2. DISCLAIMER
This presentation does not purport to contain all of the information that a prospective or current investor may require or desire concerning the matters
referred to herein. Each investor must conduct and rely upon his/her or its own evaluation of such matters, including the merits and risks of making an
investment decision. This presentation is not intended to be, nor shall it be construed as, a complete description of the facts, risks or consequences regarding
an investment involving the Sudeste Port. All potential investors should perform their own independent investigations regarding any such investment. All
potential investors should consult their own qualified advisors concerning such an investment and the suitability relating to an investor’s ability to sustain a
total financial loss of such investment. This presentation speaks as of the date upon which it is presented and the information presented herein may change
after the date hereof.
Other than to the extent required by applicable law, neither MMX Mineração e Metálicos S.A. (“MMX”) nor any other person (including the Investors) shall be
deemed to make any representation or warranty, express or implied, with respect to the information contained in this presentation. To the maximum extent
permitted by applicable law, MMX disclaims any and all liability resulting from the reliance by any person on the information contained in this presentation or
related to any material fact not included in this presentation regarding the Sudeste Port, the MMXM11 or Port11 securities or any other matter referenced
herein.
EAV Delaware LLC and IWL Holdings (Luxembourg) S.a.r.l. (the “Investors”), affiliates of Mubadala and Trafigura, respectively, participated in the preparation
of this presentation. The Investors and their affiliates disclaim any liability with regards to this presentation.
2
3. DISCLAIMER (Cont’d)
This presentation includes “forward-looking statements”, as that term is defined in the Private Securities Litigation Reform Act of 1995, in Section 27A of the
Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. All statements other than statements of historical facts are statements
that could be deemed forward-looking statements and are often characterized by the use of words such as “projects”, “expects”, “anticipates”, “intends”,
“plans”, “believes”, “estimates”, “may”, “will”, or “intends”, or by discussions or comments about our objectives, strategy, plans or intentions and results of
operations. Forward-looking statements include projections regarding our operating capacity, operating expenditures, capital expenditures and start-up dates.
By their nature, these forward-looking statements involve numerous assumptions, uncertainties and opportunities, both general and specific. The risk exists
that these statements may not be fulfilled or, even if they are fulfilled, the results or developments described in such statements may not be indicative of
results or developments in future periods. We caution participants of this presentation not to place undue reliance on these forward-looking statements as a
number of factors could cause future results to differ materially from these statements. Forward-looking statements may be influenced in particular by factors
such as the ability to obtain all required regulatory approvals on a timely basis or at all, exploration for mineral resources and reserves, difficulty in
converting geological resources into mineral reserves, and changes in economic, political and regulatory conditions. We caution that the foregoing list is not
exhaustive. When relying on forward-looking statements to make decisions, investors should carefully consider these factors as well as other uncertainties
and events. No party undertakes to update the forward-looking statements unless required by law. This presentation is neither an offer to sell (which can
only be made pursuant to definitive offering documents) nor a solicitation of an offer to buy any securities in the United States, or any other jurisdiction. The
securities referred to herein have not been registered in any jurisdiction, and in particular, will not be registered under the U.S. Securities Act of 1933, as
amended, or any applicable state securities laws and may not be offered or sold in the United States absent registration or an applicable exemption from
such registration requirements. This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole
or in part without MMX’s prior written consent.
