clients are found in Chile (CODELCO and Minera Los Pelambres), the United States (AngloAmerican), Australia (bhpBilliton), and Denmark (FLSmidth).

Strategy

While Optimiza’s proximity to the copper market provides competitive pricing against its international competitors, it still must remain competitive with other engineering and project management companies in Chile. The company maintains its competitive pricing through careful monitoring of foreign and domestic copper markets. Optimiza holds itself to a high standard of quality. Its strategic policy is based on the concept of continuous improvement built upon a strong commitment to quality customer service. Optimiza seeks to deliver technically feasible and economically viable solutions that adequately meet customer requirements and contribute to improving their competitive position, achieving relations of trust, and creating long-term customers.

Delivery time and quality vary greatly based on client location and performance is much better for

Chilean and American clients than for Australian or European clients. In order to assess these existing supply chain problems, Optimiza is presently investigating the addition of a consulting arm that would be responsible for business and process improvement. Optimiza faces similar issues in concept-to-customer cycle time as it does with delivery—with lengthier cycle times for foreign customers. In terms of corporate social responsibility, Optimiza is committed to preserving the environment by not allowing or performing work or actions that involve contamination or alteration of air, water or soil. To ensure this, the company has created an Environmental Management Plan underpinned by the following principles:

o Include environmental analysis in your projects, in order to minimize the impact, consume fewer resources (water and energy) and generate less waste.

o Establish office practices that lead to reducing the environmental impact caused by the activities of each worker.

o Promote a responsible attitude towards caring for the environment and natural resources.

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“We are considering developing a sales force. Because in 15 years of existence we have dedicated more to production than seeking opportunities to develop new customers. We are also considering pioneering an area of consulting, aimed at improving business productivity.”

-Roxana Vásquez (see exhibit 1.1 for complete interview)

Commodity: Copper

Copper is a key component in nearly every project engineered by Optimiza. Optimiza’s location in the capital of the largest net exporter of copper in the world serves as a significant competitive advantage. Its proximity to Chilean copper mines is its distinguishing factor for its customers. The copper purchased by Optimiza for its engineering ventures is used primarily for piping and electrical purposes. Presently, the company purchases its copper supplies at a rate of $3.15 per pound. All the copper procured and processed by Optimiza is compliant with ASTM international copper standards (see exhibit 1.2). Delivery requirements and scheduling information for the commodity are orchestrated by Optimiza, but dictated by the needs to the client.

Optimiza maintains a diverse transportation network to accommodate its international partners. The

abundance and consequent favorable pricing of copper in South America (especially Chile) reduces the feasibility of sourcing a copper alternative. Aluminum has emerged as a potential future substitute (but is a 65% less effective conductor than copper wire). Because a feasible copper alternative does not seem to be a reality, there are no existing plans to move away from copper a primary sourcing commodity. Optimiza standardizes its operations by sourcing its copper from exclusively Chilean mines. Because Optimiza does not own any of these mines, its pricing control is somewhat limited. Volume requirements are entirely dependent on the number and scale of the projects Optimiza is engineering at any given time. Volume can vary greatly although consumption averages around 9 million metric tons per year. There are no projected or anticipated supply chain design changes at this time.

“Chile is a mining country, therefore its economy depends mainly on copper, thus any global crisis, affecting the mining market, and therefore providers of mining, acts as a kind of internal recession in the country.”

-Roxana Vásquez

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Part II

Commodity Analysis

Copper is a metal that has been known around the world since ancient times, and it has been mined since

8,700 BC. According to the New York Mercantile Exchange, copper is the third most widely used metal in the world today. It is a very versatile material - copper can conduct electricity, destroy germs, and is used to make many different products. Copper is currently used to make important parts of printed circuit boards, lead free solder, microwave ovens, wave guides, integrated circuits, electromagnets, wiring, and piping.

In order to produce copper, copper ore is mined from an open pit or from underground mines. The mine ore is then transported to a crushing plant, where it is crushed to a smaller size and transported to the concentrator. The crushed mine ore is ground in rod and ball mills and then sent to flotation machines, where the copper mineral rises to the top in a froth. The material then goes to the smelter, where non copper elements are burned off or melted. The result is 99% pure molten copper, also known as blister, which is then poured into anode molds. It goes through electrolytic refinery, further purifying it to 99.9999% pure copper. This pure copper can then be sent out to external customers.

The current price of copper as of November 28, 2014 was 2.96 USD/lb. This price has decreased significantly over the past year, as the high was 3.37 USD/lb in late December of last year. The main cost structure of a copper mine are the operating costs, financing costs, administration cost, royalties to the country of that mine, and depreciation and amortization. Though copper has decreased in price, it is still being substituted by cheaper products including aluminum, plastics, and fiber optics. These substitutes decreased demand from 400,000 to 500,000 metric tons in 2012.

The copper mining industry is highly competitive between companies around the world. Mines have limited lives, so copper mining companies seek to acquire other reserves in order to expand their business. The mining industry has experienced significant consolidation recently. The top five companies in the mining industry are CODELCO (Chile), Freeport-McMoRan Copper & Gold Inc (Phoenix, AZ), BHP Billiton, Grupo México, Xstrata, and Antofagasta. Copper is highly available because it is traded on exchanges. Chile holds 10 of the largest copper mines in the world, the largest being Escondida, which contains over 32 million tons of copper. In June 2013, output was about 1.1 million tons, or 5% of the world’s global copper production. Peru, Indonesia, and Mexico also are major players in the copper mining industry. Only about 6.8% of the world’s copper supply comes from the United States, and more than half of this copper is mined in Arizona.

