2. 2
The material that follows is a confidential presentation of general background information about Magnesita Refratários S.A. and its consolidated subsidiaries
(“Magnesita" or the "Company") as of the date of the presentation. It is information in summary form and does not purport to be complete and is not intended to
be relied upon as advice to potential investors.
No representations or warranties, express or implied, are made as to, and no reliance should be placed on, the accuracy, fairness or completeness of the
information presented or contained in this presentation. Neither the Company nor any of its affiliates, advisers or representatives, accepts any responsibility
whatsoever for any loss or damage arising from any information presented or contained in this presentation. The information presented or contained in this
presentation is current as of the date hereof and is subject to change without notice and its accuracy is not guaranteed. Neither the Company nor any of its
affiliates, advisers or representatives make any undertaking to update any such information subsequent to the date hereof. This presentation should not be
construed as legal, tax, investment or other advice.
[Data in this presentation was obtained from various external data sources, and the Company has not verified such data with independent sources. Accordingly,
the Company makes no representations as to the accuracy or completeness of such data, and such data involves risks and uncertainties and is subject to change
based on various factors].
This presentation contains forward-looking statements. Such statements are not statements of historical facts, and reflect the beliefs and expectations of
Magnesita’s management. The words "anticipates", "wishes", "expects", "estimates", "intends", "forecasts", "plans", "predicts", "projects", "targets" and similar
words are intended to identify these statements. Although the Company believes that expectations and assumptions reflected in the forward-looking statements
are reasonable based on information currently available to the Company's management, the Company cannot guarantee future results or events. You are
cautioned not to rely on forward-looking statements as actual results could differ materially from those expressed or implied in the forward-looking statements.
This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities, and neither any part of this
presentation nor any information or statement contained therein shall form the basis of or be relied upon in connection with any contract or commitment
whatsoever.
Disclaimer
4. Company History
Over 70 years of experience in refractory and mining business
Magnesita’s
fundation after
the discovery of
a large amount
of magnesite in
Brumado (BA)
1939
Beginning of
magnesite sinter
production in Brumado
Beginning of
refractories production
in Contagem (MG)
40’s
Company’s IPO
1973
Expansion of
operations in
Brazil and
export
beginning to
South America
60’s
Foundation of the
Center of Research
and Development in
Contagem (MG)
Beginning of service
segment
70’s
Refratec
acquisition
Beggining of
slide gates
production
80’s
Beginning of CPP
model (Cost per
Performance)
Initiation in the
cement sector
90’s
GP Investments
acquire control
of
Magnesita S.A.
2007
LWB
acquisition,
becoming the
3rd largest
company in the
sector
Novo Mercado
listing
2008
New strategy
view
2012
Investments
approval to
increase
verticalization
2010
5. Magnesita Overview
Magnesita is a leading global refractory and industrial mining company
3rd largest player in the refractory sector worldwide
Revenues of R$ 2.3 billion in 2011 (R$1.9 billion 9M12)
7,000 employees, 28 industrial facilities with a nominal capacity of 1.6 million tons/year of
refractories
Presence in 4 continents, supplying more than 850 clients worldwide
Leader in the steel and cement industries in Brazil and South America
Leader in the stainless steel industry in North America and Europe
High-quality raw materials: Better, largest and lowest cost magnesita mine in the world outside
China.
Significant number of unexplored mineral rights
6. Magnesita: 3 Businesses Across the Value Chain
Net revenues
(2011)
R$ 2,034.1 million
(87.7% of the total revenues)
R$ 152.6 million
(6.6% of the total revenues)
R$ 132.2 million
(5.7% of the total revenues)
Gross margin
(2011)
32.1% 11.3% 45.8%
Details/
description
Refractories with tailor made
formulations and shapes as
well as strong technical service
Two commercial models (CPP
and conventional)
Industrial minerals primarily
talc and caustic magnesia
Excess minerals not utilized for
internal production of
refractories primarily
magnesia sinter
Assembly and installation of
refractories
Other adjacent services inside
the mill, including spot
contracts
Businessline
ServicesRefractories Solutions Industrial Minerals
Applications
Steel, cement, non-ferrous
(aluminum, nickel, copper,
etc.) and non-metallic (glass,
petrochemical, pulp and
paper)
Steel, cement and mining
Talc: Plastic industry, cosmetics,
pharmaceuticals, food, ceramics,
pulp and paper, etc..
Caustic magnesia: Fertilizers,
abrasives, animal nutrition, etc..
