Canadian Minerals and Metals Zora Toor Tarlochan Chane (TC) Mel
Chua Zhilicka Sehgal
Slide 2
INDUSTRY OVERVIEW Canadian Minerals and Metals
Slide 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)
Slide 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
Slide 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
Slide 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
Slide 7
The Canadian Mining Industry A Key Feature of Canadas 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
Canadas GDP in 2008 (Statistics Canada, 2009)
Slide 8
Capped Diversified Metals and Mining Index vs TSE Market Index
(1yr)
Slide 9
Capped Diversified Metals and Mining Index vs TSE Market Index
(5yr)
Slide 10
URANIUM
Slide 11
Uranium About Uranium Process World Production Uranium Mining
in Canada Price Supply and Demand
Slide 12
About Uranium Two uses for Uranium: 1) Military 2) Civilian
Nuclear power is a clean source of electricity, and generation
capacity is growing.
Slide 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
Slide 14
Uranium Enrichment and Processing
Slide 15
World Production Source: Cameco, 2009
Slide 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 Canadas electricity. Over 80% of the uranium
shipped from Saskatchewan mines goes to non-Canadian markets for
the generation of electricity.
Slide 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.
Slide 18
Future Uranium Demand
Slide 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.
Slide 20
Uranium Prices
Slide 21
ZINC
Slide 22
Zinc About Zinc World Zinc Production Industrial
Consumption
Slide 23
About Zinc Zinc is most commonly used for galvanizing steel.
Other applications include: Construction Transport Consumer goods
and electrical appliances General engineering
Slide 24
About Zinc (2)
Slide 25
Zinc World Production Source: International Zinc
Association
Slide 26
Zinc Spot Price (1yr)
Slide 27
Zinc Spot Price (5yr)
Slide 28
COPPER
Slide 29
Copper Overview About Copper Copper Supply and Demand World
Copper Usage Refined Copper Usage by Region Prospects and
Price
Slide 30
About Copper -Efficient conductor of electricity and heat
-Flexible, strong, durable and resistant to corrosion
Slide 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.
Slide 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
Slide 33
World Copper Usage
Slide 34
Refined Copper Usage by Region, 1993- 2008
Slide 35
Major International Trade Flows of Copper Ores and
Concentrates
Slide 36
Leading Exporters and Importers of Copper Ores and
Concentrates, 2008
Slide 37
Copper Prices, 1 Year Spot
Slide 38
Copper Prices, 5 Year Spot
Slide 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 worlds 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)
Slide 40
GOLD
Slide 41
Gold Overview About Gold Demand Prices Gold and the US
Dollar
Slide 42
About Gold Gold is used for: Jewellery Investment Medium of
exchange Industrial
Slide 43
Gold Demand
Slide 44
Gold Spot Price, 1 yr
Slide 45
Gold Spot Price, 5yr
Slide 46
Gold and the US Dollar
Slide 47
COAL
Slide 48
Coal Overview About Coal Energy Demand Types of Coal World Coal
Consumption Annual Coal Prices
Slide 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)
Slide 50
About Coal Coal is the worlds 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.
Slide 51
Types of Coal
Slide 52
World Coal Consumption
Slide 53
Annual Coal Prices
Slide 54
Spot Prices for Coal
Slide 55
(TSE: TCK-B)
Slide 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
Slide 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
Slide 58
5 Year Trend of Common Shares
Slide 59
1 yr. Stock Price Trend TCK.B
Slide 60
5 yr. Stock Price Trend TCK.B
Slide 61
1 Yr. TCK.B & S&P/TSX Global Mining
Slide 62
5 Yr. TCK.B & S&P/TSX Global Mining
Slide 63
Breakdown of Business Units
Slide 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%)
Slide 65
Investments Core Assets Zinc Trail (100%) Red Dog (100%) Energy
Fort Hills Project (20%) Frontier and Equinox Projects Other Oil
Sand Leases (50%)
Slide 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 Tecks share is 90%
Slide 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$1.3 billion
Slide 68
Teck Operation Overview
Slide 69
Overview
Slide 70
History Teck is Canada's largest diversified mining, mineral
processing and metallurgical company Owns or has interests in 15
mines in Canada, United States, Chile and Peru Cominco started in
1906 as a mining and smelting company After a merger in 2001,
became Teck Resources Ltd.
