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Canadian Minerals and Metals Zora Toor Tarlochan Chane (TC) Mel Chua Zhilicka Sehgal.

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Presentation on theme: "Canadian Minerals and Metals Zora Toor Tarlochan Chane (TC) Mel Chua Zhilicka Sehgal."— Presentation transcript:

1 Canadian Minerals and Metals Zora Toor Tarlochan Chane (TC) Mel Chua Zhilicka Sehgal

2 INDUSTRY OVERVIEW Canadian Minerals and Metals

3 Minerals and Metals Industry Comprised of mineral exploration, mining and quarry industries, primary metals, fabricated metal products and nonmetallic mineral products industries Includes Metal, nonmetal and coal mines, stone quarries, sand gravel pits, oil sands operations and manufacturing capacity (nonferrous metal smelters, refineries and steel mills)

4 Industry Characteristics Extremely Capital Intensive Exploration cost Operation cost Equipment cost Recovery cost Sensitive to changes in business cycle Large, medium and small size companies

5 Industry Characteristics (2) Very sensitive to fluctuations in exchange rates and commodity prices Hedge: Less speculative Reduced exposure and uncertainty Smooth cash flows No Hedge: Volatile cash flow Tax Self-correction in long run

6 Industry Characteristics (3) Environmental consideration: Noise pollution Acid mine drainage Changes in local water balance Soil erosion Disruption of animal life Stringent environmental regulations

7 The Canadian Mining Industry A Key Feature of Canada’s Economic Landscape Canada is a leading producer and exporter of minerals and mineral-based products. Canada is one of the largest mining nations in the world, producing more than 60 minerals and metals. The industry employs some 388,000 Canadians Contributed $40 billion to Canada’s GDP in 2008 (Statistics Canada, 2009)

8 Capped Diversified Metals and Mining Index vs TSE Market Index (1yr)

9 Capped Diversified Metals and Mining Index vs TSE Market Index (5yr)


11 Uranium About Uranium Process World Production Uranium Mining in Canada Price Supply and Demand

12 About Uranium Two uses for Uranium: 1) Military 2) Civilian Nuclear power is a clean source of electricity, and generation capacity is growing.

13 About Uranium (2) Major Stages in Production of Nuclear Fuel: 1) Uranium Exploration 2) Mining and Milling 3) Refining and Conversion 4) Enrichment and Fuel Fabrication

14 Uranium Enrichment and Processing

15 World Production Source: Cameco, 2009

16 Uranium in Canada Canada has three operating uranium mines and mill sites, one mine site, and one new uranium mine site under construction (all in Northern Saskatchewan). Nuclear power provides approximately 14.7% of Canada’s electricity. Over 80% of the uranium shipped from Saskatchewan mines goes to non-Canadian markets for the generation of electricity.

17 Uranium in Canada (2) Canada is among the top producers of uranium in the world. The uranium mining and milling industry is the only mining industry in Canada licensed and regulated by the federal government. The Canadian Nuclear Safety Commission (CNSC) is the federal regulator for the uranium industry.

18 Future Uranium Demand

19 Future Uranium Demand (2) China is expected to lead the world in the construction of nuclear power plants as electricity demand continues its rapid growth. China is currently operating 11 reactors, building 20 and planning more. We expect it to have a net increase of 42 reactors by 2019. India is also planning more reactors.

20 Uranium Prices


22 Zinc About Zinc World Zinc Production Industrial Consumption

23 About Zinc Zinc is most commonly used for galvanizing steel. Other applications include: Construction Transport Consumer goods and electrical appliances General engineering

24 About Zinc (2)

25 Zinc World Production Source: International Zinc Association

26 Zinc Spot Price (1yr)

27 Zinc Spot Price (5yr)


29 Copper Overview About Copper Copper Supply and Demand World Copper Usage Refined Copper Usage by Region Prospects and Price

30 About Copper -Efficient conductor of electricity and heat -Flexible, strong, durable and resistant to corrosion

31 About Copper (2) Conducting electricity and heat Communications Transporting water and gas Roofing, gutters and downspouts Protecting plants and crops, and as a feed supplement Making statues and other forms of art.

