Merafe Resources Limited · JSE:MRF
Merafe Resources — FY2008 Earnings Presentation
34 slides from Merafe Resources's earnings presentation, 2009
Slide 1: Annual Results Presentation for the year ended 31 December 2008
Annual Results Presentation for the year ended 31 December 2008
Slide 2: Legal Notice / Disclaimer
2 Legal Notice / Disclaimer This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Merafe Reso
Slide 3: Contents
3 Contents 1. Operational review 2. Market review 3. Merafe Coal 4. Financial performance 5. Shareholding 6. Prospects
Slide 4: Operational review
MERAFE "| Operational review
Slide 5: Operational review
5 Operational review • During the first half of 2008, demand for ferrochrome increased steadily driven by high stainless steel production •The second half of the year was characterised by a significant fall in demand for ferrochrome particularly in the fourth quarter of 2008 • As a result, the Ventu
Slide 6: Operational review (cont.)
6 Operational review (cont.) • The Premus technology at the three operating furnaces continues to provide low-silicon production which is a key element of competitiveness in the Chinese market • Lion Ferrochrome and the Bokamoso pelletising and sintering plant, resulted in an improvement of 13% in p
Slide 7: Market review
MERAFE "| Market review
Slide 8: What Merafe said in Q2 and Q3 2008
8 What Merafe said in Q2 and Q3 2008 • Slow down in global stainless steel production due to: traditional northern hemisphere summer shutdowns stockists/buyers expecting nickel prices to come down resulting in destocking • Specific to China (in addition to the above) were stainless steel cut backs d
Slide 9: What happened in Q4 2008?
9 What happened in Q4 2008? • Nickel prices continued to fall (currently $10,000/t) • Global economic downturn • Cut backs in stainless steel production • Chrome ore trade dried up • Surplus stocks of ferrochrome and chrome ore at plants, SA ports and Chinese ports • Marginal producers sold at any p
Slide 10: Regional stainless steel demand - 2008
10 Regional stainless steel demand - 2008 28 20 26 18 24 22 in Mill t 16 20 Growth Rate in % 1999 - 2008 14 18 China / Hong Kong Other America 16 Other Europe 12 14 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Others 10 India 8 Average Growth Rate: 6.0 % 6 4 Other Asia 2 Japan EU 0 NAFTA -2 -4
Slide 11: Crude stainless steel production
11 Crude stainless steel production 2007 2008 Change 2009 Change in ‘000 t in ‘000 t 08 / 07 in ‘000 t 09 / 08 in % in % USA 2,171 1,925 -11.3 1,615 -16.1 EU 8,109 7,822 -3.5 7,429 -5.0 Japan 4,024 3,725 -7,4 3,680 -1.2 China 7,610 7,196 -5.4 7,600 5.6 S. Korea / Taiwan / India 5,307 4,708 -11.3 4,4
Slide 12: Regional ferrochrome demand - 2008
12 Regional ferrochrome demand - 2008 45 8.0 Average Annual Growth Rate, in % 40 7.5 7.0 35 6.5 in Mill t China 6.0 30 5.5 25 5.0 4.5 20 4.0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 South Africa 15 India Brazil Average 10 Growth Rate: 6.4 Others South Korea 5 Japan NAFTA EU 0 0 20 40 60 80
Slide 13: Charge/HC FeCr production
13 Charge/HC FeCr production 2007 2008 Change 2009 Change in ‘000 t in ‘000 t 08 / 07 in ‘000 t 09 / 08 in % in % USA 176 171 -3.0 160 -6.4 EU 614 642 4.6 948 47.7 Kazakhstan 952 970 1.9 970 0 Japan 4 0 -100.0 0 0 China 1,232 970 -21.3 800 -17.5 India 928 840 -9.4 1,000 -19 South Africa 3,561 3,199
Slide 14: Charge Chrome prices for the past two years
14 Charge Chrome prices for the past two years European benchmark ferrochrome prices 2.5 2.05 1.92 1.85 2 US $/lb 1.5 1.21 1 1 1 0.75 0.82 0.79 0.5 0 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08 Q1'09 Average benchmark price for 2008 was US$1.76
Slide 15: Merafe Coal
MERAFE "3 Merafe Coal
Slide 16: Merafe Coal
16 Merafe Coal • Merafe Coal continues to look for growth opportunities in the coal mining sector • New Order Prospecting Rights in respect of Schoongezight and Bankfontein granted and applications made for New Order Mining Rights • These properties have total target coal resources of approximately
Slide 17: Financial performance
MERAFE RESOURCES *8 Financial performance
Slide 18: Financial highlights for the year ended 31 December 2008
18 Financial highlights for the year ended 31 December 2008 Revenue up 68% to R2.8 billion EBITDA up 247% to R1.6 billion Net profit after tax up 328% to R1 billion Earnings per share up 320% to 42 cents Debt reduced by R458 million Cash balance of R540 million
Slide 19: Abridged consolidated statement of comprehensive income
19 Abridged consolidated statement of comprehensive income Year ended Year ended 31 December 2008 31 December 2007 Audited Audited R’000 R’000 Revenue 2,781,304 1,655,803 EBITDA 1,611,923 465,140 Depreciation (77,918) (46,239) Net financing costs (63,983) (54,394) Profit before taxation 1,470,022 36
Slide 20: Abridged consolidated statement of financial position
20 Abridged consolidated statement of financial position As at As at 31 December 2008 31 December 2007 Audited Audited R’000 R’000 Assets Non-current assets 1,861,185 1,800,793 Property, plant and equipment 1,861,185 1,800,793 Current assets 1,893,165 785,409 Inventories 1,067,153 496,877 Trade and
Slide 21: Abridged consolidated statement of financial position (cont.)