While South America might be the largest producer of copper, most of the world’s copper ends up in buildings and electronics in North America, Europe, and China. Those three geographic locations are all significant producers of copper, but they don’t produce nearly enough to meet their own needs.

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Copper will continue to be available because of geographical availability and industry innovation. Copper reserves amount to 690 million tons, and copper resources are estimated to exceed 3,500 million tonnes in the future. Since 1950 there has always been about 40 years of copper reserves and over 200 years of resources left. Copper recycling also

plays a role in copper availability, as about 35% of todays copper came from recycled sources. See the below chart for historical information about the ratios of copper reserves to copper production.

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Part III

Key Potential Suppliers

AngloAmerican

One of the world’s largest mining companies, Anglo American has approximately 158,900 employees and contractors. They mine iron, coal, copper, nickel, platinum, diamonds and more. There are a total of seven copper mines they have interests in in South America. They fully own two mines and have large shares in four other mines all located in Chile. They are listed on the London Stock Exchange and their operating profit in 2013 was 6.6 billion. The company is managed by a board of twelve directors headed by Sir John Parker.

Their copper production is one of their largest commodities comprising 1.7 Billion in operating profit.

They receive 29% on capital employed in their copper business and attribute 28% of their total underlying operating profit to copper. Recent news has stated that Anglo American will be selling off some of its copper assets in Chile valued at $1 Billion USD. This appears to partially be speculation but it should be taken into consideration. They anticipate to produce approximately 720,000 tons of copper in 2014. This accounts for approximately 4% of total world copper production.

Anglo American Mining Locations

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The six mines they have interests in are located in various points around Chile. They have majority

interest in three mines located around Santiago. These are Chagres, close to sea level, Los Broncos, also close to sea level, and El Soldado, tucked higher into the mountains. In the northern part of Chile of Tarapaca resides Collahuasi, high in the mountains, of which Anglo American owns 44%. The mines they own fully are located much closer to sea level and also reside in the northern part of Chile. These are Mantos Blancos and Mantoverde.

In the third quarter of 2014 ended September 30th, Anglo produced 207,300 tons of copper. This amount is a 15% increase since the previous quarter and with Anglo’s continued ventures into obtaining new mines this amount is expected to increase. With regards to shipping Anglo’s mines are located incredibly close to our company, Optimiza. Because the country is Chile, all parties are located within a few hundred miles of the ocean allowing for ease of transport if Optimiza desired to expand their operations into foreign countries.

The risk level associated with trying to establish long term business relations is comparatively low to the average company. To demonstrate this, a few financial ratios will provide supporting evidence.

· Current Ratio 1.934 · Debt Equity Ratio 1.067 · Gross Profit Margin 20.97%

For a large company, these ratios show that Anglo American is relatively liquid, has an acceptable amount of debt levied against their equity, and brings in a healthy gross profit.

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Freeport McMoRan

Freeport McMoRan was chosen as a potential supplier because it is headquartered in the USA, where Optimiza already has a strong presence. In addition to its convenient location, Freeport McMoRan is part of the S&P 500 Stock Index and is ranked number 142 in Fortune 500 companies. Finally, it is a company in close proximity to other current clients of Optimiza.

Freeport McMoRan is already a very prominent multinational company in the metals and mining sector. The company was founded in 1912 as Freeport Sulphur Company in Freeport, Texas. Through constant growth and strategic acquisitions, Freeport McMoRan has devel oped and entered many more markets than just sulphur. Now headquarted out of Pheonix, Arizona, Freeport McMoRan had a 2013 sales volume of about 4.09 billion pounds of copper, which continued a growing trend, up from 3.65 billion pounds in 2012. Freeport McMoRan employs around 36,000 people and operates 15 copper mines around the world. Seven of these mines are in the United States, where it is headquartered, along with one in Africa, three in Indonesia, and, most importantly, four in South America. Another major reason we chose Freeport was because it currently operates three copper mines in Chile (El Abra, Candelaria, and Ojos del Salado). This allows easier access to mines that could directly supply our company.

Freeport has many major customers as a result of the size and influence of the company. As a result of

its involvement in many sectors, Freeport McMoRan works with any company working with raw materials of copper, molybdenum, gold, oil, and other commodities. As of 2013, Freeport McMoRan held an 8.8% market share in copper production and ranked second only to CODELCO. Freeport McMoRan is a publicly traded company, with a listed stock price of around $25. It is currently under some scrutiny with its stockholders as a result of its recent purchase of two companies last year, but is approaching a settlement soon. The stockholders believed that Freeport overpaid when purchasing two companies last year, and therefore, the board has worked to supply them with a fair settlement.

Freeport McMoRan has a board of directors- led by the company’s CEO, Richard C. Adkerson- that is comprised of 16 members who come from various backgrounds such as work in metals, oil, business, public affairs, and others. Currently Freeport’s board is working to maintain high profits as the price of certain commodities, including copper, are dropping worldwide. However, with its holdings, it expects its mines to increase production in the upcoming years, which will help offset the reduction in price per pound. Optimiza and Freeport McMoRan have not worked in the past, but it is our belief that a strategic partnership could benefit both parties.