Sinter: refractories industry
7. USA
Germany
China
Brazil
Headquarter
Sales Office
Raw material and
refractory production
Port (BA)
Raw Material Flow
Final Product Flow
Global scale , presence in the main markets
Global Presence
Sales in 2012 (9M12)
By Segment By Region
Refractory
Solutions -
Steel
75,0%
Refractory
Solutions -
Industrial
14,2%
Services
6,0%
Industrial
Minerals
4,8%
South
America
49,6%
North
America
20,2%
Europe
21,2%
Asia
9,0%
28 industrial facilities in 4
continents, with a nominal
capacity of 1.6 million tons
of refractories/year
8. Great availability of high quality minerals
Magnesite Mine in Brumado (BA)
• Reserve estimated of 830 mln tons
•Expected life: over 200 years
• The mine is connected to the port of Aratu
by the FCA railway
Dolomite Mine in York (USA)
• Reserve of 25 mln tons
• Expected life: 50 years
Dolomite Mine Sinterco (JV -
Belgium)
• Reserve of 31 mln tons
• Expected life: 30 years
Dolomite Mine in Qingyang (China)
• Reserve of 18 mln tons
• Expected life: 50 years
Graphite Mine in Almenara (MG)
* Still under geological study
Other reserves
• Talc
•Chromite
• Clays
• Pirofilite
78 active mineral concessions
in Brazil (several of which
unexplored)
9. Controlling
Group
%
Rhone
7,2%
Raising standards of corporate governance
Novo Mercado
Member since 2008, Novo Mercado correspond to the best practices of corporate governance,
ensuring and improving the transparency of companies with its shareholders
2 independent Board members
Financial statements in English in accordance with International Financing Report Standards (IFRS)
Stocks are included in the IGC (Index of Differentiated Corporate Governance) and ITAG (Index of
Differentiated Tag Along)
Controlling Group
GP
- Latin America leadership in Private Equity
- Culture of promotion by merit
- Proven track record
Rhône: Prior LWB controllers group
Free
Float
58,8%
GP
34,0%
10. Continuous effort in Corporate Social Responsibility
Environmental Responsibility
Project of logistic reverse: 100% of refractories residues recycling
Certifications: ISO 14001 (environmental), ISO 9001 (quality) e OHSAS 18001 (health and safety)
Social Responsibility
Project “Citizen of the Future”: Sports and musical activities for more than 200 children in Brumado (BA)
Project of Social inclusion in Magnesita (PRISMA): Inclusion of deaf people as Magnesita’s employees
Withdraw of
refractories residues
after clients use
Residues are
sent to the
recycling units
Processing and
transformation
in raw material
Use of the raw
material in
our industrial
facilities
12. 12
What is a Refractory?
Refractories are crucial for manufacturing processes with high temperatures
Product Overview Main Consumers Worldwide
Fireproof materials consumed within various production processes, retaining
physical and chemical characteristics when exposed to extreme conditions
Provides heat, chemical and mechanical resistance in industrial furnaces and
other equipments in iron and steel production and kilns in cement and lime
production
Raw material quality and ensure supply are essential
~US$ 25 billion industry globally
Represents only ~3% of the production costs in steel manufacturing
Source: Industrial Minerals Magazine, December 2010.
Others
5%
Steel
70%
Cement
7%
Glass
4%
Chemical
4%
Non-ferrous
5%
Ceramic
5%
Types of refractories
Bricks
Valves and
slide gates
Monolithics
Main raw material families
Magnesite
Application: steel and cement
Dolomite
Application: mini mills and
stainless steel
Alumina
Application: steel and cement
Consumption (average)
1 tonne of steel = ~10 Kg
1 ton of cement = ~0.6 Kg
13. 13
Electric Arc Fumace
Steel Refining Facility
Continuos Casting
Basic Oxygen Furnace
Recycled Steel
Direct Reduction
Coal Injection
Iron Ore
Coal
Coke Oven
Limestone
Blast Furnace
Natural
Gas
ELECTRIC ARC FURNACE
Volume: 120 tonnes
Life Expectancy: 1 month
BLAST FURNACE
Refractory Volume: 900
tonnes
Life Expectancy: 15 years
TORPEDO CAR
Volume: 200 tonnes
Life Expectancy: 2 years
CONVERTER
Volume: 800 tonnes
Life Expectancy: 6 months
CONTINUOUS CASTING
Volume: 25 tonnes
Life Expectancy: 10 hours
STEEL LADLES
Volume: 70 tonnes
Life Expectancy: 1 month
Source: Company
Steel industry: represents approximately 85% of Magnesita’s refractories revenues
Refractories are Continuously Consumed During
Steel Production…
14. 14
Rotary Kiln
Preheater Tower
PREHEATER TOWER
Volume: 1,000 tonnes
Life Expectancy: 5 - 10 years
… which Also Happens During Cement Production
ROTARY KILN
Volume: 250 tonnes
Life Expectancy: 10 months
CLINKER COOLER
Volume: 500 tonnes