Slide 71
Highlights and Significant Items (in billions)20092008
Operating profit before depreciation 3.72.8 Net earnings1.8.659
EBITDA4.12.0 Revenue7.76.7
Slide 72
Geographic Segment 12/31/08
Slide 73
Business Segment 12/31/08
Slide 74
Revenues and Operating Profit by Product
Slide 75
Average Metal Prices and Exchange Rates
Slide 76
Financial Instruments and Derivatives
Slide 77
Management Norman B. Keevil (B.A. Sc., Ph. D., LL.D) Joined the
Board in 1963 VP Exploration at Teck from 1962-1968 Executive VP
from 1968-1981 President and CEO form 1981-2001 Chairman of the
Board since 2001 Lifetime director of the Mining Association of
Canada Inducted into the Canadian Mining Hall of Fame in 2004
Slide 78
Managment Donald R. Lindsay (B.Sc., M.B.A) President and CEO of
Teck since January 2005 President of CIBC world Market Inc, Head of
Investment and Corporate Banking
Slide 79
TECK Financial Analysis
Slide 80
Slide 81
Slide 82
Slide 83
Debt positions and credit ratios (in millions)Dec. 31, 2008Dec.
31, 2009March 5, 2010 Term loan3,9372,325800 Bridge loan5,284--
Fixed rate term notes1,1815,086 Other167205 Total debt
(US$)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%
Slide 84
Slide 85
Slide 86
Slide 87
Slide 88
Slide 89
Slide 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
Slide 91
Outlook Foreign exchange, debt revaluation and interest expense
Sales of products are denominated in USD Expenses are incurred in
local currency (CAD)
Slide 92
Outlook 2010 production
Slide 93
Recommendation: BUY
Slide 94
(TSE: CCO)
Slide 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
Slide 96
Market Profile 1 Year Stock Chart
Slide 97
Market Profile 5 Year Stock Chart - CCO vs TTMN
Slide 98
Business Overview Cameco Uranium Fuel Services Electricity
Slide 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.
Slide 100
Business Overview The Athabasca Basin hosts the world's richest
high-grade uranium deposits
Slide 101
Uranium Processing McArthur River Key Lake Port Hope Blind
River ( UO 3 )
Slide 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
Slide 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
Slide 104
Slide 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
Slide 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
Expected Realized Prices How long terms contracts would respond
to changing spot prices Assumption: current contract portfolio
remains unchanged
Slide 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)
Slide 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
Slide 114
Foreign Exchange Natural hedge against USD Cash outlays
denominated in USD $0.01 increase in USD/CAD decreases net earnings
$7.1M
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
Slide 120
Strengths Low cost Canadian operations Largest high-grade
uranium deposits Long-term contracts High capital costs and long
lead times Barriers to entry
Slide 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 markets infancy Uranium prices are volatile
Slide 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
Slide 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
Slide 124
Material Risks to Long Term Strategy Inability to increase
production at mines Partner and political risks Natural forces Ex:
flooding at Cigar Lake
Slide 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
Slide 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
Slide 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
Slide 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.
Slide 129
Board of Directors High degree of independence from management
Only 2 of 14 individuals on Board of Directors are not
independent
Slide 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
Slide 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
Slide 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
Outlook Doubling production by 2018 to 40M lbs Exploration
costs increase by over 75% Administration costs increase 25-30%
Cost increases for sustaining operations
Slide 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
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
Slide 142
COMMON SHARES OUTSTANDING 20092008 SHARES733.5M729.6M
Slide 143
1 YEAR VS MARKET & INDUSTRY
Slide 144
5 year
Slide 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
Slide 146
Operations
Slide 147
OPERATIONS
Slide 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
Slide 149
GOLD RESERVES
Slide 150
PRODUCTION
Slide 151
GOLD PRODUCED (OUNCES)
Slide 152
REVENUES
Slide 153
EARNINGS
Slide 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
Slide 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.
Slide 156
Growth & Development Peasquito 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
Slide 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.
Slide 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
Slide 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
Slide 160
Slide 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
Slide 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
Slide 163
FINANCIAL STATEMENTS ANALYSIS Balance sheets Cash flow
statement Income statement
Slide 164
FINANCIAL OVERVIEW
Slide 165
Balance sheet Year end 2009 ASSETS
Slide 166
LIABILITIES 20092008
Slide 167
Income statement Year end 2009
Slide 168
Cash flow statement Year end 2009
Slide 169
CASH FLOW-OPERATING ACTIVITIES
Slide 170
CASH FLOW-INVESTING ACTIVITIES
Slide 171
CASH FLOW-FINANCING ACTIVITIES
Slide 172
RECOMMENDATION BUY Increasing gold prices Growth in GoldCorps
operations Increase in gold production