Chilean Mining. Opportunities for Canadian equipment and services suppliers. Gonzalo Muñoz, Trade Commissioner Canadian Embassy, Santiago, Chile

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1 Chilean Mining Opportunities for Canadian equipment and services suppliers. Gonzalo Muñoz, Trade Commissioner Canadian Embassy, Santiago, Chile

2 60 Chile Mining Exports US$ Billion

3 9 Chile: Copper Production Million FMT Current Projects

4 Sector Overview (to year 2021) Codelco ( State-owned mining company. Copper: world s largest. Produces 2 million MT/Y of fine copper. Operational expenses: $1.6 B/Y Materials purchasing: $1.8 B/Y Contracted services: $4.6 B/Y New projects investment estimate: $30.5 B. Four structural: 1. Chuquicamata underground ($3.7 B) 2. Ministro Alejandro Hales ($3.4 B) 3. Nueva Andina, phase II ($6.7 B) 4. Nuevo Nivel Mina El Teniente ($3.5 B) Private sector. Projects investment valued at $76.4 B Copper. BHP Billiton; Antofagasta Minerals; Anglo American; Glencore Xstrata; Teck; Lundin; Barrick; Gold & silver. Kinross; Yamana; Barrick; Goldcorp Iron. CMP (CAP); Vallenar Iron; Santa Fé; MMX Non-metallic. SQM (iodine; nitrates; potassium; lithium)

5 Major Developments More than 143 new mining projects from 2010 to (Source: Cochilco). Estimated investment is close to $112 billion, of which 27.3% would be by Canadian mining companies. But, 1/3 of projects have been delayed. Copper production copper production expected to increase from current 5.7 million MTY to 8.4 million MTY by Innovation should be factored in to the upcoming investment cycle as mining companies seek to reduce operational costs through costeffective and efficient technologies. In 2014, gold production in Chile totalled 44 MT. Annual production is expected to increase considerably once two large mining projects begin production. Gold Mining projects: Mostly Canadian.

6 Projected Mining Investment in Chile's Mining Sector (US$ Billion) Sector Sub- Total After 2017 Total % Copper Codelco Private Gold & silver Iron and industrial TOTAL

7 COPPER MINING PROJECTS IN CHILE US$ Million Operation Date Project Caserones Expansion Phase II (150 to 160 Ktpd) Lead Company Pan Pacific Copper Collahuasi Operating Company Type Status/Stage Investment Minera Lumina Copper Chile New Operation 3000 Doña Inés de Collahuasi Expansion Operation 300 Ministro Hales Mine Codelco Codelco New Operation 3435 Escondida New Oxides Lx Pile BHP Billiton Minera Escondida Ltda. Reposition Operation 721 Diego de Almagro Lx Copec Can-Can New Feasibility 597 Escondida OGP I Antucoya Esperanza Update BHP Billiton Antofagasta Minerals Antofagasta Minerals Minera Escondida Ltda. Expansion Construction 3838 Minera Antucoya Ltda. New Construction 1900 Antofagasta Minerals Expansion Feasibility 550 Diego de Almagro Concentration Copec Can-Can New Feasibility 597 Sierra Gorda Valle Central Expansion KGHM International Amerigo Resources Minera Quadra Chile New Construction 3900 Minera Valle Central Expansion Feasibility 152

8 COPPER MINING PROJECTS IN CHILE US$ Million Operation Date Project 2016 Encuentro Oxidos Lead Company Antofagasta Minerals Operating Company Type Status/Stage Investment Antofagasta Minerals New Feasibility 600 San Antonio Oxides Codelco Codelco New Feasibility 963 Other development projects Codelco Codelco Reposition Construction Information projects Codelco Codelco New Construction 1557 Antofagasta Esperanza Sur (Ex-Telegrafo) Minerals Minera Esperanza New Feasibility 3500 Santo Domingo Capstone Mining Capstone Mining New Feasibility 1800 Glencore Xstrata Lomas Bayas Sulphur III Glencore Xstrata Lomas Bayas New Pre-feasibility 1600 El Espino Pucobre Explorator S.A. New Ffeasibility 624 Inca de Oro PanAust (59.4%) Codelco (34%) Minera Group (6.6%) Inca de Oro S.A. New Feasibility 600 Nuevo Nivel Mina Codelco Codelco Reposition Construction 3505