32 Copper Supply and Demand Demand Growing demand because of: Widespread use Industrializing countries such as China and India Supply Copper supply comes from two sources: Primary production (88%) ~ mine from the ground Secondary supply (12%) ~ recycled copper scrap

33 World Copper Usage

34 Refined Copper Usage by Region, 1993- 2008

35 Major International Trade Flows of Copper Ores and Concentrates

36 Leading Exporters and Importers of Copper Ores and Concentrates, 2008

37 Copper Prices, 1 Year Spot

38 Copper Prices, 5 Year Spot

39 Copper Prospects Weak world economy due to financial crisis is expected to an overall global decrease in usage of 0.7% Surging industrial output in China China is the world’s largest consumer of industrial metals Decline of 17% in the 3 major markets is partly offset by growth in apparent usage in China of 26% Prices expected to stabilize by 2011 (ICSG)


41 Gold Overview About Gold Demand Prices Gold and the US Dollar

42 About Gold Gold is used for: Jewellery Investment Medium of exchange Industrial

43 Gold Demand

44 Gold Spot Price, 1 yr

45 Gold Spot Price, 5yr

46 Gold and the US Dollar


48 Coal Overview About Coal Energy Demand Types of Coal World Coal Consumption Annual Coal Prices

49 Energy Demand Primary energy demand has increased 50% since 1980 Growth is forecast to continue at annual rate of 1.6% between 2004-2030 70% of this growth will come for developing countries Fossil fuels projected to provide 80% of total energy demand into the future Coal will see the largest demand increase in absolute terms (International Energy Agency)

50 About Coal Coal is the world’s most abundant and widely distributed fossil fuel. Coal is carbon-rich mineral deposit formed as organic plant matter decayed. Coal generates the largest single source of electricity in the world. Electricity generation, steel and cement manufacturing and industrial process heating.

51 Types of Coal

52 World Coal Consumption

53 Annual Coal Prices

54 Spot Prices for Coal

55 (TSE: TCK-B)

56 Market Profile Current Price41.58 P/E12.09 Dividend Yield - Shares Outstanding589 M Market Capitalization24,495M Daily Volume2,027,262 52 Week Price Range 4.50-42.98 EPS3.44

57 Common Shares Outstanding One Class A share has the right to 100 votes One Class B share has the right to one vote CurrentDec. 31, 2009 Dec. 31, 2008 Class A9.35M Class B579.8M579.7M477.5M

58 5 Year Trend of Common Shares

59 1 yr. Stock Price Trend – TCK.B

60 5 yr. Stock Price Trend – TCK.B

61 1 Yr. TCK.B & S&P/TSX Global Mining

62 5 Yr. TCK.B & S&P/TSX Global Mining

63 Breakdown of Business Units

64 Investments – Core Assets Copper Highland Valley Copper (97.5%) Antamina (22.5%) Quebrada Blanca (76.5%) Carmen de Andacollo (90%) Duck Pond (100%) Metallurgical Coal Teck Coal Partnership (100%)

65 Investments – Core Assets Zinc Trail (100%) Red Dog (100%) Energy Fort Hills Project (20%) Frontier and Equinox Projects Other Oil Sand Leases (50%)

66 Non-Core Asset Dispositions 78.8% interest in the Morelos gold project Disposed in November 2009, for US$150 million cash, approximately 1.6 million common shares, and 12.4 million special warrants of Gleichen 60% interest of the Agi Dagi and Kirazli gold projects in Turkey Disposed in January 2010, for US$24 million, and 2.4 million shares Interest in future gold production from Andacollo mine sold to Royal Gold Disposed in January 2010, Provided Andacollo with US$218 and 1.2 million common shares of Royal Gold  Teck’s share is 90%

67 Other Dispositions Sale of one-third interest in the Waneta Dam for C$825 million, closed on March 5, 2010 Total debt decreased to C$6.7 billion Term loan is US$1.14 Cash balance C$1.3 billion

68 Teck Operation Overview

69 Overview

70 History Teck is Canada's largest diversified mining, mineral processing and metallurgical company Owns or has interests in 15 mines in Canada, United States, Chile and Peru Cominco started in 1906 as a mining and smelting company After a merger in 2001, became Teck Resources Ltd.

