African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — FY2016 Earnings Presentation
32 slides from African Rainbow Minerals's earnings presentation, Oct 13, 2016
Slide 1: Executive Chairman statement on cost reduction and dividend
“All operations implemented cost reduction and efficiency improvement initiatives which have yielded excellent results. Capital expenditure was reduced and loss making operations are being restructured. ARM declares a tenth annual consecutive dividend of 225 cents per share.” Patrice Motsepe Executi
Slide 2: Overview and strategy
Khumani Iron Ore 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% 14.6% Gold: Platinum Ferrous3 Coal Copper Strategic Harmony Services and Exploration PGMs Iron Ore Coal Copper PGMs 41.5% Modikwa1 50% Khumani 20% Participating Coal 40% Lubambe and 51% Two Rivers2 50% Beeshoek Business (PCB) Lubambe Extension Manganese Or
Slide 5: Salient features
Salient features Headline earnings decreased by 40% to R1 051 million (F2015: R1 744 million). Headline earnings per share were 494 cents compared to 803 cents in the previous corresponding financial year. ARM declares a tenth annual consecutive dividend of 225 cents per share (F2015: 350 cents per
Slide 6: Salient features
Salient features As part of the review of Lubambe Mine, all options are currently being considered to maximise value for ARM. All operations implemented cost reduction initiatives which have yielded excellent results. The iron ore, manganese ore, Modikwa, Nkomati, Lubambe and PCB operations all achi
Slide 7: Salient features
Salient features Attributable segmental capital expenditure reduced by R974 million to R2 352 million (F2015: R3 326 million). ARM and Impala Platinum Holdings Limited reached an agreement to increase ARM’s shareholding in Two Rivers Mine from 51% to 54%. Completion of the agreement is awaiting a Se
Slide 8: Safety
Safety ARM is committed to maintaining a safe and healthy work environment for all its employees. There were no fatalities in the financial year under review. ARM achieved its lowest Lost Time Injury Frequency Rate (LTIFR) of 0.32 per 200 000 man- hours (F2015: 0.35 per 200 000 man-hours). 8
Slide 9: Annual headline earnings
Annual headline earnings Headline earnings (R million) 4 500 4 108 4 000 3 737 3 374 3 451 3 500 3 000 2 500 2 000 1 714 1 744 1 500 1 051 1 000 500 0 F2010 F2011 F2012 F2013 F2014 F2015 F2016 9
Slide 10: Six-monthly headline earnings
Six-monthly headline earnings Headline earnings (R million) 2 500 2 331 2 341 1 997 2 000 1 812 1 767 1 562 1 500 1 454 1 406 1 026 1 000 718 507 544 500 0 F2011 F2012 F2013 F2014 F2015 F2016 First half (1H) Second half (2H) 10
Slide 11: Headline earnings and dividends per share
Headline earnings and dividends per share Headline earnings and dividends per share (cents) 2 000 1 900 1 800 1 735 1 585 1 615 1 600 1 400 1 200 1 000 803 800 600 600 510 494 450 475 400 350 225 200 0 F2011 F2012 F2013 F2014 F2015 F2016 Headline earnings per share Dividends per share 11
Slide 12: EBITDA margins
EBITDA margins Segmental EBITDA margins by commodity/ division (%) 37% Iron ore 37% 40% Coal (GGV) 26% 26% PGMs 22% 5% Manganese 16% 20% Chrome* 9% 15% Nickel -5% -16% Copper -40% -50% -30% -10% 10% 30% 50% 70% F2015 F2016 * Chrome includes the Dwarsrivier Chrome Mine which is reflected as a discont
Slide 13: ARM strategy
ARM strategy Quality growth continues in Operational ARM’s existing efficiencies portfolio of commodities Acquisitions and Africa partnerships Entrepreneurial Profit and cash flow Owner operator Partner of choice management focused World-class Partnering with communities, workers Employer of choice
Slide 14: Operational efficiencies
Operational efficiencies ARM’s objective is to ensure that all operations are below the 50th percentile Two Rivers Platinum Lubambe Copper Goedgevonden Coal PCB Coal Operations Cato Ridge Ferromanganese * Manganese Ore Nkomati Nickel Modikwa Khumani Iron Ore Platinum Beeshoek Iron Ore Commodity Unit
Slide 15: Operational review
Two Rivers Platinum Mine Operational review Mike Schmidt, Chief Executive Officer
Slide 16: Headline earnings/(loss) by operation/division
Headline earnings/ (loss) by operation/ division 12 months ended R million 2016 2015 % change ARM Platinum (10) 405 (102) Two Rivers Mine 318 319 - Modikwa Mine (84) (64) (31) Nkomati Mine (244) 150 > (200) ARM Ferrous 1 441 1 588 (9) Iron ore division 1 215 1 248 (3) Manganese division 198 289 (31)
Slide 17: Contribution of commodities in our diversified portfolio
Contribution of commodities in our diversified portfolio Segmental EBITDA split by commodity (%) 100% 3% 5% 6% 4% 8% 12% 5% 20% 14% 11% 80% 12% 13% 60% 57% 44% 55% 59% 56% 71% 40% 8% 10% 20% 5% 8% 0% 24% 29% 17% 16% 19% 13% 0% -6% -20% F2011 F2012 F2013 F2014 F2015 F2016 Copper Coal (GGV) Chrome Man
Slide 18: Segmental profit variance analysis
