MILPO EARNINGS32RELEASE322Q14

8/11/2019 MILPO EARNINGS32RELEASE322Q14

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a Peruvian Polymetallic Mining Company

Lima, August 18th, 2014, Compaa Minera Milpo S.A.A. (MILPO), a Peruvian mining company dedicated to the exploration, mining,

processing and marketing of zinc, copper and lead concentrates with silver and gold contents, today released its second quarter 2014

(2Q14) consolidated results. Operational and financial information, except where otherwise stated, is presented based on consolidated

figures in American Dollars according to ISA 34Interim Financial Reporting.

COMPAA MINERA MILPO S.A.A.2Q14 CONSOLIDATED EARNINGS RELEASE

Selected Operational and Financial Data

2Q14 Highlights

Milpos consolidated financial position improved this 2Q14, with higher revenues (+5%),

EBITDA (+14%) and Net Profit (+135%), in spite of the challenging scenario with lower metal

prices, mainly for copper and silver. These results proved the effectiveness of Milpos

strategy to increase production and concentrate in the most profitable operating units.

EBITDA margin reached 39% in 2Q14, compared to 36% in 2Q13, mainly due to higher

production levels and explained by the better performance in Atacocha results.

Treated ore increased by 9% quarter-on-quarter, reaching 2.4 million tonnes.

Silver content rose by 6% in the 2Q14, in comparison to that of 2Q13, reaching 1.7 million

ounces included in the concentrates produced.

Consolidated Cash Cost reached US$ 34.5 /t in 2Q14, slightly below that obtained in 2Q13.

In terms of zinc equivalent, cash cost reached US$ 1,071/t in 2Q14.

By the end of June 2014, the Net Debt/EBITDA ratio was 0.01x, lower than that obtained as

of December 2013 (0.15x)

Unit 2Q14 2Q132Q14 vs

2Q131S14 1S13

1S14 vs

1S13

Production

Treated Ore t 2,355,647 2,170,480 9% 4,534,343 4,152,898 9%

Zinc concentrate t 117,354 113,733 3% 238,480 233,707 2%

Copper concentrate t 41,432 40,367 3% 76,811 68,996 11%

Lead concentrate t 17,020 14,986 14% 33,462 26,904 24%Silver content oz 1,735,070 1,631,772 6% 3,384,159 2,895,140 17%

Price (USD/t)

Zinc US$/t 2,073 1,840 13% 2,051 1,937 6%

Copper US$/t 6,787 7,146 -5% 6,913 7,537 -8%

Lead US$/t 2,095 2,054 2% 2,100 2,177 -4%

Silver US$/oz 19.6 23.1 -15% 20.1 26.6 -25%

Cash Cost US$/t 34.5 35.1 -2% 35.4 35.8 -1%

Cash Cost Zn eq. US$/t Zn eq. 1,071 951 13% 1,034 988 5%

Revenues US$ MM 188.7 179.3 5% 377.3 352.8 7%

EBITDA US$ MM 73.5 64.7 14% 144.6 126.4 14%

Net Profit US$ MM 34.5 14.7 135% 61.7 27.9 121%

Net debt / EBITDA x times 0.01 0.5 -98% 0.01 0.5 -98%

Cash Position US$ MM 363.8 274.3 33% 363.8 274.3 33%

CAPEX US$ MM 12.5 33.9 -63% 32.5 51.9 -37%

EBITDA Margin % 39% 36% 38% 36%


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1. FINANCIAL PERFORMANCE

Milpos revenues were US$ 189 million in the 2Q14, 5% higher compared to 2Q13, this increase

was mainly due to higher production and sales volumes of zinc (+1%) and lead (+18%)

concentrates, as a result of the consolidation of Cerro Lindo 15k and El Porvenir 5.6k operations.This increase in production offset the negative effect of lower metal prices which resulted in a

negative impact of US$ 15 million.

Cost of sales increased by 6% quarter-on-quarter, due to the higher sales volume. However it is

worth mentioning that the consolidated cash cost decreased from US$ 35.1 /t in 2Q13 to US$ 34.5 /t

in 2Q14. In addition, depreciation decreased by 20% in 2Q14 in comparison to that of 2Q13 due to a

lower depreciation expense registered in the copper units currently on hold. Gross profit increased

by 15% quarter-on-quarter, reaching US$ 78 million. This result was supported by the higher volume

sold and the lower cash cost during 2Q14.

Administrative expenses decreased by 18% quarter-on-quarter, primarily due to the CorporateOffice optimization. Also, the amortization decreased by 69% in 2Q14 due to the increase in

Atacochas life of mine which allowed the company to amortize the intangible related to its

acquisition for a longer period.