71 Highlights and Significant Items (in billions)20092008 Operating profit before depreciation 3.72.8 Net earnings1.8.659 EBITDA4.12.0 Revenue7.76.7

72 Geographic Segment 12/31/08

73 Business Segment 12/31/08

74 Revenues and Operating Profit by Product

75 Average Metal Prices and Exchange Rates

76 Financial Instruments and Derivatives

77 Management Norman B. Keevil (B.A. Sc., Ph. D., LL.D)  Joined the Board in 1963  VP Exploration at Teck from 1962-1968  Executive VP from 1968-1981  President and CEO form 1981-2001  Chairman of the Board since 2001  Lifetime director of the Mining Association of Canada  Inducted into the Canadian Mining Hall of Fame in 2004

78 Managment Donald R. Lindsay (B.Sc., M.B.A)  President and CEO of Teck since January 2005  President of CIBC world Market Inc, Head of Investment and Corporate Banking

79 TECK Financial Analysis




83 Debt positions and credit ratios (in millions)Dec. 31, 2008Dec. 31, 2009March 5, 2010 Term loan3,9372,325800 Bridge loan5,284-- Fixed rate term notes1,1815,086 Other167205 Total debt (US$)10,5697,6166,091 Total debt (C$)12,8748,0046,402 Cash balances (C$)8501,420900 Net debt (C$)12,0246,5845,502 D/E54%36%29% Net D/E52%31%26%







90 Outlook General economic conditions Base metal prices increased Improved customer demand Capital expenditures Approximately $1.05 billion for 2010 $375 million of sustaining capital expenditures $675 million on development projects

91 Outlook Foreign exchange, debt revaluation and interest expense Sales of products are denominated in USD Expenses are incurred in local currency (CAD)

92 Outlook 2010 production

93 Recommendation: BUY

94 (TSE: CCO)

95 Market Profile Current Price28.67 P/E12 Dividend Yield0.82% Shares Outstanding392.71B Market Capitalization11.55B Average Daily Volume 984,678 52 Week Price Range 17.01 - 35.00 EPS1.84

96 Market Profile 1 Year Stock Chart

97 Market Profile 5 Year Stock Chart - CCO vs TTMN

98 Business Overview Cameco Uranium Fuel Services Electricity

99 Business Overview Uranium 16% of world production 480M lbs of U 3 O 8 (Cameco`s share) Low cost producer Fuel Services Refines and converts uranium to UF 6 for use in nuclear reactors Electricity Generation 31.6% stake in Bruce Power L.P Gold As of December 2009, CCO sold stake in Centerra Gold Inc.

100 Business Overview The Athabasca Basin hosts the world's richest high-grade uranium deposits

101 Uranium Processing McArthur River Key Lake Port Hope Blind River ( UO 3 )

102 Important Mines McArthur River World's largest high-grade uranium deposit Milled at Key Lake 232.2M pounds (69.8% share) End product: U 3 O 8 – 19.5% grade

103 Important Mines Cigar Lake World's second largest undeveloped high-grade uranium deposit 104.7M pounds reserve (50% share) End product: U 3 O 8 – 17% grade


105 Important Mines Cigar Lake Development began 2005 2006 and 2008 flooding Share price dropped to $38 from $43 Production start date mid-2013 New Jet Boring mining method

106 Important Mines Inkai, Kazakhstan 85.1M pounds (60% share) End product: U 3 O 8 – 0.07% grade In Situ Mining method Currently test mine Commercial production expected 2009* Was able to produce 0.3M lbs for Cameco

107 Reserves As of Dec 31, 2009

108 15 Year U 3 O 8 Price History

109 6 Year UF 6 Price History

110 Uranium Prices Average realized prices 200920082007 % Change 2008- 2009 Uranium $US/lb $Cdn/lb 38.25 45.12 39.52 43.91 37.47 41.68 (3)% 3% Fuel Services $Cdn/lb17.8415.8514.0413% Electricity$Cdn/MWh64575212%

111 Expected Realized Prices How long terms contracts would respond to changing spot prices Assumption: current contract portfolio remains unchanged

112 Financial Contracts Most contracts are long term; CCO sells directly to nuclear utilities Sells uranium concentrate, UO 2, UF 6, conversion or fuel fabrication Current contracting strategy is to have contracts of 10+ years Provides cash flow visibility (reduced volatility)

