African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — H1 F2012 Earnings Presentation
48 slides from African Rainbow Minerals's earnings presentation, February 2012
Slide 1: Executive Chairman quote on sales volume increases
“ARM achieved sales volume increases in iron ore, manganese ore, manganese alloys, PGMs, nickel, chrome concentrate and Eskom thermal coal. We are making substantial progress with our growth projects and are excited about Government’s stated commitment to allocate huge resources to upgrade rail, por
Slide 2: Disclaimer
Disclaimer Certain statements in this report constitute forward looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, pla
Slide 3: Group structure
Group structure (1) Assets held through ARM Mining Consortium’s effective interest of 41.5%, the balance held by local communities. (2) ARM’s shareholding in Two Rivers will reduce to 51% once the transfer of Kalkfontein portions 4, 5 and 6 and Tweefontein prospecting rights has been effected. (3) P
Slide 4: Overview and strategy
Overview and strategy Patrice Motsepe, Executive Chairman Loading at the Khumani Iron Ore pit 4
Slide 5: Salient features
Salient features Headline earnings increased 24% to R1.94 billion (1H F2011 R1.56 billion). Headline earnings per share were 912 cents per share (1H F2011: 734 cents per share). Cash generated from operations increased by 25% to R2.56 billion (1H F2011 R2.05 billion). 5
Slide 6: Salient features
Salient features Increased sales volumes for iron ore, manganese ore, manganese alloys, PGMs, nickel, chrome concentrate and Eskom thermal coal. Robust financial position maintained, with net cash (excluding partner loans) of R1.66 billion. Government’s commitment to substantially invest in rail, po
Slide 7: Earnings profile
Earnings profile Headline earnings (R million) 3 500 3 272 3 000 2 500 2 232 2 000 1 944 1 757 1 562 1 500 1 260 1 000 741 454 500 85 0 F2008 F2009 F2010 F2011 F2012 First half (1H) Second half (2H) 7
Slide 8: Significant increase in iron ore revenue contribution
Significant increase in iron ore revenue contribution 1H F2011 Revenue 1H F2012 Revenue Nickel Nickel 11% 8% Iron Ore Iron Ore 30% 43% Platinum 21% Platinum 24% Coal 5% Chrome Coal 5% 4% Chrome Manganese 7% 24% Manganese 18% 8
Slide 9: EBITDA margins
EBITDA margins The ARM average EBITDA margin decreased to 42% (1H F2011: 46%) 67.6% Iron Ore 64.1% 48.2% Manganese 37.5% 40.2% Coal 35.3% 31.7% Platinum 30.2% -4.5% Chrome 7.3% 40.1% Nickel -16.0% -30% -10% 10% 30% 50% 70% 1H F2011 1H F2012 9
Slide 10: Strategy
strategy Entrepreneurial Owner operator Profit focused Partner of choice management World-class management team 10
Slide 11: Strong focus on cost control
Strong focus on cost control ARM target for operations on the respective global cost curve by 2012 (ARM estimate, benchmarked at steady-state/normalised production volumes) 11
Slide 12: ARM growth
ARM growth Volumes doubled as 2 X 2010 growth 2005 - 2010 strategy successfully completed. Aggressive growth continues with growth 2011 - 2014 projects in iron ore, nickel, coal and copper. Increased rail, port and electricity capacity > 2015 in South Africa will support and enhance ARM’s aggressive
Slide 13: Iron ore growth profile
Iron ore growth profile Iron ore sales volumes (on 100% basis – million tonnes) 18 16.0 16 15.1 14 2 X 2010 12.4 growth strategy 12 9.8 10.0 10 8 5.8 6 4 2 0 F2005a F2010a F2011a F2012e F2013e F2014e The “a” included in the x-axis refers to actual and the “e” to estimated 13
Slide 14: Nickel growth profile
Nickel growth profile Nickel production volumes (on 100% basis – thousand tonnes) 25 20.5 20 17.0 2 X 2010 15.3 15 growth strategy 9.7 10.1 10 5.3 5 0 F2005a F2010a F2011a F2012e F2013e F2014e The “a” included in the x-axis refers to actual and the “e” to estimated 14
Slide 15: Full production in coal
Full production in coal Goedgevonden thermal coal sales volumes (on 100% basis - million tonnes) 8 7.0 7.0 7.0 7 6 5.4 5 2 X 2010 growth strategy 4 3 2.4 2 1 0.86 0 F2006a F2010a F2011a F2012e F2013e F2014e Domestic thermal coal Export thermal coal The “a” included in the x-axis refers to actual and
Slide 16: Aggressive growth in copper
Aggressive growth in copper Konkola North copper sales volumes (on 100% basis – thousand tonnes) 60 50 48.3 48.9 45.6 40.6 40 30 20 17.5 10 0 F2013e F2014e F2015e F2016e F2017e The “e” included in the x-axis refers to estimated 16
Slide 17: Significant investment in growth
Significant investment in growth ARM’s Capital Expenditure F2005 – F2011 F2012 – F2014 R16.9 bn R9.9 bn F2005 – F2014 Growth projects + Investment in R26.9 bn completed growth Partners’ Capital Expenditure F2005 – F2011 F2012 – F2014 F2005 – F2014 R13.8 bn + R8.9 bn R22.7 bn Projected total investme