EBITDA reached US$ 74 million in 2Q14, compared to the US$ 65 million obtained in 2Q13 which

was driven by the higher revenues as well as the positive impact of Atacochas EBITDA. It is worth

mentioning that the EBITDA registered in 2Q14 was the highest in the last 10 quarters. The net

financial expenses are related to the interests accrued by the bonds issued in the international

capital market in March 2013, which allowed the company to improve its financial flexibility to

address market volatility.

Finally, the Company totaled a consolidated net profit of US$ 34 million in 2Q14, robust growth of

135% quarter-on-quarter due to the higher EBITDA. It is worth mentioning the net profit obtained by

Atacocha of US$ 1.2 million in the 2Q14 in comparison of the net loss of US$ 10.6 million in 2Q13.

US$ 000 2Q14 2Q132Q14 vs

2Q131S14 1S13

1S14 vs

1S13

Revenues 188,715 179,298 5% 377,309 352,762 7%

Cost of Sales (88,198) (83,472) 6% (175,259) (160,840) 9%

Depreciation (22,073) (27,451) -20% (46,083) (57,370) -20%

Gross Profit 78,444 68,375 15% 155,967 134,552 16%

Amortization (1,786) (5,679) -69% (4,059) (10,638) -62%

Selling Expenses (5,973) (5,730) 4% (12,430) (10,667) 17%Administrative Expenses (7,182) (8,774) -18% (15,053) (17,202) -12%

Other Operating Results, net1 (13,836) (17,983) -23% (29,935) (39,006) -23%

Operational Profit 49,667 30,209 64% 94,490 57,039 66%

Financial Expenses, net (4,334) (4,657) -7% (8,384) (6,397) 31%

Taxes2 (10,849) (10,899) 0% (24,362) (22,758) 7%

Net Profit 34,484 14,653 135% 61,744 27,884 121%

EBITDA 73,526 64,711 14% 144,632 126,419 14%

EBITDA Margin (%) 39% 36% 38% 36%

(1) EBITDA is not affected by the impairment of lands for the amount of US$ 1,372 thousand as of June 2013, this

amount is recorded in Other Operating Results account.

(2) For purpose of this report, the Special Mining Tax which appears in the financial statements as part of IncomeTax, was reclassified in the Other Operating Results account.


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2. BUSINESS AND OPERATIONAL PERFORMANCE

Cerro Lindo Unit

During the 2Q14, Cerro Lindo increased its concentrate production by 7% quarter-on-quarter, due to

the higher zinc (+9%), copper (+3%) and lead (+15%) concentrate production, related to higher

treated ore. Cerro Lindo revenues amounted to US$ 126 million, 4% up on 2Q13, mainly due to the

higher concentrate production.

The unitscash cost was of US$ 30.5/t during 2Q14, slightly higher than that obtained in 2Q13, due

to higher maintenance costs, and to an increase in the exploration and development activities in themine.

In terms of EBITDA, Cerro Lindo totaled US$ 70 million during 2Q14, a 3% increase compared to

that of 2Q13, mainly due to the higher revenues.

El Porvenir Unit

Unit 2Q14 2Q13 2Q14 vs2Q13

1S14 1S13 1S14 vs1S13

Production

Zinc Concentrate t 69,709 63,800 9% 142,829 137,063 4%

Copper Concentrate t 38,530 37,557 3% 71,303 62,741 14%

Lead Concentrate t 5,397 4,694 15% 10,486 9,296 13%

Fine Metal in Concentrate Production

Zinc t 38,505 35,421 9% 79,951 76,143 5%

Copper t 10,235 9,629 6% 19,078 16,052 19%

Lead t 3,593 3,031 19% 6,969 6,048 15%

Silver oz 726,311 750,355 -3% 1,347,071 1,311,128 3%

Cash Cost US$ / t 30.5 29.3 4% 31.7 29.3 8%

Cash Cost Zn eq. US$/t Zn eq. 973 828 17% 931 849 10%Revenues US$ MM 125.6 120.6 4% 247.4 232.5 6%

EBITDA US$ MM 69.8 67.5 3% 133.9 132.7 1%

EBITDA Margin % 56% 56% 54% 57%


2Q131S14 1S13

1S14 vs

1S13

Production

Zinc Concentrate t 30,783 28,535 8% 61,369 55,175 11%

Copper Concentrate t 1,577 1,386 14% 2,956 3,324 -11%Lead Concentrate t 6,345 6,381 -1% 13,271 10,186 30%


Zinc t 15,371 15,120 2% 31,012 29,393 6%

Copper t 371 309 20% 703 749 -6%

Lead t 3,575 3,616 -1% 7,721 5,766 34%

Silver oz 525,629 517,364 2% 1,128,390 870,845 30%

Cash Cost US$ / t 38.5 42.2 -9% 39.0 44.1 -12%

Cash Cost Zn eq. US$/t Zn eq. 1,228 1,148 7% 1,161 1,224 -5%

Revenues US$ MM 35.2 36.8 -5% 76.2 70.7 8%

EBITDA US$ MM 9.0 12.5 -28% 23.8 24.0 -1%

EBITDA Margin % 26% 34% 31% 34%


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During the 2Q14, El Porvenir increased its concentrate production by 7% quarter-on-quarter, due to

the higher treated ore, which allowed the increase of zinc (+8%) and copper (+14%) concentrates.

