African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — H1 F2013 Earnings Presentation
47 slides from African Rainbow Minerals's earnings presentation, February 2013
Slide 1: Chairman's quote on interim results
“ARM’s significant sales volume growth reduced the impact of the fall in iron ore prices. There were huge improvements in contributions to earnings at Nkomati nickel mine and ARM Coal. ARM continues to deliver on its iron ore, nickel and copper growth projects. The Lubambe project produced copper ah
Slide 2: Overview and strategy
Lubambe Copper Mine Overview and strategy Patrice Motsepe, Executive Chairman
Slide 3: 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 4: Group structure
Group structure 100% 100% 10% 51% 100% 100% 15% Gold: Platinum Ferrous Coal Copper Exploration Harmony PGMs Iron Ore Coal Copper Projects PGMs 41.5% Modikwa 1 50% Khumani 20% Xstrata Coal 40% Lubambe 55% Two Rivers 2 50% Beeshoek South Africa Manganese Ore Nickel, PGMs Manganese Ore Coal Copper Expl
Slide 5: Salient features
Salient features Headline earnings reduced by 30% to R1.41 billion (1H F2012 restated: R2.00 billion) primarily as a result of the fall in iron ore prices and the above inflation unit cost increases at some operations. This reduction was partially offset by improved performances at Nkomati Nickel an
Slide 6: Salient features
Salient features The Nkomati Nickel Mine improved its mining and metallurgical recoveries and has increased production of nickel by 87% and reduced unit costs by 50% to US$5.13/lb. Contribution to headline earnings of R147 million (1H F2012: R75 million loss). The concentrator plant at the Lubambe C
Slide 7: Headline earnings
Headline earnings Headline earnings (R million) 2 500 2 232 1 997 2 000 1 812 1 562 1 454 1 406 1 500 1 260 1 000 454 500 85 - F2009 F2010 F2011 F2012 * F2013 First half (1H) Second half (2H) * The 1H F2012 and 2H F2012 headline earnings have been restated to take into account the early adoption of
Slide 8: Revenue composition
Revenue composition 1H F2012 revenue split 1H F2013 revenue split Nickel Nickel 8% 12% Iron Ore 43% Iron Ore Platinum 35% 21% Platinum 23% Coal 5% Chrome 5% Coal 5% Chrome Manganese Manganese 6% 19% 18% Nickel and platinum’s contribution increases 8
Slide 9: EBITDA margins
EBITDA margins The ARM average EBITDA margin decreased to 32% (1H F2012: 43%) 64% Iron Ore 48% 37% Coal 38% -2% Nickel 31% 30% Platinum 27% 38% Manganese 23% 7% Chrome 4% -30% -10% 10% 30% 50% 70% 1H F2012* 1H F2013 * 1H F2012 was restated to take into account the early adoption of IFRIC 20. 9
Slide 10: ARM strategy
ARM strategy Quality growth continues in Operational ARM’s portfolio efficiencies of commodities Acquisitions and partnerships Africa Entrepreneurial Owner operator Profit focused Partner of choice management World-class Responsible community Employer of choice management team development 10
Slide 11: Update on growth projects
Update on growth projects The Khumani Iron Ore Expansion Mine is at full production one year ahead of schedule. There was significant improvement in the operational performance at Nkomati Nickel Mine. The concentrator plant at the Lubambe Copper Project was commissioned in October 2012, two months a
Slide 12: Growth in iron ore
Growth in iron ore Total iron ore sales (million tonnes) 18 16.0 16.0 16.0 16 14.8 14 12 10.0 10 8 7.4 6 4 2 0 F2011a F2012a F2013e F2014e F2015e 1H F2013 Iron ore sales volumes increased by 10%. Additional overburden stripping to increase (1H F2012 vs 1H F2013) mining flexibility 12