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CODELCO

CODELCO is the main copper producer in the world and controls 10% of the world’s copper reserves. CODELCO came to fruition in 1976 after the Chilean state purchased most of the country’s copper reserves in 1971. CODELCO would seem to be the obvious choice since it’s the largest producer. Since it’s the biggest

producer, they are able to offer competitive prices and reliable service. CODELCO is an autonomous organization but state owned by the Chilean government. In 2013, it had total sales revenue of 14.96 billion USD and employed about 19019 people. There are five principle mines in CODELCO’s operations. The biggest of these is the operation titled CODELCO Norte. The main mine is Chuquicamata. Mining began in the late 19th century. Currently, there is 182,000 tons of daily capacity in the mine. Radomiro Tomic is located five km from Chuquicamata and produced 379,600

tons in 2013. Also, there is the Ministro Alejandro Hales, which are mined minimally, as there are high levels of arsenic in the ore. The second major operation is the mine in El Salvador, although production there has been slow since the mine is not as profitable as it once was. The Andina mine is near Santiago and is planning to raise mill capacity to 200,000 tons a day. El Teniente largest underground copper mine in the world and contains 73 million tons of copper. The final mine is El Abra, where CODELCO is working towards 168,000 tons of capacity. CODELCO also has a part in many joint ventures and partnerships in mines around the world, and sources some of their copper from these other companies.

In 2011, CODELCO produced 1,796,169 metric tons of fine copper. However, the company has been

facing a decline in overall production. Earlier this year, CODELCO had to cancel shipments to China this year due to lack of production in certain mines. CODELCO is also a provider to other major markets such as America, Europe, Korea and Taiwan. CODELCO is responsible for 32% of Chile’s copper output. CODELCO is owned by the Chilean government, but functions autonomously. The Board of Directors is the ruling body in CODELCO. It consists of nine members, three of which are appointed by the Chilean government, four from a list selected by the Council of Senior Public Management, one from the Federation of Copper Workers, and one from either the Federation of Copper Supervisors and the National Association of Copper Supervisors.

CODELCO has the backing of the Chilean government, as well as billions of dollars in investments,

assets, and mines. The company consists of mainly Chilean workers and is known for being on the forefront of new technologies to efficiently mine copper and refine the harmful chemicals. Although they have a varied base of mines in Chile, they cannot always react to changes in demand and production. Since copper production is effected by many outside factors such as weather, their supply chain is not very flexible. The main methods of transportation for CODELCO’s metals are through trains, ships, and automobiles, which are also very sensitive to outside variables. CODELCO prides themselves on high safety standards, with only 1.39 hours per million worked lost due to injury.

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Currently, many of the mines are not being used to their full capacities due to lacking technology and increased difficulties with mining and ore quality. CODELCO produced 162 million tons last year, 1.5% drop, five year low due to lower ore grades and trickier mining operations. The company has said that they expect to increase capacity but in order to do that they will have to develop technology to help them meet that demand. Earlier this year they had to cancel 10,000 orders to China, which shows that they cannot currently meet demand to the extent that they have to cancel orders. The cost of CODELCO’s copper depends largely on what copper is being traded for on the commodities market, currently at a 5 year low. The market price for copper peaked around 2010. Currently, Optimiza uses CODELCO as one of their main suppliers and has for many years, which is convenient due to the location of both companies. However, it is unclear if CODELCO will be able to meet the increasing demands of Optimiza going forward.

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Part IV

Recommendations

Alternative 1: Expedite/Improve Addition of Consulting Branch

Currently the consulting branch of Optimiza is fresh and underutilized. Due to the relatively young age of the company we find that adding resources into this branch of the company will likely lead to its continued success and maintain its tremendous rate of growth. A current trend in global business—regardless of industry or market—is the implementation of not only a strategic sourcing plan, but continued re-evaluation of strategic sourcing. While we can provide recommendations as far as current sourcing plans go, we recommend most strongly that infrastructure within the company be arranged so that Optimiza may continue to be a key player in Chile as well as the rest of their global industry. Using strategic tools like supplier scorecards and comparative financial ratios, Optimiza can work internally to continually improve its supply chain and work pursue cost cutting measures.

The addition of an internal consulting branch will also play an important role from a sustainability

standpoint. Third-party consulting work not only places an enormous cost burden on the company, but it has also been shown to be less effective than internal auditing processes. A team that is permanently dedicated to improving Optimiza’s operations will be much more familiar with the company’s existing assets and corporate structure than a third party consulting arm would be. Form our exclusive interview with CEO Roxana Vásquez, we know that Optimiza has already been considering the idea of expansion to incorporate “an area of consulting” aimed at “improving business productivity.” We would encourage this expansion and suggest that this addition to the company be expedited and realized as soon as possible so that Optimiza can begin collecting data from day-to-day activities and make meaningful, long-term improvements to its operations and supply chain.

The only potential drawback to the addition of this consulting arm is the initial cost of creating the

department and hiring/training employees to perform these activities. However, with the cost-saving measures the consulting branch would undoubtedly pay for themselves within a few years.

Alternative 2: Phase Out CODELCO, Phase in Anglo American and other non-Chilean Suppliers

Currently, Optimiza sources much of its copper from its home country, Chile. However, Chilean mines are beginning to become depleted and have been producing lower quality ore in recent years. Due to CODELCO’s recent problems fulfilling orders, we would recommend phasing out sourcing with them. However, the problems with Chilean copper production are not limited to to just CODELCO’s mines. Many Chilean reserves are beginning to deplete or are consistently producing lower grade copper ores. Because of

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this, we would also recommend a slight decrease in sourcing from Anglo American, beginning to build sourcing relationships with companies that have mines in many different countries, such as the supplier Freeport McMoRan.