The silver content in the concentrates grew 2% in 2Q14.

El Porvenir revenues were US$ 35 million in 2Q14, a 5% decrease compared to those of 2Q13 dueto the negative price effect of US$ 3 million.

The units cash cost was US$ 38.5/t in 2Q14, 9% down quarter-on-quarter due to the optimization in

exploration and development activities in the mine. The units EBITDA was US$ 9 million in 2Q14, a

28% decrease due to the lower revenues and the retirement incentive program.

Atacocha Unit

Revenues were US$ 26 million during 2Q14, a robust growth of 39% due mainly to the increase in

lead concentrate production (+35%) and silver content in concentrates (+33%) which by far pffset

the decrease in zinc and copper production.

Furthermore, as a result of the cost reduction plan implemented in the Unit, Atacochas cash cost in

2Q14 was US$ 44.4/t, 5% lower when compared to that of 2Q13 (US$ 46.6/t). This reduction was

achieved mainly due to the optimization of supplies consumption in all operating areas.

Atacocha generated an EBITDA of US$ 7 million in 2Q14 from a negative EBITDA of US$ -2 millionin 2Q13 mainly due to the higher revenues and lower cash cost. In the 1S14, the EBITDA was

703% higher than 1S13, clearly a different trend compared to the previous year.

It is worth mentioning the Net Profit generated by the unit in 2Q14 of US$ 1 million in comparison to

the Net Loss in 2Q13 of US$ 11 million.

3. CAPEXDuring the 2Q14, Milpo invested US$ 12 million in sustaining Capex for its mining units. Among the

most important investments is the installation of the third mill at Cerro Lindo Unit, which will provide


2Q131S14 1S13

1S14 vs

1S13

Production

Zinc Concentrade t 16,862 21,398 -21% 34,282 41,469 -17%Copper Concentrade t 1,325 1,424 -7% 2,551 2,931 -13%

Lead Concentrade t 5,278 3,911 35% 9,705 7,422 31%


Zinc t 8,935 11,435 -22% 18,262 22,202 -18%

Copper t 335 358 -6% 644 744 -13%

Lead t 3,054 2,342 30% 5,592 4,456 26%

Silver oz 483,131 364,054 33% 908,698 713,167 27%

Cash Cost US$ / t 44.4 46.6 -5% 44.5 47.9 -7%

Cash Cost Zn eq. US$/t Zn eq 1,327 1,352 -2% 1,314 1,328 -1%

Revenues US$ MM 26.1 18.8 39% 50.4 42.3 19%

EBITDA US$ MM 7.0 -2.2 n.a. 12.6 1.6 703%EBITDA Margin % 27% -12% 25% 4%


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operational support to the mills already installed thereby ensuring the operation stability and

increase the treatment capacity.

4. LIQUIDITYBy the end of June 2014, the cash balance was

of US$ 364 million and the gross debt amounted

to US$ 367 million (US$ 378 million by the end of

2013).

As in the last quarters, Milpo maintains healthy

leverage levels, being the Net Debt / EBITDA ratio

of 0.01x times in 2Q14 compared to 0.15x times at

the end of 2013.

US$ (MM) 2Q14 2Q13 Var (%) 1S14 1S13 Var (%)Expansion 0.0 23.9 -100% 0.0 36.7 -100%

Sustaining and Others 12.3 10.1 22% 27.7 15.2 82%

TOTAL MILPO 12.3 33.9 -64% 27.7 51.9 -47%

Debt Amortization Schedule(US$ million)

CASH


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ADDITIONAL INFORMATION2Q14 Results Global Conference Call will be held on Monday, August 18th, 2014 at 9:00 a.m.(Lima) / 10:00 a.m. (New York) / 15:00 p.m. (London).

To access the call, please dial:

Within U.S. : 1 (877) 317-6776

Outside U.S. : 1 (412) 317-6776

Conference ID Code : Minera Milpo

To access via webcast, please go to:

http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=2486

To access the replay of the 2Q14 Global Conference Call audio please dial:

U.S. Participants : 1 (877) 344-7529

Outside the U.S. : 1 (412) 317-0088

Passcode : 10047291

The Global Conference Call will be broadcast live at our Investor Relations website ir.milpo.com.Aslide presentation will also be available on the same website.