Slide 13: Nkomati Nickel Mine achieves
Nkomati Nickel Mine achieves Nickel produced (thousand tonnes) 25 20.5 20.5 20.5 20 15 14.0 10.1 10 11.3 5 - F2011a F2012a F2013e F2014e F2015e 1H F2013 Improvement in the operational performance at Nickel production increased by 87% and Nkomati Nickel Mine. forecast to achieve steady state this yea
Slide 14: Lubambe Copper Project
Lubambe Copper Project Copper produced (thousand tonnes) 50 50 45.0 45.0 45.0 45 45 40 40 34.6 35 35 30 30 25 25 20 20 15.0 15 15 10 10 5 5 3.2 0 0 F2013e F2014e F2015e F2016e F2017e 1H F2013 The concentrator plant at the Lubambe Copper Project was commissioned in October 2012, two months ahead of s
Slide 15: Operational efficiencies
Operational efficiencies ARM’s objective is to have its operations below the 50th percentile on the global cost curve. Two Rivers Platinum Goedgevonden Coal Khumani Iron Ore Dwarsrivier Nchwaning Manganese Chrome Modikwa Platinum Manganese Smelter Lubambe Copper (2015) Nkomati Nickel (2014) Commodit
Slide 16: Continued growth in existing assets
Continued growth in existing assets Early works capital expenditure to expand the Black Rock manganese mining operations from 3 mtpa to 4 mtpa approved. Feasibility studies are underway to further expand ARM’s iron ore operations to benefit from Transnet’s R300 billion Market Demand Strategy (MDS),
Slide 17: Mergers and Acquisitions
Mergers and Acquisitions Continuous focus on value adding acquisitive growth. ARM’s strong financial status, positions it favourably to pursue value adding acquisitive growth. 17
Slide 18: Safety and sustainability
Safety and sustainability ARM’s Lost Time Injury Frequency Rate (LTIFR) remained steady at 0.41 per 200 000 man hours. The ARM managed operations were fatality free for the reporting period. 18
Slide 19: Outlook
Outlook Commodity markets in China are recovering from the F2012 slowdown. Weak demand fundamentals in the PGM, nickel and chrome markets are expected to continue in the short-term, partly due to uncertainty in the developed markets. The long-term fundamentals of PGMs and nickel remain positive; to
Slide 20: Operational review
PCMZ Concentrator at Nkomati Mine Operational review Mike Schmidt, Chief Executive Officer
Slide 21: Divisional headline earnings
Divisional headline earnings Contribution to headline earnings (R million) six months ended 31 Commodity group December 2012 2011 % change Platinum Group Metals 152 162 (6) Nkomati Nickel and Chrome 147 (75)* - Ferrous Metals 1 061 1 974 (46) Coal 105 (12) - Copper (21) (30) 30 Exploration (36) (54)
Slide 22: Significant improvement in safety record
Significant improvement in safety record Lost Time Injury Frequency Rate (LTIFR) per 200 000 man hours worked 2.50 2.00 1.50 1.00 0.50 0.00 3 month moving average 12 month moving average 22
Slide 23: Significant sales volume increases
Significant sales volume increases 1H F2013 vs. 1H F2012 sales volumes (% change) 129% 92% 21% 10% 7% 7% 3% -5% -44% -70% Dwarsrivier Nickel GGV Iron ore GGV PGMs Ferromanganese Manganese ore Ferrochrome Nkomati chrome chrome ore Eskom coal Export coal conc * * Nkomati chrome spiral plant closed 23
Slide 24: Decrease in commodity prices