9 COPPER MINING PROJECTS IN CHILE US$ Million Operation Date Project Lead Company Operating Company Type Status/Stage Investment 2018 Tovaku Pucobre Explorator S.A. New Pre-feasibility 600 Traspaso Mina-Planta Codelco Codelco Reposition Construction 1420 Chuqui Underground Codelco Codelco Reposition Feasibility 4080 RT Sulphurs Phase II Codelco Codelco New Feasibility 5430 El Abra Mill Project Freeport McMoRan El Abra SCM New Feasibility Productora Hot Chili Soc. M. El Aguila New Pre-feasibility 700 Expansion Phase III (160 to 260 Doña Inés de Ktpd) Collahuasi Collahuasi Expansion Pre-feasibility 6500 Relincho Teck Relincho Copper New Feasibility 3900 Quebrada Blanca Hypogene Teck Cia. Minera Quebrada Blanca New Feasibility Antofagasta Antofagasta Encuentro Sulfuros Minerals Minerals New Pre-feasibility 3500 Nueva Andina Phase II Codelco Codelco Expansion Feasibility Antofagasta Antofagasta Pelambres Expansion II Minerals Minerals Expansion Pre-feasibility

10 GOLD & SILVER MINING PROJECTS IN CHILE US$ Million Operation Date Project Lead Company Operating Company Type Status/Stage Investment 2015 Nueva Esperanza - Arqueros Kingsgate Consolidate Ltd. Laguna Resources Chile New Feasibility 300 La Coipa, Phase 7 Kinross Gold Mantos de Oro Reposition Feasibility Jerónimo Yamana Gold Agua de la Falda S.A. Reposition Pre-Feasibility 423 Pascua Lama Barrick Gold Cia. Minera Nevada New Construction 4250 Lobo - Marte Kinross Gold Minera Santa Rosa New Feasibility Cerro Maricunga Atacama Pacific Gold Atacama Pacific Gold New Feasibility 515 Caspiche Exeter Resources Eton Chile New Feasibility Volcán Andina Minerals Andina Minerals Chile New Feasibility 800 El Morro Goldcorp El Morro SCM New Feasibility 3900 Minera Estrella de 2020 Cerro Casale Barrick Gold Oro S.A. New Feasibility 6000 TOTAL INVESTMENT IN GOLD & SILVER PROJECTS US$ BILLION Note: 98.5% of Gold & Silver projects are to be developed by Canadian companies

11 Operation Date Project Lead Company Operating Company Type Status/Stage Investment Cerro Negro Norte Los Colorados Expansion Romeral Phase V Oso Negro CAP CAP CAP Hebei Wengfeng Group Cia. Minera del Pacífico New Operation 880 Cia. Minera del Pacífico Expansion Construction 413 Cia. Minera del Pacífico Expansion Operation 196 Minera San Fierro Ltda. New Construction 90 Bellavista JSW Steel Santa Fé Mining New Feasibility 143 SUB-TOTAL IRON INVESTMENT US$ 1.72 BILLION 1722 Pampa Hermosa SQM SQM Expansion Feasibility 1033 Coya Sur Potasium Nitrate Plant SQM SQM Expansion Construction 250 Expansion Pampa Blanca SQM SQM Nitrato Expansion Construction Cerro Blanco IRON AND INDUSTRIAL MINERALS PROJECTS IN CHILE US$ Million White Mountain Titanium White Mountain Titanium New Feasibility 380 SUB-TOTAL INDUSTRIAL MINERALS INVESTMENT US$ BILLION 2328 TOTAL IRON AND INDUSTRIAL MINERALS INVESTMENT US$ 4.05 BILLION 4050

12 Investment Distribution by Sector and Country of Origin , US$ Billion Total Investment Copper Gold & Silver Iron & Industrial Minerals Million Million Country Total % US$ % Million US$ % US$ % Chile Canadá Japón Suiza Reino Unido Australia EE.UU Polonia Perú Corea India China TOTAL

13 1. Mining Industry Issues in Chile Water. Supply constraints in North Chile. Solutions: Use of salt water. (Current: Esperanza; Project: El Morro) and desalinization plants. Power. More than 80% of Northern grid s consumption is mining. Coal fired and Natural gas. The future: RNCE; Inter-connection with Central grid. Increase efficiency. Nuclear?; CSR. EIA and engagement with local (and national) communities. Practically no Chilean stock listing (Agreement signed between TSX and Chilean counterpart in March 2014 and now 5 Canadian Juniors are dual-listed. Lack of human resources. High market demand: Mining engineers and geologists are the best paid professionals in Chile. Also valid for workers (Potential: 80,000 new positions. As per current delays, the figure is estimated at 37,000) Labour pressure: forecasted beyond regular negotiation processes.

