SELF FINANCED PRIVATE INITIATIVE NEW SAN JUAN DE MARCONA PORT TERMINAL

Information to be published in ProInversion’s webpage, pursuant to item a) in paragraph 45.1 in Article 45 of Supreme Decree N° 410-2015-EF, Regulations of Legislative Decree N° 1224, which approves the Private Investment Promotion Framework Law between Public – Private Partnerships and Asset Projects.

Project Overview

To award a concession contract to design, finance, build, maintain and operate a new port terminal for public use, specialized in providing storage and cargo loading of iron and copper concentrates plus raw materials for mining production.

Name

New San Juan de Marcona Port Terminal

Authorized Entity

Ministry of Transport and Communications through the National Port Authority (APN)

Recitals

By Law N° 28521, dated May 23rd, 2005, the Government declared the construction of a mega- port in Marcona district, Nazca province, Ica department, of national necessity and public interest, authorizing the Ministry of Transport and Communications (MTC), to award port management under any of the methods permitted by current legislation. It should also be included in the National Port Development Plan (PNDP).

The APN incorporated the San Juan de Marcona Port Terminal Master Plan into the PNDP, establishing a territory plan where current and future use of port and/or port terminals water and land areas is specified, along with information concerning estimated cargo movement and expected vessel husbandry, and preliminary designs with corresponding investment estimations.

Pursuant to Supreme Decree N° 009-2010-DE, dated November 10, 2010, separate registration and free transfer of a 729,127.204 m2 (72.91 Ha.) land parcel, property of the Ministry of Defense – Peruvian Navy, were made in favor of the MTC in an effort to promote private investment and concession of the San Juan de Marcona Port Terminal

Area of Influence

The Project will be developed in the San Juan de Marcona Bay, Marcona district, Nazca province, Ica department. Its area of influence includes the flow of potential cargos, which would use the port services for public use of the future New San Juan de Marcona Port Terminal.

The direct area of influence comprises Marcona district, where the main economic activities are mining, small scale fishing and commerce/trade.

The indirect area of influence includes 29 provinces and 280 districts from the lca, Ayacucho, north area of Arequipa, Apurimac an d Cusco regions..

Important: This is an unofficial translation. In the case of divergence between the English and Spanish text, the version in Spanish shall prevail. Objectives

• To fill the shortages of infrastructure and public port services, with a first stage aimed at loading of minerals, pursuant to what is described in the PNDP and the San Juan de Marcona Port Terminal Master Plan made by the National Port Authority (APN). • Meet current and estimated future demand from mining projects under production and exploration, as well as those in portfolio, located within the area of influence of the new port terminal. • Take advantage of the main deep water bay harbor with privileged geographical conditions in the country to develop the largest public use port terminal for mineral and other loads, which allow entrance of high tonnage vessel and obtaining competitive marine freight prices. • Energize the local and regional economy, generating industrial and related activities, plus an increase in employment for the local population, starting with the construction of the new port terminal.

Project Classification

Self-financed Public Private Partnership

Diagnostic of the current infrastructure provision

Currently, there being no port infrastructure in San Juan Bay, demand is simply not met nor there is any port service offer; thus there are no available records on movement of iron concentrates or other minerals going through the bay onto ships.

Marcona Mine (Shougang Hierro Perú S.A.) located in San Juan de Marcona district, as of 1992 to date, has been exported great volumes of iron concentrates through the private dock in San Nicolas.

San Juan de Marcona Bay has the only operational dock that is more of an artisanal fishing pier; it is 112 m long and 7 m wide, which was transferred to the Regional Government of Ica on January 10, 2012 throughl Supreme Decree N° 001-2012-PRODUCE, by the Ministry of Production.

Characteristics of Existing Demand and Offer in Terms of Coverage and Quality

The area of influence of the new port terminal includes several provinces in Ica, Huancavelica, Ayacucho, Apurímac, Cuzco and Arequipa departments; the main economic activities generating cargo have been identified. '

Among the export activity in derivatives from traditional mining prevail (particularly concentrates), which were a big percentage of exports in 2016, mainly from the departments in the area of influence of the terminal.