Life Expectancy: 1 - 3 years
Cement industry: represents approximately 10% of Magnesita’s refractories sales
Clinker
Cooler
Source: Company
15. Magnesita: Integration in the refractory supply chain
Mine
Magnesite sinter
Raw material Refractory Solutions
Bricks
Valves and slide
gates
Services
Installation of refractories
Technical Assistance
Magnesite Mine in
Brumado (BA)
Furnace (HW) of sinter
production
Monolithics
17. The new vision and the 4 strategy pillars
Vision:
Be the best provider of refractories
solutions and industrial minerals,
leveraging and developing our minerals base
Continue to develop
high quality, low cost
raw material sources
to support our
current busi-nesses
as well as new
businesses where we
can have a
sustainable
competitive
advantage
Strive to keep
offering high quality
and innovative
products, unrivaled
services and cost
performance
Optimize production
globally to improve
efficiency and
support growth
Develop global
supply chain
management
Pursue long term
growth opportunities
in selected markets
where we can deliver
superior value to our
customers and
shareholders
Expand industrial minerals
base
Ensure leadership in our
core markets
Maintain a global low
cost production base
Grow selectively and
aggressively
▪ Meritocracy
▪ Ethics
▪ Profit
▪ Management and Method
▪ Customer
▪ People
▪ Agility and Transparency
▪ Respect for Safety, Environment and Communities
Our values
Oneglobalorganization
18. Industrial Minerals
Initial portfolio of attractive mineral rights
Very favorable
geography for
industrial minerals
in Brazil
Possibility to occupy a “white
space” in the market and
become most important (if not
sole) player in it
0 1
2
3
Magnesita’s
strategic
positioning
Privileged access to
deal flow and other
unique resources:
▪ Geological and
research skills
▪ knowledge of
local licensing
requirements
▪ Knowledge of
local stake-holder
management
19. Magnesita 2017
Industrial
Minerals
New
refractories
markets
Core refractories
Markets
Integrated product
offer:
•Raw materials
•Refractory
Solutions
•Services
• Largest magnesite
mine ex-China
• Low-cost/high
quality source for a
relevant refractories
raw materials
• Portfolio of
industrials minerals
in Brazil
•Leadership in South
America and dolomite
products
• Sustainable
position in
selected markets
with focus in
growth and
industrial
applications
21. 11,.%
2.5%
7.4%
8,.%
3.1%
1.0%
1.3%
46.9%
18.0%
0.4%
EuropeanUnion(27)
OtherEurope
C.I.S.(6)
NorthAmerica
SouthAmerica
Africa
Middle East
China
Asia(ex-China)
Oceania
Refractories Solutions - Opportunities
Strategic Focus
Ensure our leadership in key markets and follow its growth
Increase presence in markets where our participation is low or nil, with geographic and industry diversity
Competitive advantages
Global player, with local presence in key markets
High raw materials verticalization and low cost production
High technology and specialized technical assistance
Long term relationship with clients
Experienced management
Refractories comsumption - Global Market Magnesita – Refractories Solutions by segment (9M12)
Global Steel Production by region (2012 until oct.) Magnesita – Refractories Solutions by region (9M12)
70.0%
30.0% Steel
Industrial
84.0%
16.0%
Steel
Industrial
49.6%
202%
21.2%
9.0% SouthAmerica
NorthAmerica
Europe
Asia
22. Services - Opportunities
Strategic Focus
Focus on segments with higher added value :
Service contracts related to the maintenance, assembly and installation of refractories
Longer and bigger spot contracts
Expand to other segments such as mining and cement
Geographic expansion
Competitive advantages
Expertise
High qualified technical staff
Ensure that the quality of installation is adding value to our clients, besides offering a better package solutions for
them
Assembly of refractories
23. Minerals - Opportunities
Strategic Focus
Development of Graphite Project
Expand Talc business
New minerals
Competitive advantages
70 years of mining experience in Brazil
Dedicated team to prospect, analyze and develop business
78 active mineral concessions
28. 900.2
957.3 968.0
1,060.0 1,074.4
787.7 761.2 791.8 819.1 834.7
2.11x
2.24x 2.30x
2.51x
2.76x
3Q11 4Q11 1Q12 2Q12 3Q12
Net Debt Workingcapital Net Debt/EBITDA
Debt and leverage
Net debt and leverage
R$ million
Debt profile
6.8%
93.2%
Short term Long term
16.9%
83.1%
Local currency (BRL) Foreign currencies
29. Investor Relations Contacts
Octavio Pereira Lopes
CEO and IRO
Daniel Domiciano Silva
Investor Relations
Phone: 55 11 3152-3202/3241
ri@magnesita.com
www.magnesita.com
Thank you!