113 Financial Contracts Contracts include embedded derivatives to protect downside and participate with price increases 40:60 ratio 40% at fixed prices based on long term indicator adjusted for inflation 60% at spot price near delivery time CME contract size: 250lbs of U 3 O 8

114 Foreign Exchange Natural hedge against USD Cash outlays denominated in USD $0.01 increase in USD/CAD decreases net earnings $7.1M

115 Revenue and Profit Segmentation

116 Geographic Revenue and Asset Segmentation

117 Growth Oriented Highlights20092008Change % UraniumVolume20.8M lbs17.3M lbs20 Revenue ($ M)1,5511,5123 Fuel service Volume12.3M kgU8.3M kgU48 Revenue ($ M)27625220 ElectricityOutput (100%)24.6TWh24.7TWh- Revenue ($M)1,6401,40916 EBI22414159

118 8 Year Revenue Growth

119 Growth Oriented Increasing demand for electricity by India and China Global clean energy movement 53 reactors in construction, 91 projected to come online in 2019 Uranium demand projected to grow at 3% over next 10 years

120 Strengths Low cost Canadian operations Largest high-grade uranium deposits Long-term contracts High capital costs and long lead times Barriers to entry

121 Weaknesses Nuclear plant construction very costly Does not qualify for greenhouse gas emission credits Moderate growth for uranium fuel as not many reactors are online Demand is cyclical due to market’s infancy Uranium prices are volatile

122 Long Term Strategy Uranium – double production to 40M pounds by 2018 from existing assets Fuel Services – invest to support nuclear reactor growth Electricity – maintain cash flow and look for new opportunities Cigar Lake Maintain exploration 70 active exploration projects

123 New Projects Millennium Founded in Saskatchewan in 2000 42% ownership, 19.6M lbs of U 3 O 8 Kintyre Acquired from Rio Tinto in Australia in 2008 in joint venture 70% ownership

124 Material Risks to Long Term Strategy Inability to increase production at mines Partner and political risks Natural forces Ex: flooding at Cigar Lake

125 Management Gerald W. Grandey, President and CEO Current Appointed CEO of Cameco January 1, 2003. Appointed president elected as director on Cameco's board May, 2000. On the boards of the Canadian Nuclear Association, the Nuclear Energy Institute, the National Mining Association

126 Management Gerald W. Grandey, President and CEO Previous Vice-chair and chief executive officer of The Concord Mining Business Unit President of Energy Fuels (an American coal and uranium mining company) Practiced law in the mid '70s with a major Denver law firm specializing in mineral financing, natural resources and environmental law. President of the Uranium Producers of America Vice-chair of the World Nuclear Association Colorado School of Mines (1968), Bachelor of Geophysical engineering Northwestern University (1973), Law Degree

127 Management Tim S. Gitzel: Senior Vice-President and Chief Operating Officer -16 yrs of senior management experience in uranium industry -Executive VP of mining business unit for AREVA (France): global uranium and gold exploration - Chief of staff to SK deputy premier and minister of economic development

128 Management O. Kim Goheen: Senior Vice-President and Chief Financial Officer - Extensive experience in domestic and international finance in transportation, petroleum, mining and energy industries -Served in a variety of financial capacities at IPL Energy Inc. (Enbridge) - Commerce degree from UBC 1977, MBA from U of Western Ontario.

129 Board of Directors High degree of independence from management Only 2 of 14 individuals on Board of Directors are not independent

130 Financial Highlights Highlights20092008Change % Revenue231521836 Gross profit750829(10) Net earnings1099450144 -$ per common share (diluted) 2.821.28120 Adjusted net earnings (non- GAAP) 582589(1) -$ per common share (adjusted and diluted) 1.491.67(11) Cash provided by continuing operations 69053030

131 Financial Analysis – Net Earnings Net earnings higher due to sale of Centerra gold stake 374M of 1099M Mark to market gains of 179M on financial instruments ~50% of net earnings from one-time items

132 Financial Analysis – Adjusted Net Earnings Earnings decreased 1% Higher uranium costs due to purchasing at higher prices Lower gold sales Electricity sales increased due to higher prices