21 Abridged consolidated statement of financial position (cont.) As at As at 31 December 2008 31 December 2007 Audited Audited R’000 R’000 Equity and liabilities Capital and reserves 2,479,338 1,438,526 I Issued share capital 24,593 24,494 Share premium 1,244,072 1,238,643 Equity-settled share-based
Slide 22: Abridged consolidated statement of financial position (cont.)
22 Abridged consolidated statement of financial position (cont.) As at As at 31 December 2008 31 December 2007 Audited Audited R’000 R’000 Current liabilities 429,876 629,582 I Loans and borrowings 1,200 86,305 Financial liability 11,466 - Trade and other payables 331,364 350,879 Current tax liabili
Slide 23: Abridged consolidated statement of cash flows
23 Abridged consolidated statement of cash flows Year ended Year ended 31 December 2008 31 December 2007 Audited Audited R’000 R’000 Net profit for the year before taxation 1,470,022 364,507 Interest paid 55,579 55,075 Interest received (3,062) (681) Depreciation 77,918 46,239 Adjusted for non-cash
Slide 24: Abridged consolidated statement of cash flows (cont.)
24 Abridged consolidated statement of cash flows (cont.) Year ended Year ended 31 December 2008 31 December 2007 Audited Audited R’000 R’000 Cash flows from investing activities (138,262) (380,998) Acquisition of property, plant and equipment - expansionary (13,658) (199,148) Acquisition of property
Slide 25: Dividend policy
25 Dividend policy • Merafe has adopted a hybrid dividend policy that has features of: a stable dividend policy; and a residual dividend policy •The intention is to pay a stable dividend annually •Periodically the directors will consider special dividends and/or share buy-backs, dependant on: the Co
Slide 26: Gearing
26 Gearing R’m Opening balance 1 January 2008 808 Preference shares 120 ABSA (Lion Ferrochrome, Wonderkop & Bokamoso) 350 Xstrata 147 Overdraft 191 Debt repaid during the year (458) Closing balance 31 December 2008 350** Cash balance 31 December 2008 540 **Due to be repaid in one instalment on 31 De
Slide 27: Production costs
27 Production costs Cost pressures in 2008: • high oil prices increased costs of: transporting chrome ore to smelters internal transport road transport and shipping costs of ferrochrome to customers • electricity costs increased by 27% • double digit increases in labour costs • 71% increase in the p
Slide 28: Shareholding
MERAFE RESOURCES "| Shareholding
Slide 29: Shareholder analysis
29 Shareholder analysis Major shareholders at end of December 2008 SA (42%) Royal Bafokeng (29%) Offshore (7%) IDC (22%)
Slide 30: Prospects
MERAFE "S Prospects
Slide 31: Prospects
31 Prospects • Current demand for ferrochrome in Europe, North America and Japan remains low • Demand for ferrochrome and chrome ore in China has picked-up • Chinese demand, however, appears to be coming from restocking • No decision has been taken to restart any of the Venture’s idled capacity • Ex
Slide 32: Prospects (cont.)
32 Prospects (cont.) • Merafe’s strong cash position ensures it is well placed to weather the current economic downturn • Recovery in ferrochrome demand is dependant on the recovery of the global economy •Outlook for ferrochrome remains robust in the medium to long term supported by urbanisation and
Slide 33: Current pain could lead to long-term gain
33 Current pain could lead to long-term gain Phase I: Phase II: Phase III: Phase IV: G. R.: - 5.0% G. R.: - 1.9% G. R.: - 1.3% G. R.: 4.8% 3.50 Realistic Price 3.00 Forecast (in 2007 US$) 2.50 in US$ / lb 2.00 1.50 Nominal Prices 1.00 0.50 0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020
Slide 34: www.meraferesources.co.za
www.meraferesources.co.za