Headquartered in Phoenix, AZ, Freeport McMoRan has impressive facilities across the globe. Because Freeport McMoRan is smaller in scope and size than CODELCO, Optimiza could exert more power over this particular supplier, giving them the ability to negotiate better shipping terms and potentially even lower prices. Freeport McMoRan could also strengthen Optimiza’s current corporate social responsibility practices. As Freeport McMoRan is very outwardly and actively concerned with the health and safety of its employees, minimizing adverse impacts on the environment, as well as forming long-term relationships with customer, we feel that this supplier would be a very beneficial choice for Optimiza and would push them to become more responsible to their employees, the environment, and their suppliers.

The biggest drawback we see to pursing a supplier relationship with Freeport McMoRan is increased

shipping costs and tariffs or taxes in order to get the commodity into Chile. But, with the large number of copper mines that Freeport McMoRan has a stake in, we feel that Optimiza could weigh all of the potential costs and benefits of their mining locations in order to chose one that is the most cost effective.

Alternative 3: Create Recycling Incentive to Reuse Old Metals

The global demand for copper is increasing each and every year with more companies developing and requiring it. Developed countries also have shown no signs of stopping consumption of copper. For this reason, we believe it is in Optimiza’s best interest to begin finding ways to recycle and/or reuse copper.

There are several initiatives and organizations designed around recycling on a large scale. A partnership with the Institute of Scrap Recycling Industries based out of Washington DC would be advisable. This non-profit organization is designed to equip companies with safety advice, networking opportunities, regulatory information and standards, up to date market research and current publications for the purpose of enabling companies such as Optimiza to figure out how they can best understand new techniques, trends and projects.

Some examples over copper recycling programs have been realized through projects like Toyota’s Wire Harness Recycling Project. This project essentially takes copper out of the rubber wiring it is encased it. The drawbacks to this project are the high costs associated with the methods used, however we believe that this is still worth looking into because the price of copper will very soon exceed the cost of recycling it. Further research and development is highly recommended into all manner of copper recycling programs.

Recommended Alternative

Given our existing recommendations, the best course of action for Optimiza is to follow our second alternative. This recommendation permits Optimiza to become a more global company, while also benefiting the quality of its products. This recommendation begins with Optimiza reducing its reliance on CODELCO as its primary supplier. We recommend this because the ore coming from CODELCO mines is now rated as an

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inferior product. Furthermore, there has been speculation with regards to the existing copper supplies in Chile that have resulted in a drop in consumer confidence and increasing prices for copper sourced from these mines. Therefore, we feel that Optimiza should look into building and improving relationships with other suppliers such as AngloAmerican and/or Freeport McMoRan. These suppliers allow access to mines all over the world, allowing Optimiza to obtain the best quality copper they can find, and with more competitive pricing than sourcing the majority of their product from only Chilean mines. Yet, these suppliers also still have Chilean mines, which allow for quick access to copper if Optimiza needs it. This means Optimiza can continue to provide quick and efficient project service to its existing Chilean and South American customers while also taking advantage of competitive pricing abroad and improving its service and delivery times with its foreign clients. Finally, by working with these new suppliers, which are true multinational corporations, Optimiza’s influence will be enhanced throughout the globe.

Our existing research with AngloAmerican suggests that sourcing a larger percentage of Optimiza’s copper from it should not pose significant risk to the company. AngloAmerican has a stable amount of equity levied against its debt and its existing growth rates seem sustainable for the foreseeable future. Freeport McMoRan offers proximity to Optimiza’s existing clients as well as access to substantial North American copper reserves. The company is ranked second only to CODELCO, whose share of the market is projected to fall in the coming decade. Increasing sourcing form both of these suppliers should not pose any significant threat to Optimiza from a supplier risk standpoint.

If Optimiza complies with this recommendation, it will not only ensure that the company is not affected by potentially dwindling supplies of copper in Chile, but it will help Optimiza to diversify its suppliers, lower procurement costs, and provide superior performance to its increasing number of foreign clients. If the company wishes to continue its tremendous growth and not be stagnated by the copper market or rising commodity prices, improving relations with more geographically diverse suppliers like AngloAmerican and contracting new suppliers like Freeport McMoRan is the best course of action for the immediate and long-term benefit of the enterprise.

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Exhibits

Exhibit 1.1

Entrevista con Roxana Vásquez

¿Podría darnos una breve descripción de cuál es el propósito de su empresa y cuál es el producto o servicio que esta ofrece?

R:El propósito es ser la mejor empresa de ingeniería Chilena para la minería. El producto es desarrollar proyectos de Ingeniería multidisiciplinarios para Plantas de Procesamientos de Minerales

¿Qué le hizo decidir empezar una nueva empresa, su propio emprendimiento? ¿Cuáles fueron sus principales razones?

R:La principal razón fue haber quedado sin trabajo a inicios del año 1999 debido a la crisis asiática, con casi 10 años de permanencia en una empresa de ingeniería.

¿Qué características de su empresa considera únicas? ¿Existe algún valor agregado que usted considere que pertenece sólo a su compañía?

R:El clima laboral que hemos forjado en base a una filosofía de trabajo feliz. La calidez y empatía con que se trata a todos los clientes.

¿Cuáles fueron las percepciones de mercado iniciales que le hicieron querer ingresar a la industria en que actualmente desarrolla su negocio? ¿Fueron estas percepciones completamente determinantes en su decisión?