This area has iron deposits, like in Marcona, Pampa de Pongo, Acarí, Hierro Apurímac, among others, on the other hand copper mining projects have increased, although still in survey stage. Already operational and producing iron is Marcona, run by Shougang, and Las Bambas, a copper mine operated by MMG Limited. There also are gold and silver production units in the area of influence.

Project Demand:

Several demand scenarios are on the board, based on top production estimates (Metric Ton) in the 30 year term, as described in the following chart:

DEMAND SCENARIOS BASED ON MAXIMUM YIELD PROJECTIONS

Mineral Mining Project Pessimist Moderate Thousand MT Thousand MT

Iron Marcona expansion 6,031 6.031 Pampa de Pongo 25,260 25,260

Copper Mina Justa 333 827

Copper Hakira 881

Copper Los Chancas 355

Copper Cotabambas 274

Copper Trapiche 365

Copper Anubia 80

Iron, 256 256 Copper, Exploitation of tailings Zinc

Total (MT) 31,889 34.340

The worst scenario showed in the chart is based on the demand coming from four mining projects located around San Juan de Marcona Port Terminal, which only in iron with a total of six million tons per year would be the first confirmed load for the port Project. Also, the initiative is factoring in the production from Pampa de Pongo mining Project, the largest iron deposit in Latin America, and Mina Justa located in Marcona district, with plans to start operating in 2020.

Port offer:

There are four port terminals that provide service to the current mineral concentrate production:

PORT TERMINALS WITHIN THE AREA OF INFLUENCE OF THE PROJECT

Use Port Terminal Location Public Mineral Loading Terminal Public South International Terminal (TISUR) Matarani – Arequipa Private SHOUGANG HIERRO PERU San Nicolas - Ica Private Southern Peru Copper Corporation Ilo Puerto / Ilo Punta Capones

Made by: MTC

We are showing the service offer from public use terminals since private terminals have a limited capacity to meet loads from third parties, as is established in Article 20 of the National Port System Law Regulations.

Concerning iron ore projects located in Apurimac region, its transportation to any of the ports is too high to make it feasible, unless the much awaited San Juan de Marcona - Andahuaylas - Cusco railroad project is finally executed, the same happens with the copper mining projects, where distance is a critical cost.

The existing port terminals have storage warehouses specially built for specific nearby mining projects, which will use these facilities almost exclusively, which would create an offer-demand for storage.

This highlights the need for a new port infrastructure alternative to meet the demand from mining projects inside the area of influence, since the already existing ones do not have enough storage capacity and their infrastructure has limitations.

The new port terminal will allow intermodal transportation and the consolidation of the logistics axis of the Trans-oceanic highway to , in terms that could boost potential trade flows connected to production, operation and transportation not only of minerals but also other products, which in the end will benefit the increase of a big enough demand to justify private investment in a multipurpose port terminal.

Levels of Service Waiting times per ship: For any ship or vessel waiting to be processed at Port Terminal waiting time should not exceed four (4) hours, waiting time means period, measured in hours (or hour fractions), which start on the time and date the vessel is accounted as arrived to San Juan de Marcona port, and its representative has requested permission for berthing, according to safety procedures and protocols established to this effect, and which ends on the date and time the ship is moored; waiting time should not include times not attributable to the port operator.

Loading start time: Three (3) hours is the time established for this type of load (minerals) and at the area of influence, starting as of the time the ship is moored to port terminal to complete protocols obligatory for a terminal specialized in loading of mineral concentrates and commencement of loading operations and commencement of actual loading on moored ship.

Waiting time should not include times not attributable to port operator.

Productivity indicators: Productivity levels must show a net yield no less than 1,600 ton/hour, this indicator is taken from the concession contract for Transportadora Callao and Matarani.

Additionally, it is within pertinent entities’ purview to expand and develop service and productivity levels demanded as part of this Project.

Estimated amount of investment

Reference estimated amount for the investment commitment or minimum start works is US$ 378.4 million. Investment for expansion works based on demand has been estimated at US$ 203.4 million in total.