Decrease in commodity prices 1H F2013 vs. 1H F2012 realised prices (% change) 20.00% 10.00% 0.00% -10.00% -20.00% -30.00% -40.00% Iron ore Rhodium Chrome Nickel FeMn Palladium Platinum Copper FeCr Export coal Gold Manganese R/$ ($/t) ($/oz) concentrate ($/lb) ($/t) ($/oz) ($/oz) ($/lb) ($/t) ($/t) (
Slide 25: Spot prices recover
Spot prices recover Spot prices on 21 February 2013 vs. 1H F2013 realised prices (% change) 70.00% 60.00% 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% -10.00% -20.00% Export coal Gold Nickel Copper Platinum R/$ FeMn Palladium Rhodium Manganese Chrome Iron ore ($/t) ($/oz) ($/lb) ($/lb) ($/oz) exchange (
Slide 26: Unit cost changes by commodity
Unit cost changes by commodity 1H F2013 vs. 1H F2012 unit production costs (% change) Consumer price inflation at 5.7% Manganese ore Iron ore PGM: Modikwa PGM: Two Rivers Chrome ore PCB Coal GGV Coal Nickel -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% The Nkomati Nickel Mine US Dollar C1 unit cash c
Slide 27: Analysis of costs
Analysis of costs ARM Ferrous ARM Platinum ARM Coal Unit costs increased mainly due to Modikwa experienced excessive Production unit costs at GGV overburden waste stripping, the labour cost increases and Two reduced as a result of increased cessation of cost capitalisation and Rivers took over 1 660
Slide 28: Profit variance analysis
Profit variance analysis Unaudited profit variance analysis – Profit from operations before exceptional items (R million) Factors subject to market conditions Controllable factors 4 500 867 (1 843) 4 000 3 500 3 158 808 (603) 3 000 (317) 2 500 71 (79) 2 061 2 000 1 500 1 000 500 0 1H F2012 Exchange
Slide 29: ARM Platinum growth
ARM Platinum growth PGM and nickel production 450 13 000 409 400 384 11 000 11 258 361 6E PGM thousand ounces 353 350 9 000 Nickel tonnes 318 300 7 000 6 014 250 5 000 4 886 200 3 785 3 000 2 271 150 1 000 1H F2009 1H F2010 1H F2011 1H F2012 1H F2013 PGMs (000 oz) Nickel (tonnes) 29
Slide 30: Significant improvement in Nkomati operational performance
Significant improvement in Nkomati operational performance Monthly tonnes milled (thousand tonnes) Average recoveries (%) 800 80% 675 700 631 75% 72% 72% 600 532 524 541 Tonnes milled % Recovery 70% 67% 500 438 65% 400 65% 62% 300 60% 60% 200 55% 100 0 50% F2011 F2012 1H F2012 2H F2012 1H F2013 Stea
Slide 31: ARM Ferrous
ARM Ferrous Iron ore and manganese ore* sales volumes (million tonnes) 8.0 7.4 7.0 6.8 6.0 5.0 4.5 4.0 4.0 3.5 3.0 2.0 1.5 1.5 1.6 1.5 1.3 1.0 0.0 1H F2009 1H F2010 1H F2011 1H F2012 1H F2013 Iron Ore Manganese ore* * Manganese ore sales exclude intragroup sales 31
Slide 32: ARM Coal
ARM Coal The Goedgevonden Mine produced 4.41 million tonnes saleable in 1H F2013 (1H F2012: 2.8 million tonnes). 47% committed to date on the R8.2 billion Tweefontein Optimisation Project (TOP). The Project is expected to be completed in F2016. PCB and GGV achieved unit cost decreases of 8% and 24%
Slide 33: ARM Copper
ARM Copper The concentrator plant at the Lubambe Copper Project was commissioned in October 2012, two months ahead of schedule. Capital expenditure of $410 million (in July 2010 terms) is within budget. Unit costs at steady state are expected to be $1.45/lb in July 2015 terms. 33
Slide 34: ARM Copper: Extension Area growth
ARM Copper: Extension Area growth Approximately 10 535 metres were drilled during the reporting period with six drill rigs. AMEC initial ore resources statement of 105 million tonnes at 3.66% total copper in-situ with an average reef width of 11.25 metres. Indicated resources 73 million tonnes at 3.