3
4. TABLE OF CONTENTS
1
ROYALTY BONDS
2
DEBT RESTRUCTURING
3
PORT ECONOMICS
4
GENERAL BONDHOLDER MEETING
APPENDIX – FORM OF
PORT11 INDENTURE
4
5. EXECUTIVE SUMMARY
Positive Impact from Investors’ Involvement:
Secures completion of the Port, expected to start operations in Q3 2014 (first royalty cash flow expected in 2015)
Increases port capacity thereby enhancing Brazilian infrastructure and unlocking Minas Gerais production
Investors aligned with bond economics as they will hold 34% upon completion
Transaction Update:
Investors and MMX are working on completing CPs: closing expected in December, 2013
Master Amendment Agreement already executed with subordinated lenders
Commercial terms of the renegotiation of the senior debt agreed in principle: senior lenders have imposed new
cash waterfall requiring the amendment of MMXM11 terms
MMXM11 amendment required to facilitate transaction closing
5
7. MMXM11 - PORT11
ECONOMICS
MMXM11 HOLDER
PORT11 HOLDER
Bonds value significantly impaired if the
Price is expected to be the NPV of future
Port is not completed (current price
royalty cash flows resulting from the
supported by the Investors’ involvement)
completed port and Investors’ involvement
US$5 per tonne adjusted by PPI
US$5 per tonne adjusted by PPI, recorded
since September 2010
No visibility on first royalty cash flow
First royalty cash flow expected in 2015
7
8. POTENTIAL UPSIDE FOR
HOLDERS OF PORT11
Additional volumes and trading activity via Port could generate additional
cash flow
Anticipated opportunities to lower OPEX under new management
8
9. MMXM11 VS. PORT11
INDENTURES
Item
MMXM11
PORT11
Form
Nominative, book-entry registered
Nominative, book-entry registered, and convertible
Maturity
Perpetual
Perpetual
Termination Amount
Appraisal report prepared by an independent first-tier
financial institution chosen by Free-Float
Appraisal report prepared by an independent first-tier financial
institution chosen by Free-Float
Trigger for Royalty
Payment
Triggered when “Sufficient Gross Profit”
No defined formula of Gross Profit
Triggered when Cash Available for Royalties>0
Defined formula for calculation of Cash Available for Royalties
Possibility of annual review by PORT11 holders
Royalties(1)
US$ 5 / ton adjusted by PPI
US$ 5 / ton adjusted by PPI
PPI
U.S Producer Price Index unspecified
U.S Producer Price Index for Finished Goods
Reference Date for PPI
adjustment
May 2011, as per MMX accounting records
September 2010
Cumulativeness
Yes
Yes
No
Yes for accrued and unpaid royalties
1% per month
1% per month
Collateral
The Securities are unsecured
The Securities are unsecured
Mandatory Redemption
Securities are not subject to mandatory redemption
Securities are not subject to mandatory redemption
Cash Sweep for Royalty
Payment
Default Interest (in case of
Trigger)
Note: (1)
US$5.50 as of December 31, 2013.
9
10. PORT11 CASH WATERFALL
NET REVENUES
-
CASH COSTS FROM OPERATIONS
-
MAINTENANCE CAPEX
-
CASH OPERATING EXPENSES
CASH FLOW FOR SENIOR DEBT PAYMENT
INTEREST / AMORT. SENIOR DEBT1
-
CASH FLOW BEFORE TAXES AND PROVISIONS
CASH PROVISIONS FOR INCOME TAXES (IRPJ+ CSLL), PLUS OTHER
CASH PROVISIONS AS REQUIRED BY AUDITORS
-
CASH AVAILABLE FOR ROYALTIES
ROYALTIES, EXCL. EB2 DEFERRED ROYALTIES
-
CASH FLOW FOR SUBORDINATED DEBT PAYMENT3
1- Includes Reserve Account for 6 months of senior debt services.
2- EB refers to Eike Batista.
3- All accrued royalties, including the deferred but accrued royalties to EB are senior to subordinated debt payments.
10
11. PORT11 ATTRIBUTES
Key Attributes
1
Royalties will be senior in payment to any subordinated debt, dividends, share repurchase and cash distribution to equity
holders, and junior to Senior Debt
2
For the purpose of the calculation of “Cash Available for Royalties”, no senior debt other than the current debt facilities
will be considered. PortCo shall have the ability to refinance the BNDES debt.