R:No hubo percepciones, es lo que yo sabía hacer. No hubo análisis de ningún tipo, solo la convicción de hacerlo.

¿Qué pasos debió tomar correctamente para desarrollar su negocio de manera exitosa?

R:Los pasos fundamentales fueron: realizar el trabajo con estándares de clase mundial desde el primer día, dedicación al 100%, sin horario, ni fines de semana, ni vacaciones durante los primeros años, identificar profesionales con alto conocimiento técnico. Amor por el trabajo y no tener permitido el fracaso.

¿A qué tipo de sociedad pertenece su empresa? ¿Quiénes son los socios fundadores, miembros o empleados claves de su negocio?

R: Sociedad Anónima cerrada. Yo soy la socia fundadora, y mi marido que además es mi socio, ha sido un elemento clave en la gestión financiera del negocio.

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Al inicio de sus actividades, ¿requirió usted de alguna ayuda financiera externa? ¿De ser así las podría describir? Si no, ¿cómo se autofinanció?

R: Si se requirió, y conseguimos un crédito del Banco de Chile, por 5 millones de pesos, como capital de trabajo, donde en realidad recibimos 4 millones, ya que el millón restante quedaba como seguro del crédito.

¿Por qué cree usted que sus usuarios o clientes consideran sus productos o servicios?

R: Calidad, compromiso y capacidad de respuesta es nuestro sello, y nos esforzamos por hacer de este sello una realidad, creo que por eso los clientes nos consideran.

¿Qué características está considerando agregar a su negocio en el futuro próximo o lejano? De ser posible, nombre 2 o 3.

R: Estamos considerando desarrollar:

-‐ Una fuerza de venta, ya que en 15 años de existencia nos hemos dedicado más a producir que a la búsqueda de oportunidades o desarrollo de clientes nuevos.

-‐ Un área de consultoría, orientada a mejorar la productividad de las empresas

¿Cuál ha sido el momento más difícil por el cual su empresa ha tenido que atravesar? ¿Cómo logró sobrellevar esa situación?

R: Hemos tenido varios momentos difíciles, durante el 3er año para lograr financiamiento vendimos nuestra casa, el 7° año fue muy difícil también, pero ya teníamos una historia por lo que el banco nos prestó financiamiento, y este año que también ha sido complicado, la baja demanda ha hecho caer los precios de ventas, y los clientes han aumentado los periodos de pagos casi al doble, lo que sin duda altera los flujos de caja.

Según su percepción, ¿Cuáles son los mayores riesgos de su negocio?

R: Chile es un país minero, por ende su economía depende fundamentalmente del cobre, por ende cualquier crisis mundial, afecta el mercado minero, y por ende a los proveedores de la minería, de igual manera si hay algún tipo de recesión interna en el país.

¿Cuáles son los factores que limitan la velocidad de crecimiento del negocio? ¿Cuáles son sus planes de crecimiento para el futuro en el corto, mediano y largo plazo?

R: La velocidad de crecimiento se ve limitada por la incertidumbre del mercado.

Los planes de crecimiento, obedecen a las oportunidades de proyectos que puedan venir, hoy día en Chile se ve un notorio estancamiento, por lo que muchas empresas han debido disminuir su dotación, en nuestro caso, estamos empeñados en mantenernos. Una vez que se normalice podremos analizar si podremos continuar con el ritmo de crecimiento promedio anual de 35%, como ha sido nuestra historia.

¿Cuáles son las proyecciones de la empresa en los próximos 3 años y cuáles son los supuestos claves detrás de estas predicciones?

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R: El supuesto clave es que el segundo semestre del 2016 se recupera la economía en Chile, y por ende comienza un nuevo ciclo en la minería chilena.

Otro supuesto clave, es que los 2 contratos de servicios que Optimiza tiene por 2 años, van a demandar el trabajo declarado por el cliente.

Dada las condiciones actuales en Chile, las proyecciones crecer un 20% en el 2015, aumentando a un 30% en el 2016 y ojala recuperar el histórico 35% en el 2017.

Después de convertirse en emprendedor, ¿cómo logra balancear las responsabilidades profesionales, familiares y de desarrollo personal?

R: Durante 15 años me he dedicado al desarrollo de Optimiza y de mis hijos, recién ahora estoy pudiendo ocuparme un poco de mi misma y de mi marido. Es difícil y desgastador, pero con la ayuda y entendimiento de mi familia los logros han sido más que satisfactorios, pero ha implicado un gran esfuerzo y mucho trabajo, pero me gusta hacer lo que hago, creo que eso es lo más importante, y no lo podría haber logrado sin la ayuda de muchas personas que creyeron en mí.

¿Podría otorgarles algunas recomendaciones a quienes estén por iniciar su propio emprendimiento o a quienes no les resultó exitoso?

R: No creo que haya una receta, ya que cada caso en único. Pero creo que lo fundamental es que ames lo que haces, trabajar sin límites, ser ordenado en todos los ámbitos, ocuparse de la calidad y de la imagen del producto, saber que siempre puede ser mejor. Ser autoexigente, y exigente con los que trabajan contigo, pero a su vez respetuoso y afable, es decir se debe “Liderar y Trabajar con Amor”.