14 2. Mining Industry Issues in Chile Delays and deferrals of projects (1/3?). Due to price of metals and domestic issues (litigation). Exploration delays: Largest drilling services company had 120% drill rigs demand in 2012, now down to 35%... But slowly increasing Value of Mining Exploration companies at Canadian Stock Market is ¼ of its value 2 years ago.

15 3. Market for Mining Suppliers Local Production/Capabilities Local manufacturers satisfy ¼ of Chile s demand in this sector. (only 10 percent of the sector s demand was produced locally 10 years ago. Higher US$ value increases potential for local manufacturing and exports. But also increases opportunities for Canadians. Preferred long-term market strategy for Canadian firms is to partner with local companies and using Chile as a regional business platform Some local mining companies are fostering cluster concepts. Canadian Position First foreign investor in Chile s mining. Will maintain that predominant position Close to 60 Canadian mining companies in Chile Suppliers Importers Local manufacturing Engineering services (EPC and EPCM) Specialized services (drilling, geomatics, environmental, CSR, energy saving, water management, etc.)

16 Mineral Exploration Chile: Mineral Exploration Spending By Company (%) Other 39% BHP Billiton 18% Antofagasta Minerals 15% Codelco 5% Lundin Mining 2% Freeport-McMoRan 5% Kinross Gold 3% Hot Chili 3% Yamana Gold 5% Barrick Gold 5%

17 Sector Overview To Note: Chile: world s largest producer and exporter of copper. World s largest in lithium. Important in other metals, concentrates and ores such as molybdenum, gold and silver. Large mining annual operational spending: surpasses $10 billion; annual spending: machinery parts, mining equipment and plant and mine consumables is close to $2 billion; annual contract services: valued at about $2.6 billion. Chile also invests $2.5 billion average/year in mining projects. Some annual mining sector yearly expenditures: $315 million for flotation reactants and sulphuric acid; $304 million for steel grinding balls and steel grinding mill parts; $108 million for imported off-road tires; $96 million for large trucks; $21 million for shovels; and $2 million for underground mining machinery.

18 Sector Overview Of the US$112 B investment estimate for 2021: Construction: US$ 47 B Equipment: US$ 44 B Engineering: US$ 8 B Other: US$ 13 B More than 5000 supply companies $ 1.8 billion/y on imported goods and services. Currently, 1,000 large off-road trucks. Grinding balls (steel) $300 M/Y Steel coatings $130 M/Y. Reagents: $150 M/Y Services, $2.5 B/Y: General and maintenance: $1.74 B/Y Engineering and consulting: $290 M/Y Construction: $870 M/Y 27 Mining Suppliers (%) Operation support Equipment & supplies Mining contractors Engineering and consulting

19 Sector Overview What we (TCS) do for Canadian suppliers: Projects database: own detailed information about mining projects under development. Importations database: Customs information about importers/products Contacts: Lists Buyers: Mining companies; engineering companies Local suppliers: competition; partners; agents; representatives Promotional/Marketing venues : PDAC (Toronto, March 6 9, 2016): close to 200 Chilean participants. CESCO Week (Santiago, April 4 8, 2016): Canadian participants Expomin (Santiago, April, 2016): companies from Canada Seminars, Conventions and every mining event with networking potential CIM Los Andes Branch (every month meetings and networking) Sponsorship of high level activities (i.e. Comisión Minera) Specialized Media.

20 Chilean Mining Suppliers Close to 6,000 (4,643 in 2010). SMEs: 66%, Large: 14%. Support services: 34%; Consulting and Eng.: 9%; Contractors: 27%. Supply and equipment: 30%. 66% located in Santiago; 12% in Antofagasta. 1 million employees (13.3% of the Chile s active workforce). 29% professionals; 16% technicians. 34% of these companies export. Innovation: 12% innovated in products 41% innovated in processes 51% innovated in management 31% innovated in marketing A vast majority of the suppliers have development needs

21 2.b. The South America Market for Mining Suppliers in this Decade Estimated investment $ 250 billion Argentina: $20 B Brazil: $58 B Chile: $ 114 B Colombia: $20 B Peru: $56 B Chilean mining suppliers, exports volume: $710 M: $ 496 M (72%) to South America $ 193 M (28%) to North America $ 28.4 M (4%) to Europe

22 Merci Thank you - Gracias