For further information please contact [email protected] enter toir.milpo.com
http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=2486http://ir.milpo.com/http://ir.milpo.com/http://ir.milpo.com/mailto:[email protected]:[email protected]:[email protected]://ir.milpo.com/http://ir.milpo.com/http://ir.milpo.com/mailto:[email protected]://ir.milpo.com/http://webcast.mzvaluemonitor.com/Cover.aspx?PlatformId=2486


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EXHIBIT I: COMPAIA MINERA MILPO S.A.A. AND SUBSIDIARIESCONDENSED INTERIM CONSOLIDATED INCOME STATEMENT

2014 2013

US$ 000 US$ 000

Unaudited Unaudited

Sales 377,309 352,762

Cost of Sales (221,342) (218,210)Gross Profit 155,967 134,552

Selling expenses (12,430) (10,667)

Administrative expenses (15,053) (17,202)

Other expenses, net (25,653) (41,451)

Operating Profit 102,831 65,232

Finance income 1,434 1,520

Finance costs (9,818) (7,917)

Profit before income tax 94,447 58,835

Income tax (32,703) (30,951)

Profit for the period 61,744 27,884

Total profit for the period attributable to:

Controlling interest 62,060 34,291

Non-controlling interest (316) (6,407)

61,744 27,884

For the six-period ended

June 30,


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EXHIBIT II: COMPAIA MINERA MILPO S.A.A. AND SUBSIDIARIESCONDENSED INTERIM CONSOLIDATED BALANCE SHEET

At June 30, At December, 31 At June 30, At December, 31

2014 2013 2014 2013

US$ 000 US$ 000 US$ 000 US$ 000

Unaudited Unaudited

CURRENT ASSETS CURRENT LIABILITY

Cash and cash equivalents 363,793 342,406 Borrowings 12,588 20,545

Trade receivables 137,273 118,346 Trade payables 96,664 97,686

Other receivables 46,542 49,219 Other payables 58,444 52,311

Inventories 64,102 64,576 Provisions 12,951 21,020Prepaid expenses 11,504 4,553 Total current liabilities 180,647 191,562

Total current assets 623,214 579,100

BORROWINGS 354,013 356,926

DEFERRED INCOME TAX ASSETS 25,555 22,840

DEFERRED INCOME TAX LIABILITY 912 1,100

OTHER FINANCIAL INVESTMENTS 19 19

PROVISIONS 99,046 98,610

PROPERTY, PLANT AND EQUIPMENT 433,699 452,346

EQUITY

INTANGIBLE AND EXPLORATION ASSETS 152,912 156,971 Capital 423,829 347,024

Investments shares 4,552 3,296

Other reserves 71,839 65,291

Other comprehensive income (4,515) 2,522

Retained earnings 69,739 108,658

565,444 526,791

Non-controlling interest 35,337 36,287TOTAL EQUITY 600,781 563,078

TOTAL ASSETS 1,235,399 1,211,276 TOTAL LIABILITIES AND EQUITY 1,235,399 1,211,276

ASSETS LIABILITIES AND EQUITY


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EXHIBIT III: COMPAIA MINERA MILPO S.A.A. AND SUBSIDIARIESCONDENSED INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

2014 2013

US$ 000 US$ 000

Unaudited Unaudited

CASH FLOWS FROM OPERATING ACTIVITIES

Collection from clients 423,075 396,454

Payment to suppliers (223,164) (194,754)

Payment of remunerations and social benefits (51,296) (58,861)

Income tax payments (24,129) (20,813)

Other tax payments (37,844) (48,061)Tax refunds 1,571 -

Other payments (12,218) 5,130

Net cash generated from operating activities 75,995 79,095

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of intangible assets - (26,405)

Disposal of property, plant and equipment 837 4,414

Purchase of property, plant and equipment (28,205) (35,083)

Net cash used in investing activities (27,368) (57,074)

CASH FLOWS FROM FINANCING ACTIVITIES

Borrowing received - 347,438

Payment of borrowings (2,336) (206,446)

Interests paid of borrowings (8,534) (2,460)

Dividends (16,370) -

Net cash (used in) generated from financing activities (27,240) 138,532

Net increase in net cash and cash equivalents 21,387 160,553

Cash and cash equivalents at the begining of the period 342,406 113,699

Cash and cash equivalents at the final of the period 363,793 274,252

For the six-period endedJune 30,

MILPO EARNINGS32RELEASE322Q14

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