Investing in Growth: Funding a Treasury Transformation ...

Investing in Growth: Funding a Treasury Transformation Initiative

Tracy Park Senior Manager, Treasury First Quantum Minerals Ltd.

Lorne Hamilton Regional Sales Director Reval

First Quantum Minerals Ltd. at a Glance • An established and rapidly growing mining and

metals company operating seven mines and developing five projects worldwide.

• We currently produce copper, nickel, gold, zinc and platinum elements.

• Compounded annual return of over 30% since listing on the TSX in 2000.

• Acquired Inmet Mining Corporation in March 2013.

Strategic Vision for Treasury

*Published by Treasury Strategies, Inc.

• Broaden Treasury focus beyond execution to Strategic analysis and management

• Respond to Senior Management rapidly & comprehensively

• Integrated with Business Units

• Assess impacts of major events

• Plan proactively

• Access the power of integrated data

Source: Treasury Strategies, 3.0 Analysis

End Goal : More Strategic and Agile

Business drivers at FQM Key Issue Primary Need

1. Legacy Technology Integrate FQM onto Inmet legacy platform

2. Cash Visibility Cash Positioning; Forecasting, CONNECTIVITY

3.Investment Portfolio Mgmt/Liquidation

Portfolios funded by Inmet liquidated by FQM on acquisition

2. FX / Commodity Management

Future requirements, Visibility to exposures, Efficient hedge execution (STP)

3. Counterparty Risk • Cash at Risk (Bank accounts & Investments)

• Potential Risk (Derivatives, Credit facilities) 4. Policy Compliance Limits, Performance Metrics

5. Reporting Dashboards, Ad-hoc reports, KPI’s

6. Strategic Planning • Leveraging analytics/intelligence for strategic decision making

• Support for future growth plans

Define Requirements • Determine Priorities

– SaaS vs ASP vs In House – Supplier and Platform – Functional requirements

− Cash Positioning − Cash Forecasting − Financial Transactions (Debt, Inv, FX, Der) − Risk Management − Payments − Pooling − Intercompany loans and external debt − General Ledger and Hedge Accounting − Bank Account Management (FBAR) − Connectivity (Trading Portals, Balance Reporting, Payments, etc.)

• Weight Functions According to Their Importance

• Assess Technical and Interface Requirements

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Treasury Challenges at Inmet and FQML • Previous TMS was not performing the activities originally

implemented nor being supported by vendor – Bank polling and positioning – Journal entry creation

• Too many spreadsheets! • Future growth of the company would include:

– Hedging – More intercompany loans and external facilities – Debt Issue – Foreign Exchange trading – STP – Forecasting – Leveraging the TRM used by Inmet for the FQM treasury processes and

entities We needed a TRM system that could provide for our current and future needs

Phases of a Business Transformation at FQML

Catalyst • Something

changed • Business • Technology

Strategy • Objectives • Learning • A Plan • Executive

Commitment

People • Build Team • Alignment on

Strategy

Execution • Partners • Project • Process • Technology

Synergy • Performance

Management • Improve

Treasurer Feedback - Challenges What is required in 2014 • Staying in Front of Issues

– Planning ….. not reacting – Tools required

• Monitoring and Compliance with Policies

– Preservation and Safety of Cash and Liquidity • Early warning system to CFO

• Ensuring exposures in Separately Managed Accounts didn’t breach policy

limits

• Growth of Bottom up forecasts rather than Top down…. Better information

• Accurate forecasting would be crucial for $6B Panama project costs for Inmet 9

Treasurer Feedback Areas of Focus • Focus on Global Visibility of Cash

– Independent of geographic locations – Independent of banks – Inmet used only one bank for most of its entities. FQM uses

many banks making the use of a TRM more important to ensure accurate daily balances are easily and quickly visible.