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Exhibit 1.2

Pipe and Tube

Designation Title

B42 - 10 Standard Specification for Seamless Copper Pipe, Standard Sizes

B43 - 14 Standard Specification for Seamless Red Brass Pipe, Standard Sizes

B68 / B68M - 11 Standard Specification for Seamless Copper Tube, Bright Annealed

B75 / B75M - 11 Standard Specification for Seamless Copper Tube

B88M - 13 Standard Specification for Seamless Copper Water Tube [Metric]

B88 - 14 Standard Specification for Seamless Copper Water Tube

B111 / B111M - 11

Standard Specification for Copper and Copper-Alloy Seamless Condenser Tubes and Ferrule Stock

B135 - 10 Standard Specification for Seamless Brass Tube

B135M - 10 Standard Specification for Seamless Brass Tube [Metric]

B188 - 10 Standard Specification for Seamless Copper Bus Pipe and Tube

B251 - 10 Standard Specification for General Requirements for Wrought Seamless Copper and Copper-Alloy Tube

B251M - 10 Standard Specification for General Requirements for Wrought Seamless Copper and Copper-Alloy Tube [Metric]

B280 - 13 Standard Specification for Seamless Copper Tube for Air Conditioning and Refrigeration Field Service

B302 - 12 Standard Specification for Threadless Copper Pipe, Standard Sizes

B306 - 13 Standard Specification for Copper Drainage Tube (DWV)

B315 - 12 Standard Specification for Seamless Copper Alloy Pipe and Tube

B359 / B359M - 12e1

Standard Specification for Copper and Copper-Alloy Seamless Condenser and Heat Exchanger Tubes With Integral Fins

B360 - 09 Standard Specification for Hard-Drawn Copper Capillary Tube for Restrictor Applications

B372 - 12a Standard Specification for Seamless Copper and Copper-Alloy Rectangular Waveguide Tube

B395 / B395M - 13

Standard Specification for U-Bend Seamless Copper and Copper Alloy Heat Exchanger and Condenser Tubes

B447 - 12a Standard Specification for Welded Copper Tube

B466 / B466M - 14

Standard Specification for Seamless Copper-Nickel Pipe and Tube

B467 - 14 Standard Specification for Welded Copper-Nickel Pipe

B543 / B543M - 12

Standard Specification for Welded Copper and Copper-Alloy Heat Exchanger Tube

B552 - 12 Standard Specification for Seamless and Welded Copper–Nickel Tubes for Water Desalting Plants

B587 - 12 Standard Specification for Welded Brass Tube

B608 - 11 Standard Specification for Welded Copper-Alloy Pipe

B640 - 12a Standard Specification for Welded Copper Tube for Air Conditioning and Refrigeration Service

B643 - 12 Standard Specification for Copper-Beryllium Alloy Seamless Tube

21

B687 - 99(2011) Standard Specification for Brass, Copper, and Chromium-Plated Pipe Nipples

B698 - 10 Standard Classification for Seamless Copper and Copper Alloy Plumbing Pipe and Tube

B706 - 00(2011) Standard Specification for Seamless Copper Alloy (UNS No. C69100) Pipe and Tube

B743 - 12 Standard Specification for Seamless Copper Tube in Coils

B813 - 10 Standard Specification for Liquid and Paste Fluxes for Soldering of Copper and Copper Alloy Tube

B819 - 00(2011) Standard Specification for Seamless Copper Tube for Medical Gas Systems

B828 - 02(2010) Standard Practice for Making Capillary Joints by Soldering of Copper and Copper Alloy Tube and Fittings

B837 - 10 Standard Specification for Seamless Copper Tube for Natural Gas and Liquefied Petroleum (LP) Gas Fuel Distribution Systems

B903 - 10 Standard Specification for Seamless Copper Heat Exchanger Tubes With Internal Enhancement

B919 - 12 Standard Specification for Welded Copper Heat Exchanger Tubes With Internal Enhancement

B937 - 04(2010) Standard Specification for Copper-Beryllium Seamless Tube (UNS Nos. C17500 and C17510)

B944 - 11 Standard Specification for Copper-Beryllium Welded Heat Exchanger and Condenser Tube (UNS No. C17510)

B956 / B956M - 10e1

Standard Specification for Welded Copper and Copper-Alloy Condenser and Heat Exchanger Tubes with Integral Fins

Plate, Sheet, and Strip

Designation Title

B19 - 10 Standard Specification for Cartridge Brass Sheet, Strip, Plate, Bar, and Disks

B36 / B36M - 13

Standard Specification for Brass Plate, Sheet, Strip, And Rolled Bar

B96 / B96M - 11

Standard Specification for Copper-Silicon Alloy Plate, Sheet, Strip, and Rolled Bar for General Purposes and Pressure Vessels

B100 - 13 Standard Specification for Wrought Copper-Alloy Bearing and Expansion Plates and Sheets for Bridge and Other Structural Use

B101 - 12 Standard Specification for Lead-Coated Copper Sheet and Strip for Building Construction

B103 / B103M - 10

Standard Specification for Phosphor Bronze Plate, Sheet, Strip, and Rolled Bar

B121 / B121M - 11

Standard Specification for Leaded Brass Plate, Sheet, Strip, and Rolled Bar

B122 / B122M - 11

Standard Specification for Copper-Nickel-Tin Alloy, Copper-Nickel-Zinc Alloy (Nickel Silver), and Copper-Nickel Alloy Plate, Sheet, Strip, and Rolled Bar