Segmental profit variance analysis Unaudited profit variance analysis – Profit from operations before special items (R million) Factors subject to market Factors subject to management’s control conditions 7 000 3 650 (4 806) Increase 6 000 Decrease 5 000 4 000 3 011 3 000 251 (148) 76 (2) 2 032 2 00
Slide 19: Changes in sales volumes
Changes in sales volumes F2016 versus F2015 sales volume changes (%) Increase Decrease 17% 18% 13% 10% 7% 5% -1% -10% -19% -22% -28% Nkomati Manganese Copper Eskom Nickel Iron Dwarsrivier PGMs Manganese Export Two Rivers chrome alloys coal ore chrome ore ore * coal chrome concentrate concentrate *Ex
Slide 20: Changes in average realised US Dollar prices and exchange rate
Changes in average realised US Dollar prices and average exchange rate F2016 versus F2015 average realised US Dollar prices and average exchange rate changes (%) 27% Increase Decrease -3% -20% -24% -23% -25% -28% -32% -31% -40% -39% Rhodium Nickel Chrome Export Palladium Export Platinum Export Coppe
Slide 21: Changes in average realised Rand prices
Changes in average realised Rand prices F2016 versus F2015 average realised Rand prices changes (%) Increase Decrease 3% -2% -3% -6% -8% -13% -14% -22% -24% Rhodium Nickel Chrome Manganese Palladium Export Platinum Export iron High carbon (R/oz) (R/lb) concentrate ore (R/oz) coal (R/oz) ore FeMn (R/
Slide 22: Unit cost changes by commodity
Unit cost changes by commodity F2016 versus F2015 on-mine unit production costs per tonne (%) Increase Copper * -14% Decrease Iron ore -8% Manganese ore -6% Inflation (CPI) at 6% Coal: GGV and PCB -6% Nickel 0% PGM: Modikwa and Two Rivers 4% Manganese alloys 9% -20% -15% -10% -5% 0% 5% 10% 15% 20% *
Slide 23: ARM Ferrous: Iron ore
ARM Ferrous: Iron ore Iron ore operational performance - 100% basis Record iron ore sales volumes of 17 million % tonnes were achieved. F2016 F2015 change Export sales 000 14 103 13 659 3 volumes tonnes Local sales 000 2 905 2 526 15 volumes tonnes Beeshoek life-of-mine strip ratio was reduced from
Slide 24: ARM Ferrous: Manganese ore
ARM Ferrous: Manganese ore Manganese ore operational performance -100% basis On-mine unit production costs were reduced by 6% compared to F2015. % F2016 F2015 change Export sales 000 3 001 2 667 13 volumes tonnes Local sales 000 89 60 48 volumes* tonnes Change in unit % (6) 17 High grade production
Slide 25: ARM Ferrous: Manganese alloys
ARM Ferrous: Manganese alloys Manganese alloys operational performance (100% basis) Manganese alloy sales volumes were 19% lower due to an oversupply in the global F2016 F2015 % ferromanganese market. change 000 Sales volumes 175 223 (22) tonnes Change in unit % 9 1 production costs At the Cato Ridg
Slide 26: ARM Platinum: PGM
ARM Platinum: PGM PGM operational performance (100% basis) Two Rivers Mine achieved record production volumes of 400 722 6E PGM % F2016 F2015 change ounces. 6E PGM Production 851 924 776 996 10 ounces Modikwa cash cost R/oz 6E 8 244 8 481 (3) Two Rivers cash cost R/oz 6E 5 624 5 365 5 Modikwa Mine r
Slide 27: ARM Platinum: Nickel
ARM Platinum: Nickel Nickel C1 cash costs net of by-products The nickel price was 22% lower than F2015 in Rand terms. F2016 F2015 % change On-mine cash cost US$/lb 4.49 5.97 (25) Off-mine cash cost US$/lb 2.79 2.48 13 By-product credits US$/lb (3.11) (3.60) 14 The high-cost underground mine was plac
Slide 28: ARM Coal: GGV and PCB
ARM Coal: GGV and PCB GGV and PCB operational performance (100% basis) The decline in average Rand realised export coal prices (especially in the second half of % F2016) and higher interest paid impacted F2016 F2015 change negatively on the ARM Coal results. Total export sales Mt 18.67 15.89 17 volu
Slide 29: ARM Copper
ARM Copper Lubambe Mine operational performance (100% basis) Production volumes at Lubambe Mine F2016 F2015 % change decreased by 19% as part of the revised mine plan to 80 000 tonnes per month. Milled tonnes 000t 1 277 1 650 (23) Mill head grade % Cu 2.01 1.93 Concentrator recovery % 81.5 81.1 Copp
Slide 30: Net debt to equity ratio
Net debt to equity ratio R million F2016 F2015 1H F2016 Cash and cash equivalents 1 316 * 2 257 1 444 Total borrowings (5 551) (3 882) (4 124) Long-term borrowings (4 171) (2 511) (2 767) Short-term borrowings (1 380) (1 371) (1 357) Net debt (4 235) (1 625) (2 680) Net debt to equity ratio 17.2% 6.
Slide 31: Capital allocation: segmental analysis
Capital allocation: segmental analysis Capital expenditure (R million)* 4 000 3 489 3 500 3 326 3 000 2 918 2 650 2 500 2 352 2 250 2 100 2 000 1 500 1 000 500 0 F2013a F2014a F2015a F2016a F2017e ** F2018e ** F2019e ** ARM Platinum ARM Ferrous ARM Coal ARM Copper * Capital expenditure includes (i)
Slide 32: Thank you
We do it better FaxtM African Rainbow Minerals ES ES ES Thank you 32
African Rainbow Minerals — FY2016 Earnings Presentation on 6ix