3
The PortCo governance structure among MMX and Investors contemplates:
All Southeast Brazilian iron ore trading activities of shareholders to be conducted via the Port
Port operated as a profit center
Related party transactions are subject to arm’s length terms, and, depending on the size of the transaction,
fairness opinions may be sought by non related party shareholders
4
EB’s right to receive payments deferred until 2018 (except if there is excess cash available)
11
12. STRUCTURE AFTER PROPOSED
EXCHANGE OFFER TRANSACTION
MMXM11
PORT11
FLOW TO HOLDERS OF PORT11
FLOW TO HOLDERS OF MMXM11
(100% OF FREE FLOAT ACCEPT EXCHANGE OFFER)
(LESS THAN 100% OF FREE FLOAT ACCEPT EXCHANGE OFFER)
MMXM11
EB / Investors
Free Float
$
Free Float
$
66%
$
$
34%
EB / Investors
FIP-IE
100%
$
PORT11
SECURITY
$
FIP-IE
66%
PORT11
SECURITY
$
PortCo
34%
$
$
PortCo
MMXM11 holders retaining units (instead of converting into PORT11) will receive royalties through MMX
12
13. FIP-IE BENEFITS
Governance
FIP-IE will comply with governance requirements provided for by
article 1, paragraph 8, of Law 11,478/2007, as amended
FIP-IE manager to represent all bond holders in any PORT11 related
matter
MMX and Investors are currently working on a structure to allow all investors which cannot hold quotas
issued by the FIP-IE to hold the Port11 security
13
14. STRONG AND COMMITTED PARTNERS
MUBADALA
TRAFIGURA
Investment and development company wholly owned by
the Government of Abu Dhabi, United Arab Emirates
STRONG
FINANCIAL
PARTNERS
3rd largest physical oil trader and 2nd largest non-ferrous
metals trader
C. $55bn of AuM
Turnover of $120bn, profits in excess of $1bn, $41bn
financial lines available
Strong long-term credit rating: Aa3/AA/AA
Stable, resilient and profitable business model based on
physical arbitrage, supported by industrial assets ($4.6bn
book value)
Large portfolio of hard commodities assets
COMMODITY
KNOWLEDGE
Leading position in physical trading market with:
Owner of one of the largest single-site aluminium smelters
in the world (EMAL)
–
103 mn Metric tonnes of oil and oil products and
–
35 mn Metric tonnes of non-ferrous and bulk traded in
2012
Recently signed a merger between EMAL and DUBAL
Recent acquisition of mining assets in Africa
Portfolio of oil & gas assets via Mubadala Petroleum
14
16. REQUIRED DEBT RESTRUCTURING
Debt restructuring of Port required by senior lenders and fundamental to Investors’
investment proposition
− Under pre-restructuring case Port company would be unable to meet debt amortization
requirements
Anticipated that additional US$550mn of capex will be required to make Port operational
Completion of Port requires:
− Successful debt restructuring
− Equity injection by the Investors, together with the release of committed and undrawn
debt (BNDES)
16
17. SUMMARY UPDATE ON DEBT
RENEGOTIATION
Approximately US$1.1 bn will be held at PortCo
Existing mine debt is transferred to PortCo and will be subordinated to BNDES and
Port11 holders
Master Amendment Agreement signed with subordinated lenders (i.e. Itaú and
Bradesco)
BNDES restructuring commercially agreed in principle. Board approval expected by
the end of November
17
18. ANTICIPATED DEBT RESTRUCTURING
Port Debt Profile
BNDES
Other Senior Lenders
Other debt
Additional 2 year grace period
Final maturity extended to 2029
Additional US$242 mn to finance company CAPEX, already contracted
with BNDES and Bradesco
Additional 2 year grace period
Final maturity extended to 2023
Additional US$67 mn to finance company CAPEX
New maturity extended to June 2029
New grace period: June 2018
18
20. SIGNIFICANT POTENTIAL
FOR THE SUDESTE PORT
Targeted production capacities:
up to 24.0 mtpy
Gerdau:
18.0 mtpy
Ferrous:
15.0 mtpy
MUSA:
12.0 mtpy
Somisa:
9.5 mtpy
Serra Azul:
7.0 mtpy
Pau de Vinho:
6.0 mtpy
Arcelor Mittal:
3.2 mtpy
MMX
Comisa:
Minerita:
3.2 mtpy
Existing take-or-pay agreement with Sudeste Port
With Vale and CSN Ports running at full capacity, Sudeste Port is the only alternative for many mining
companies
Source: Brasil Mineral Magazine 2013 and company estimates.