B129 - 12 Standard Specification for Cartridge Brass Cartridge Case Cups

B130 - 13 Standard Specification for Commercial Bronze Strip for Bullet Jackets

B131 - 12 Standard Specification for Copper Alloy Bullet Jacket Cups

B152 / B152M - 13

Standard Specification for Copper Sheet, Strip, Plate, and Rolled Bar

B169 / B169M - 10

Standard Specification for Aluminum Bronze Sheet, Strip, and Rolled Bar

B171 / B171M - 12

Standard Specification for Copper-Alloy Plate and Sheet for Pressure Vessels, Condensers, and Heat Exchangers

B194 - 08 Standard Specification for Copper-Beryllium Alloy Plate, Sheet, Strip, and Rolled Bar

22

B248 - 12 Standard Specification for General Requirements for Wrought Copper and Copper-Alloy Plate, Sheet, Strip, and Rolled Bar

B248M - 12 Standard Specification for General Requirements for Wrought Copper and Copper-Alloy Plate, Sheet, Strip, and Rolled Bar (Metric)

B370 - 12 Standard Specification for Copper Sheet and Strip for Building Construction

B422 / B422M - 10e1

Standard Specification for Copper-Aluminum-Silicon-Cobalt Alloy, Copper-Nickel-Silicon-Magnesium Alloy, Copper-Nickel-Silicon Alloy, Copper-Nickel-Aluminum-Magnesium Alloy, and Copper-Nickel-Tin Alloy Sheet and Strip

B432 - 14 Standard Specification for Copper and Copper Alloy Clad Steel Plate

B465 - 11 Standard Specification for Copper-Iron Alloy Plate, Sheet, Strip, and Rolled Bar

B506 - 09 Specification for Copper-Clad Stainless Steel Sheet and Strip for Building Construction

B508 - 08 Standard Specification for Copper Alloy Strip for Flexible Metal Hose

B534 - 14 Standard Specification for Copper-Cobalt-Beryllium Alloy and Copper-Nickel-Beryllium Alloy Plate, Sheet, Strip, and Rolled Bar

B569 - 14 Standard Specification for Brass Strip in Narrow Widths and Light Gage for Heat-Exchanger Tubing

B591 - 09 Standard Specification for Copper-Zinc-Tin and Copper-Zinc-Tin-Iron-Nickel Alloys Plate, Sheet, Strip, and Rolled Bar

B592 - 11 Standard Specification for Copper-Zinc-Aluminum-Cobalt Alloy, Copper-Zinc-Tin-Iron Alloy Plate, Sheet, Strip, and Rolled Bar

B694 - 13 Standard Specification for Copper, Copper-Alloy, Copper-Clad Bronze (CCB), Copper-Clad Stainless Steel (CCS), and Copper-Clad Alloy Steel (CAS) Sheet and Strip for Electrical Cable Shielding

B740 - 09 Standard Specification for Copper-Nickel-Tin Spinodal Alloy Strip

B747 - 11 Standard Specification for Copper-Zirconium Alloy Sheet and Strip

B768 - 11 Standard Specification for Copper-Cobalt-Beryllium Alloy and Copper-Nickel-Beryllium Alloy Strip and Sheet

B882 - 10 Specification for Pre-Patinated Copper for Architectural Applications

B888 / B888M - 13

Standard Specification for Copper Alloy Strip for Use in Manufacture of Electrical Connectors or Spring Contacts

B936 - 13 Standard Specification for Copper-Chromium-Iron-Titanium Alloy Plate, Sheet, Strip and Rolled Bar

Rod, Bar, Wire, Shapes and Forgings

Designation Title

B16 / B16M - 10

Standard Specification for Free-Cutting Brass Rod, Bar and Shapes for Use in Screw Machines

B21 / B21M - 14

Standard Specification for Naval Brass Rod, Bar, and Shapes

B98 / B98M - 13

Standard Specification for Copper-Silicon Alloy Rod, Bar and Shapes

B99 / B99M - 11

Standard Specification for Copper-Silicon Alloy Wire for General Applications

B124 / B124M - 14a

Standard Specification for Copper and Copper Alloy Forging Rod, Bar, and Shapes

B134 / B134M - 08

Standard Specification for Brass Wire

23

B138 / B138M - 11

Standard Specification for Manganese Bronze Rod, Bar, and Shapes

B139 / B139M - 12

Standard Specification for Phosphor Bronze Rod, Bar, and Shapes

B140 / B140M - 12

Standard Specification for Copper-Zinc-Lead (Red Brass or Hardware Bronze) Rod, Bar, and Shapes

B150 / B150M - 12

Standard Specification for Aluminum Bronze Rod, Bar, and Shapes

B151 / B151M - 13

Standard Specification for Copper-Nickel-Zinc Alloy (Nickel Silver) and Copper-Nickel Rod and Bar

B159 / B159M - 11

Standard Specification for Phosphor Bronze Wire

B187 / B187M - 11

Standard Specification for Copper, Bus Bar, Rod, and Shapes and General Purpose Rod, Bar, and Shapes

B196 / B196M - 07(2013)

Standard Specification for Copper-Beryllium Alloy Rod and Bar

B197 / B197M - 07(2013)

Standard Specification for Copper-Beryllium Alloy Wire

B206 / B206M - 12

Standard Specification for Copper-Nickel-Zinc (Nickel Silver) Wire and Copper-Nickel Alloy Wire

B249 / B249M - 14

Standard Specification for General Requirements for Wrought Copper and Copper-Alloy Rod, Bar, Shapes and Forgings

B250 / B250M - 13

Standard Specification for General Requirements for Wrought Copper Alloy Wire

B272 - 12 Standard Specification for Copper Flat Products with Finished (Rolled or Drawn) Edges (Flat Wire and Strip)