• Organizational efficiencies rather than just departmental – Accounting – creating journal entries for all treasury transactions

saved hours for the accounting area – Procurement – Sales

Treasurer Feedback - Challenges What is required in 2014 • Integration of Business units into a

single platform • Support business global expansion and

capital requirements – Available liquidity - Domestic and Global – Tax implications – Global cash movements – Intercompany Funding Structures

Treasurer Feedback – Challenges 2014 • Analysis of Operations

– Cash and Liquidity Optimization – Counterparty Management – Policy Compliance – Scenario Stress Testing – Forecasting Analytics

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Treasurer Feedback Areas of Focus • Counterparty Limit Management

– Global – Name based as well as country based

• Operational efficiencies – In-house bank – Payment hubs – Multilateral netting programs – Time savings – Automate processes – Cross Department

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Treasurer Feedback Areas of Focus • Moving away from Unique Practices to

Best Practices – More benchmarking – Peer group discussions – Asking “Why”

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Treasurer Feedback Requirements for 2014 and Onward • One solution/ one platform - Full TRM capabilities

• Scalability to grow with the Company when and as required

• Partner who can bring best practices to the table along with Peer

group that drives a continuous improvement cycle to development of product and services – Power of the Crowd High value people doing high value activities, analysis and management

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Corporate Technology Tools

Bank Websites

Trading & Specialized Portals

Market Rate Providers

Internal Environment External Environment

FQML Selection Process • Issued a comprehensive RFP in January 2012 • RFP responses and demos held with each supplier in

February 2012 • Reval selected in March 2012 • Phase 1 of implementation started in April 2012

– Bank polling and positioning

– Portfolio management

– Automation of journal entries

• Parallel testing complete and Go Live in July 2012

Key elements to selecting a Vendor at FQML • Ability to handle our current needs and help us plan

for the future • Strong reputation as the industry leader for Hedge

accounting • Reporting capabilities • Lower cost than other platforms without any reduction

in capabilities of the system • Dedicated and responsive implementation personnel • Reval took care of the bank connectivity via Fides • Built in redundancies for some of our current

processes and some that fulfill our wish list – STP, Portal investments, FX trading

Assess Vendor STP Community To extend the value provided to their customers by improving treasury workflow and enhancing the overall user experience

Mission

• Focused on facilitating STP workflow and simplifying the client experience

• Joint Partner Commitment to establishing tightly integrated user and technical interfaces

• Strong Partner Alignment beginning with Sales all the way through Implementation and Production Support

• Independent Vendors working as a “team” for the benefit of “their Customer”

Goals

Standard of Excellence

Flexibility

Accessibility

Responsiveness

Cost Effectiveness

Client Server Software

Avoid Change

Old Technology

Long Upgrades

Hidden Costs

SaaS Solutions

Embrace Change

New Technology

No Upgrades

Transparent Costs

Assessment of Technical Platforms at FQML

Why Build a Business Case?

• Treasury Transformation Drives a New Level of Business Value for the Organization – Competitive & Compelling Business Value vs. Cost Center

• Required To Support the Funding for a Successful

Treasury Transformation Project – Strategy Investment vs. Tactical “Plug the Problem”

• Helps Define the Strategic Value To Internal Clients /

Partners – Promotes A Stronger Internal Partnership with Business Units

How FQM Assessed and Developed the Business Case • Treasury ROI “Ingredients”

– Business Value Drivers: • Managing Financial Market Risk • Liquidity Planning • Compliance • Operational Efficiency & Effectiveness

– Technology Drivers: • Enablement • Cost • Supplier risk

• Business Case Model

– Revenue – Expense – ROI

Analyze Present & Determine Future • Analyze/Improve/Eliminate Current Processes

− Identify areas of “pain” where is improvement is mandatory − Identify areas where improvement is desired – “best practices” − Identify all resources required for a timely and successful

implementation − Prioritize immediate and near term needs

• Determine if Help (Consulting) Needed − Process Review − Selection Process − Implementation

Treasury as the Financial Advisory Center

Treasury

Tax

Accounting

Procurement /Sales

FP&A

IT

Operations

CFO

Risk Management Committee

Treasurer Feedback Treasury & Risk Management • Emergence of the Financial Risk Management Policy

Committee

• Hedging and Risk management no longer viewed as “win-lose” decisions

• An appreciation for “Margin Conservation” – Interest Rate, FX Rate, Commodity

• The use of more sophisticated instruments that better

match to company’s objectives – Collars – Options

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Treasurer Feedback What is the Market saying and doing 2014 • Move towards a SaaS solution

– Growing understanding that it is different than ASP or Hosted – IT independence – Regulatory compliance – Ease of access and distribution – Scalability – No Excel slippage

• Platform or Portal agnostic yet providing STP

– MMK funds – FX Trading

• Bank Connectivity Solutions

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Questions? Lorne Hamilton Regional Sales Director Reval 416 622 2338 [email protected] Tracy Park Senior Manager, Treasury First Quantum Minerals Ltd 416 953 4014 [email protected]

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