Slide 18: Further growth
Further growth Potential Future Projects • Iron ore expansion beyond 16mtpa • Manganese ore expansion to 6mtpa • Expansion of Modikwa Platinum Mine to 500 000 PGM ounces per annum • Two Rivers Merensky Project • Konkola North Area A • Kalplats Platinum project • Exploration with Rovuma Resources • T
Slide 19: Safety and sustainability
Safety and sustainability Two fatalities occurred at the Two Rivers Platinum Mine one on 13 December 2011 and another on 21 January 2012. A double fatality occurred at Modikwa Platinum Mine on 27 January 2012. The ARM Board of Directors and ARM management team extends their deepest condolences to th
Slide 20: Safety and sustainability
Safety and sustainability Modikwa Platinum Mine achieved 5 years and 8 months fatality-free at the end of December 2011, Two Rivers achieved 4 years and two months fatality-free at the end of December 2011. Khumani Iron Ore Mine completed two million fatality-free shifts Cato Ridge Works completed o
Slide 21: Corporate activity
Corporate activity The Participating Coal Business (PCB) completed the sale of the Spitzkop and Tselentis Collieries in Mpumalanga. Zambia Consolidated Mines Investment Holdings plc (ZCCM) exercised its option for 20% participation in the Konkola North Copper Project, contributing towards funding pr
Slide 22: Outlook
Outlook Uncertainty in global markets persists driven by European sovereign debt issues, delayed recovery in the US economy and concerns about a slowdown in China. Volatility in commodity and financial markets is expected to continue in the short-term. We are confident about the medium-to long-term
Slide 23: Operational review
Operational review André Wilkens, Chief Executive Officer Transportation of mill shells for the Konkola North Copper Project 23
Slide 24: Safety
0.0 0.5 1.5 2.0 2.5 1.0 Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 3MMA Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 12MMA Jul-10 Oct-10 Lost Time Injury Frequency Rate (LTIFR) measured per 200 000 man hours worked Jan-11 Apr-11 Jul-11 Oct-11 Safety 24
Slide 25: Headline earnings by division
Headline earnings by division Contribution to headline earnings Commodity group six months ended 31 December R million 2011 2010 % change Platinum Group Metals 162 161 1 Nkomati Nickel and Chrome (128) 134 (196) Ferrous Metals 1 974 1 256 57 Coal (12) (54) 78 Copper (30) (64) 53 Exploration (54) - C
Slide 26: Significant increases in sales volumes
Significant increases in sales volumes 1H F2012 vs. 1H F2011 sales volumes* percentage change 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% -20% Export coal FeCr Chrome ore PGMs Manganese FeMn Nickel Eskom coal Iron ore ore * Sales volumes on 100% basis 26
Slide 27: Volatility in commodity prices
Volatility in commodity prices 1H F2012 vs. 1H F2011 average realised commodity price percentage change 40% 30% 20% 10% 0% -10% -20% -30% -40% Chrome Rhodium Manganese FeMn Nickel Platinum Copper R/$ Iron ore Palladium Gold Export conc ($/oz) ore ($/t) ($/lb) ($/oz) $/lb) exchange ($/t) ($/oz) ($/oz
Slide 28: Spot commodity prices have been subdued
Spot commodity prices have been subdued Spot prices ( as at 14 February 2012) vs. 1H F2012 average realised prices percentage change 40% 30% 20% 10% 0% -10% -20% -30% FeCr Iron ore Rhodium Export coal Platinum Palladium Exchange Gold Nickel Copper Manganese FeMn ($/t) ($/t) ($/oz) ($/t) ($/oz) ($/oz
Slide 29: Profit variance analysis
Profit variance analysis Profit from operations before exceptional items (R million) 5 000 619 (18) (154) ( 1 433) 4 500 1 697 (150) 4 000 3 500 48 (59) 3 084 3 000 2 534 2 500 2 000 1 500 1 000 500 0 1H F2011 Volume Commodity Exchange Rand local Mark-to- Cash cost Non-cash Corporate 1H F2012 dollar
Slide 30: Cash from operations
Cash from operations Net cash inflow/ (outflow) from operating activities (R million attributable) * Iron Ore 773 1 255 Manganese 485 286 Chrome ((110) 105) Coal 89 182 Platinum 390 441 Nickel 269 ( 27) Copper (108)( 49) Exploration - ( 54) ( 200) 0 200 400 600 800 1 000 1 200 1 400 1H F2011 1H F201
Slide 31: Unit cost changes and EBITDA margins
Unit cost changes and EBITDA margins % unit cost change 1H F2012 Commodity Group Unit cost metric 1H F2012 vs. 1H F2011 EBITDA (decrease)/increase margin (%) Manganese alloys R/tonne (5.3) 41.0 Chrome ore R/tonne (2.8) 38.4 Manganese ore R/tonne 4.4 37.3 Platinum R/PGM ounce 7.5 30.2 Iron ore * R/to
Slide 32: On-mine cash costs
On-mine cash costs ARM Ferrous ARM Platinum ARM Coal Two separate industrial actions Accelerated waste stripping to open Nkomati Mine unit costs increased relating to wages and ESOPs up the ore reserves at Khumani Mine due to lower than expected mill head negatively impacted production and contribut