B283 / B283M - 14a

Standard Specification for Copper and Copper-Alloy Die Forgings (Hot-Pressed)

B301 / B301M - 13

Standard Specification for Free-Cutting Copper Rod, Bar, Wire, and Shapes

B371 / B371M - 08(2013)

Standard Specification for Copper-Zinc-Silicon Alloy Rod

B411 / B411M - 14

Standard Specification for Copper-Nickel-Silicon Alloy Rod and Bar

B441 - 04(2010)

Standard Specification for Copper-Cobalt-Beryllium, Copper-Nickel-Beryllium, and Copper-Nickel-Lead-Beryllium Rod and Bar (UNS Nos. C17500, C17510, and C17465)

B453 / B453M - 11e1

Standard Specification for Copper-Zinc-Lead Alloy (Leaded-Brass) Rod, Bar, and Shapes

B455 - 10 Standard Specification for Copper-Zinc-Lead Alloy (Leaded-Brass) Extruded Shapes

B570 - 06(2010)

Standard Specification for Copper-Beryllium Alloy (UNS Nos. C17000 and C17200) Forgings and Extrusions

B870 - 08(2014)

Standard Specification for Copper-Beryllium Alloy Forgings and Extrusions Alloys (UNS Nos. C17500 and C17510)

B927 / B927M - 13

Standard Specification for Brass Rod, Bar, and Shapes

B929 - 05(2011)e1

Standard Specification for Copper-Nickel-Tin Spinodal Alloy Rod and Bar

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B967 / B967M - 12a

Standard Specification for Copper-Zinc-Tin-Bismuth Alloy Rod, Bar and Wire

B974 / B974M - 12a

Standard Specification for Free-Cutting Bismuth Brass Rod, Bar and Wire

B981 / B981M - 12

Standard Specification for Low Leaded Brass Rod, Bar and Shapes

F68 - 10 Standard Specification for Oxygen-Free Copper in Wrought Forms for Electron Devices

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Bibliography "Annual Report 2013." (n.d.): n. pag. Angloamerican.com. Anglo American Plc, Spring 2014. Web. 6 Dec.

2014. ASTM. (n.d.). Copper Standards. Retrieved December 2, 2014, from http://www.astm.org/Standards/copper-

standards.html Web. 06 Dec. 2014. Basov, Vladamir. "Top 10 Copper Companies in 2012." Mining.com. N.p., n.d. Web. 06 Dec. 2014. "CODELCO - Corporación Nacional Del Cobre , Chile - Inicio." CODELCO - Corporación Nacional Del

Cobre , Chile - Inicio. CODELCO, n.d. Web. 06 Dec. 2014. "Copper." – Anglo American. N.p., Dec. 2014. Web. 06 Dec. 2014.

<http://www.angloamerican.com/products/copper.aspx>. "Copper Supply & Consumption — 1993–2013." EpscoHost. Copper Development Association, Inc., 1 Jan.

2014. Web. 06 Dec. 2014. “Comodity Information” Optimiza, S.A. Ltd., n.d. Web. 06 Dec. 2014. Crane, Tom. "Member Services & Benefits." Member Services. N.p., n.d. Web. 06 Dec. 2014.

<http://www.isri.org/about-isri/membership/member-services-benefits#.VIPczjHF-So>. DraKoln, Noble. "Commodities: Copper." Investopedia. Investopedia, LLC., n.d. Web. 06 Dec, 2014. "FCX_Freeport-McMoRan Inc. - Our Company, Who We Are." FCX_Freeport-McMoRan Inc.Web. 1 Dec.

2014. <http://www.fcx.com/company/who.htm>. "History." – Anglo American. N.p., Dec. 2014. Web. 06 Dec. 2014. http://www.angloamerican.com/about-

us/history Hoffman, Liz. "Freeport-McMoRan Nears Settlement Over McMoRan, Plains Deals." The Wall Street Journal.

Dow Jones & Company, 1 Jan. 2014. Web. 1 Dec. 2014. <http://online.wsj.com/articles/freeport-mcmoran-nears-settlement-over-mcmoran-plains-deals-1417379391>.

"How Do They Do That? How Copper Is Made." Copper Development Association, Inc. BHP Copper, n.d.

Web. 06 Dec. 2014. "Long-Term Availability of Copper." Copper Alliance. International Copper Association, Ltd., n.d. Web. 06

Dec. 2014. "Market Share of Major Copper Producing Companies 2013." Statista. 1 Jan. 2014. Web. 1 Dec. 2014.

<http://www.statista.com/statistics/274260/market-share-of-major-copper-producing-companies/>.

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"Revenue and Profit of Copper Manufacturer CODELCO 2013 | Statistic." Statista. N.p., n.d. Web. 06 Dec.

2014. "Reviving CODELCO." The Economist. The Economist Newspaper, 23 Oct. 2010. Web. 06 Dec. 2014. Sprovieri, John. "Wire Harness Recycling." Assemblymag.com. Assembly, 1 July 2014. Web. 6 Dec. 2014.

<http%3A%2F%2Fwww.assemblymag.com%2Farticles%2F92263-wire-harness-recycling>. Troszkiewicz, Agnieszka. "Copper Substitution Seen by KME Accelerating on Slow Growth." Bloomberg.com.

Bloomberg, 5 Mar. 2013. Web. 06 Dec. 2014. Vásquez, Roxana. "About Optimiza." Telephone interview. 6 Nov. 2014.

Supplier and Sourcing Strategy - Optimiza

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