136 2010 Sales Outlook Uranium Decrease 5-10% Lower volume Fuel services Increase 5-10% Higher volume Electricity Decrease 5-10% Lower prices

137 Outlook Doubling production by 2018 to 40M lbs Exploration costs increase by over 75% Administration costs increase 25-30% Cost increases for sustaining operations

138 Recommendation HOLD Increased exploration and costs Weak demand for uranium Uranium competes with other forms of alternative energy (i.e. coal and wind) SPECULATIVE BUY Market leader Highly levered to Ux prices


140 TSE: G

141 Market Profile HIGH42.00 LOW40.92 52 WEEK HIGH 48.37 52 WEEK LOW 32.39 BETA0.82 MRKT CAP 30.42B P/E25.02 FWD P/E31.56 ANNUAL DIVIDEND 0.19 YIELD0.50 as on 10 th March 2010



144 5 year

145 ABOUT Leading gold producer engaged in gold mining and related activities including exploration, extraction, and processing One of the top senior gold producers in the world Produces Gold, Silver, and Copper

146 Operations


148 2004: Goldcorp: Red Lake Mine & Wharf Mine 2005: Acquired Wheaton River Minerals & Virginia Gold 2006: Acquired Canadian Placer Dome assets & Glamis Gold 2008: Gold Eagle Mines 2009: El Morro project 2009: Goldcorp acquired 100% interest in the Camino Rojo gold/silver project in Mexico






154 FINANCIAL RISKS The Company closely monitors its financial assets and does not have any significant concentration of credit risk. The Company ensures that sufficient committed loan facilities exist to meet its short-term business requirements The Company is exposed to currency risk The Company monitors its exposure to interest rates Price-Risk: May hedge up to 50% of its base metal sales volume to manage its exposure to fluctuations in base metal prices

155 FINANCIAL CONTRACTS Sells its products exclusively to large international financial institutions Enters into contracts and performs business activities that give rise to commitments for future minimum payments. May hedge up to 50% of its base metal sales volume over the next fifteen months to manage its exposure to fluctuations in base metal prices.

156 Growth & Development Peñasquito is one of the largest projects and one of the largest new mines in the world that will be the primary driver of growth for Goldcorp in the next 5 years Other important projects include Red Lake, Musselwhite, and Pueblo Viejo

157 STRATEGIC OBJECTIVES Goldcorp is focused on delivering long-term value and superior returns to its shareholders. Its goal is to be a low cost gold producer with geographic diversification and low political risk operating in a responsible manner with our neighbours and the environment.

158 STRATEGY FOR GROWTH Strong focus on organic growth No gold hedging Low cost gold producer Maintain a strong balance sheet Focus on low political risk jurisdictions $110 million exploration budget for 2009

159 FACTS Goldcorp is the 2009 recipient of the Viola R. MacMillan Award for company or mine development Goldcorp announces 6 th consecutive annual increase in gold reserves It completes acquisition of 70% interest in EI Morro project Delivers record 2009 gold production; peer leading 5-year growth profile extended Its cash flow increases 35% in the 2009 3 rd quarter Goldcorp has grown from a strong intermediate player to one of the top senior gold producers in the world


161 MANAGEMENT Charles Jeannes Charles A. Jeannes was appointed President and CEO of Goldcorp effective 1 st January 2009 Previously Executive Vice President from 2006-08 From 1999 until the completion of the acquisition of Glamis, he was Executive Vice President, Administration, General Counsel and Secretary of Glamis

162 MANAGEMENT Ian Telfer (Chairman) - President and CEO of Goldcorp from 2005 until its merger with Glamis Gold in 2006 - CEO & President of Wheaton River from 2002 until merger in 2005 - Over 20 years experience in mining industry -Raised over $1 billion for mining exploration and development around the world

163 FINANCIAL STATEMENTS ANALYSIS Balance sheets Cash flow statement Income statement


165 Balance sheet Year end 2009 ASSETS

166 LIABILITIES 20092008

167 Income statement Year end 2009

168 Cash flow statement Year end 2009




172 RECOMMENDATION BUY Increasing gold prices Growth in GoldCorp’s operations Increase in gold production

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