Slide 35: Capital expenditure
Capital expenditure Capital expenditure (R million)* 5 000 4 500 4 321 4 000 3 494 3 400 3 500 2 950 3 000 2 738 2 600 2 500 2 000 1 500 1 000 500 0 F2010a F2011a F2012a F2013e F2014e F2015e ARM Platinum ARM Ferrous ARM Coal ARM Copper *The forecasted capital expenditure in F2014 and F2015 is an est
Slide 36: Transnet's Market Demand Strategy
Transnet’s Market Demand Strategy by 2019 36
Slide 37: Potential future projects
Potential future projects • Iron ore expansion beyond 16 mtpa • Manganese ore expansion to 5 mtpa • Expansion of Modikwa Platinum Mine • Lubambe Copper Extension • Exploration with Rovuma Resources • Thermal coal projects 37
Slide 38: ARM Exploration
ARM Exploration ARM signed an agreement in July 2011 with Rovuma Resources which is a Mozambican exploration company, to explore for PGM, nickel, copper and other base metals. Rovuma Resources has been exploring in Mozambique since 2007. ARM agreed to continue with the second year of exploration (co
Slide 39: Financial position
Financial position EBITDA excluding exceptional items Cash on statement of financial position R million R million 7 000 6 517 6 531 4 000 3 668 3 513 3 564 6 000 3 500 3 039 2 971 5 000 4 484 3 000 3 907 2 500 4 000 2 875 2 000 3 000 1 500 2 000 1 000 1 000 500 - - F2009 F2010 F2011 F2012 1H F2013 F
Slide 40: Questions?
Questions? We do it better 40
Slide 41: Appendix
FaxtM African Rainbow Minerals Appendix We do it better
Slide 42: Net cash / (net debt) position
Net cash / (net debt) position six months ended change 31 December R million 2012 2011 Cash and cash equivalents 2 971 2 825 146 Long term interest borrowings (3 370) (1 835) (1 535) Short term interest borrowings (1 011) (1 227) 216 Total interest bearing borrowings (4 381) (3 062) (1 319) Net cash
Slide 43: Income statement
Income statement six months ended 31 December R million 2012 2011* % change Sales 8 845 8 721 1 Profit from operations (before exceptional items) 2 061 3 158 (35) Income from investments 123 141 (13) Finance costs (108) (93) (16) Income / (loss) from associate 42 (6) - Exceptional items - 2 - Taxati
Slide 44: Cash flow statement
Cash flow statement six months ended 31 December R million 2012 2011* change Cash generated from operations 1 665 2 673 (1 008) Net finance income 35 59 (23) Dividends received 32 38 (6) Dividends paid (1 021) (959) (63) Tax paid (350) (631) 281 361 1 180 (819) Maintenance capital expenditure (778)
Slide 45: Statement of financial position
Statement of financial position six months ended 31 December R million 2012 2011 Non-current assets 26 946 25 198 Property, plant, equipment and other 20 684 17 763 Investments 6 262 7 435 Other - - Current assets 10 163 9 243 Cash and equivalents 2 971 2 825 Other 7 192 6 418 Total assets 37 109 34
Slide 46: Cash flow statement
Cash flow statement Cash flow statement analysis – cash and cash equivalents (R million) 7 000 3 192 (1 527) 6 000 5 000 (1 021) 4 000 (350) (778) 3 227 3 000 (1 272) 934 81 2 486 2 000 1 000 0 F2012 Cash from Working Dividends Taxation Maintenance Expansionary Net Other 1H F2013 operations capital
Slide 47: Operational summary
Operational summary 1H F2013 1H F2012 % change Modikwa PGMs in concentrate Ounces, 6E 176 701 176 490 - Cash cost R/kg, 6E 187 418 157 246 19 Cash operating margin % 20 28 Two Rivers PGMs in concentrate Ounces, 6E 179 513 163 177 10 ARM Platinum Cash cost R/kg, 6E 164 629 152 200 8 (100% basis) Cash
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