Slide 33: Aggressive growth continues
Aggressive growth continues The Khumani Iron Ore Expansion Project from 10 mtpa to 16 mtpa has been handed over to the mine and is currently ramping up production well ahead of schedule. The Nkomati Nickel Large-Scale Expansion Project is ramping up in accordance to the revised plan and showed notab
Slide 34: The Khumani Iron Ore Mine
The Khumani Iron Ore Mine Total project cost R6.7 billion approved - project is currently well within budget Capital expenditure to date R5.2 billion Full production 2013 financial year - project is currently ahead of schedule Steady state 14 mtpa export iron ore; 2 mtpa local iron ore Position on c
Slide 35: Logistics
Logistics Saldanha export channel Current capacity: 60 mtpa Potential expansion capacity: 80-100 mtpa 35
Slide 36: Nkomati Nickel is ramping up
Nkomati Nickel is ramping up Capital expenditure to date R3.5 billion, project completed under budget by R170 million Stage Ramp up – head grade is currently low however plant recoveries are improving Full production 2014 financial year Steady state 20 500t nickel Position on cost curve 45th percent
Slide 37: Update on Nkomati ramp-up
Update on Nkomati ramp-up Nkomati Nickel concentrator recoveries (%) 70% 65% 62.5% 60% 56.4% 55% 50% 45% 2H F2011 1H F2012 Jun 11 Jul 11 Aug 11 Sep 11 Oct 11 Nov 11 Dec 11 Steady state target recovery at 70% 37
Slide 38: Goedgevonden Coal Mine is at full production
Goedgevonden Coal Mine is at full production Capital expenditure to date Project completed, underspent by R51 million of the revised approved R3.6 billion Full production Achieved in the 2011 calendar year Steady state volumes 3.2 mtpa export thermal coal; 3.8 mtpa Eskom thermal coal Position on cos
Slide 39: Konkola North Copper Project is progressing well
Konkola North Copper Project is progressing well Total project cost $399 million (in July 2010 terms) of which 87% has already been contracted for. Plant commissioning December 2012 Full production 45 000 tonnes copper per annum – full production expected in 2015 financial year Position on cost curv
Slide 40: Mill and Float section at Konkola North Copper Project
Mill and Float section at Konkola North Copper Project 40
Slide 41: Aggressive growth continues
Aggressive growth continues Attributable capital expenditure by division (R million)* 4 500 4 100 4 000 3 500 3 333 3 404 3 400 3 000 2 738 2 500 2 400 2 000 1 500 1 000 500 0 F2009a F2010a F2011a F2012e F2013e F2014e ARM Copper ARM Coal ARM Ferrous ARM Platinum *The forecasted capital expenditure i
Slide 42: A robust growth pipeline
FaxrtM African Rainbow Minerals A robust growth pipeline Exploration to Project development Steady state Declining feasibilty and ramp up (>15 years life-of-mine) operations Beeshoek Iron Ore Thermal coal mines Manganese and chrome smelters Manganese ore mines Two Rivers Platinum Mine Modikwa Platin
Slide 43: Robust financial position
Robust financial position EBITDA excluding exceptional items Cash on statement of financial position R million R million 4000 3 668 8000 7 229 3 513 3500 7000 6 434 3 039 3000 2 660 2 825 6000 5000 4 484 2500 4000 3 907 3 635 2000 3000 1500 2000 1000 1000 500 0 0 F2008 F2009 F2010 F2011 1H F2012 F20
Slide 44: Sufficient capacity to fund growth
Sufficient capacity to fund growth Net cash/ (Net debt) calculation Per statement of financial position December 2011 December 2010 Cash and cash equivalents 2 825 2 301 Long-term interest bearing borrowings (1 835) Short-term interest bearing borrowings (1 227) Total interest bearing borrowings (3
Slide 45: Summarised income statement
Summarised income statement six months ended 31 December R million 2011 2010 % change Sales 8 721 6 714 30 Profit from operations (before exceptional items) 3 084 2 534 22 Income from investments 141 108 31 Finance costs (93) (99) (6) (Loss)/income from associate (6) (60) (90) Exceptional items 2 (4
Slide 46: Summarised cash flow
Summarised cash flow six months ended 31 December R million 2011 2010 % change Cash generated from operations 2 561 2 049 25 Net finance income 59 31 90 Dividends received 38 32 19 Dividends paid (959) (425) 126 Tax paid (631) (486) 30 1 068 1 201 (11) Capital expenditure (1 868) (1 632) 14 Investme
Slide 47: Summarised statement of financial position
Summarised statement of financial position six months ended 31 December R million 2011 2010 Non-current assets 25 024 21 649 Property, plant, equipment and other 17 589 14 928 Investments 7 435 6 721 Current assets 9 266 7 864 Other 6 441 5 563 Cash and equivalents 2 825 2 301 Total assets 34 290 29
Slide 48: Questions?
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