20
21. PORT ECONOMICS:
KEY ASSUMPTIONS
Volumes
MMX Mines (~7Mt until 2018), Major Miners (~22Mt
in 2016 growing to 35Mt in 2019) and Small Miners
(5-10Mt)
Depreciation
Blended tariff: ~15 US$/t (gross of PIS/ COFINS,
assuming sales mix of 2017)(1)
Port Costs
Tariffs
Payment occurs only when Cash Available for Royalties
is positive (Net Revenues - Cash Costs From
Operations - Maintenance Capex - Cash Operating
Expenses - Interest / Amort. Senior Debt(2) - Cash
Provisions For Income Taxes (IRPJ+ CSLL) - Other
Cash Provisions As Required By Auditors)
Current PP&E (US$1,682 mn) and future capex: 15
year depreciation period
Costs are split between Fixed and Variable
Total fixed costs increases depending on the minimum
volume of the Port (from US$9.5 mn (2.5m tonnes) to
US$37.9 mn (50m tonnes)
Variable costs (per tonne) decreases depending on the
minimum volume of the port (from US$3.4 per tonne
(2.5m tonnes) to US$1.1 per tonne (50m tonnes)
Capex
Trading Costs
Acquisition costs at 45 % of FOB prices
Cost from mine to Road of 6.6 US$/t
Cost of rail transportation of 12.2 US$/t
Receivables (Port and Trading): 30 days
Royalties
Payables (Trading): 30 days
Inventories (Trading): 20 days
Total of US$5.00(1) per tonne
Total expansion capex of US$ 550 mn
Source: Company estimates.
(1) Price shall be adjusted annually in accordance with the variation of the PPI recorded since September, 2010.
(2) Includes Reserve Account for 6 months of senior debt services.
Working Capital
21
22. PORT ECONOMICS: PRO FORMA
PROJECTED FINANCIALS
(US$ millions, otherwise stated)
2014E
2015E
2016E
4
22
33
P&L
Net Revenues
Gross Profit
EBITDA
43
18
(245)
271
187
(21)
441
342
131
Cash Flow
Cash Flow Available for Debt Service
Debt Drawdown
Debt Repayment
Trading Revenues
(345)
289
(13)
-
129
20
(76)
12
296
15
(155)
20
Royalties
Royalities Due
Royalties Accrued (End of Period)
Royalties Paid to All Bondholders Except EB (1)
(170)
240
-
(200)
263
(117)
(204)
200
(177)
Net Change in Cash Flow
(69)
(32)
-
Projected Volumes (million tonnes)
(1) EB’s right to receive payments deferred until 2018 (except if there is excess cash available)
22
24. EXPECTED TIMELINE
Board of Directors’
Meeting of MMX
Approve the merger of
Porto Sudeste S.A. into
MMX
Call notice of the
General Shareholders’
Meeting of MMX
Call notice of the
General Meeting of
MMXM11 Securities
Holders
Approve the
amendment to the
MMXM11 indenture.
General Shareholders’
Meeting of MMX
General Meeting of
MMXM11 Securities
Holders
Closing
General Shareholders’
Meeting of Porto
Sudeste S.A.
Approve the merger of
Porto Sudeste S.A. into
MMX
24
25. CONCLUSION
Positive Impact from Investors’ Involvement:
Secures completion of the Port, expected to start operations in Q314 (first royalty cash flow expected in 2015)
Increases port capacity thereby enhancing Brazilian infrastructure and unlocking Minas Gerais production
Investors aligned with debenture economics as they will hold 34% upon completion
Transaction Update:
Investors and MMX are working on completing CPs: closing expected in December, 2013
Master Amendment Agreement already executed with subordinated lenders
Commercial terms of the renegotiation of the senior debt agreed in principle: senior lenders have imposed new
cash waterfall requiring the amendment of MMXM11 terms
MMXM11 amendment required to facilitate transaction closing
25
