African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — FY2013 Earnings Presentation
49 slides from African Rainbow Minerals's earnings presentation, Dec 15, 2013
Slide 1: Headline earnings increased by 8%
ARM’s headline earnings increased by 8% mainly as a result of improved performances at Nkomati Nickel mine, the platinum mines and Goedgevonden Coal mine. The dividend increased from R4.75 to R5.10 per share Patrice Motsepe Executive Chairman 1
Slide 2: Overview and strategy
Concentrator at Nkomati Mine Overview and strategy Patrice Motsepe, Executive Chairman 2
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 PGMs 41.5% Modikwa 1 50% Khumani 20% GlencoreXstrata Coal 40% Lubambe 55% Two Rivers 2 50% Beeshoek South Africa Manganese Ore Nickel, PGMs & Chrome Manganese Ore Coal Cop
Slide 5: Salient features
Salient features Headline earnings increased 8% to R3.74 billion (F2012: R3.45 billion). The headline earnings per share were 1 735 cents compared to 1 615 cents in F2012. ARM declared an increased dividend of 510 cents per share, compared to the F2012 dividend of 475 cents per share. ARM Platinum c
Slide 6: Salient features
Salient features Basic earnings of R1.6 billion were negatively impacted by an exceptional net R2.0 billion after tax unrealised mark-to-market impairment of the Harmony investment in terms of ARM’s accounting policy. Increased sales volumes were achieved in nickel, Platinum Group Metals (PGM), iron
Slide 7: Growth projects deliver
Growth projects deliver The iron ore mines have ramped up to steady state production. The Nkomati Nickel Mine achieved a significant turnaround increasing production by 66% to 23 220 tonnes of nickel and reducing costs by 42% to US$ 4.98/lb. The Lubambe Copper Mine commissioned its concentrator plan
Slide 8: Safety and sustainability
Safety and sustainability ARM is proud to declare that in F2013 no fatalities occurred at any of the mines which ARM manages. ARM’s Lost Time Injury Frequency Rate (LTIFR) was 0.50 (per 200 000 man hours) compared to 0.40 in F2012. 8
Slide 9: Safety achievements
Safety achievements Nkomati Mine achieved 3 million fatality-free shifts in March 2013. Khumani Mine achieved 3 million fatality-free shifts in January 2013. Two Rivers Mine achieved 1 million fatality-free shifts in May 2013. Modikwa Mine achieved 1 million fatality-free shifts in November 2012. 9
Slide 10: Headline earnings
Headline earnings Headline earnings (R million) 4 000 3 737 3 374 3 451 3 500 3 000 2 500 2 317 2 000 1 714 1 500 1 000 500 0 F2009 F2010 F2011 F2012 F2013 Headline earnings increased 8% during challenging and difficult times 10
Slide 11: Dividends and earnings
Dividends and earnings Headline earnings per share and dividends per share (cents per share) 2 500 Headline earnings per share Dividends per share 2 000 1 735 1 585 1 615 1 500 1 094 1 000 807 510 450 475 500 175 200 0 F2009 F2010 F2011 F2012 F2013 Dividend cover 6.3 X 4.0 X 3.5 X 3.4 X 3.4X As a gl
Slide 12: Robust financial position
Robust financial position Net cash excluding partner loans (R million) 3 000 2 680 2 594 2 500 2 303 2 000 1 811 1 575 1 500 1 000 500 0 F2009 F2010 F2011 F2012 F2013 ARM is in a strong financial position 12
Slide 13: Revenue composition
Revenue composition F2012 revenue split F2013 revenue split Nickel Copper Nickel 0% 9% 11% Platinum 19% Iron Ore Iron Ore 39% Platinum 44% 21% Coal 4% Coal Chrome 5% 6% Chrome Manganese 5% Manganese 18% 19% PGM, nickel and coal headline earnings contribution increased 13
Slide 14: EBITDA margins
EBITDA margins The ARM average EBITDA margin was 36% (F2012: 37%) 60% Iron Ore 55% 42% Coal 45% 25% Manganese 28% 25% Platinum 28% 2% Nickel 26% -5% Chrome -4% -30% -10% 10% 30% 50% 70% F2012 F2013 Increase in EBITDA margins for coal, manganese, platinum and nickel 14
Slide 15: 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 15
Slide 16: Lubambe Copper Mine
Lubambe Copper Mine Copper produced (thousand tonnes) ,50.0 ,45.0 ,45.0 ,45.0 ,45.0 ,40.0 ,35.0 ,35.0 ,30.0 ,25.0 ,20.0 ,14.9 ,15.0 ,10.0 ,5.0 ,0.0 F2013a F2014e F2015e F2016e F2017e The concentrator plant was commissioned in October 2012; capitalisation of costs ceased at the end of April 2013 16
Slide 17: 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 Manganese Ore Manganese Dwarsrivier Modikwa Platinum Smelters Chrome Ore Beeshoek Iron Ore Nkomati Nickel Lubambe Copper (2015
Slide 18: Mergers and Acquisitions
Mergers and Acquisitions ARM continues to focus on value adding acquisitive growth. ARM’s strong financial status, positions it favourably to pursue value adding acquisitions. 18
Slide 19: Outlook
Outlook Global commodity prices and currencies remain volatile. ARM’s operational strategy in the flat commodity price environment remains focussed on operational efficiencies. Target to have all operations positioned below the 50th percentile of each commodity’s global cost curve. Capital allocatio
Slide 20: Operational review
Stackers at Goedgevonden Mine Operational review Mike Schmidt, Chief Executive Officer 20
Slide 21: Divisional headline earnings
Divisional headline earnings Contribution to headline earnings (R million) Commodity group Year ended 30 June 2013 2012 % change Platinum Group Metals 295 190 55 Nkomati Nickel and Chrome 232 (130) - Ferrous Metals 3 237 3 495 (7) Coal 148 52 185 Copper* (135) (31) >(250) Exploration (88) (113) 22 G
Slide 22: Headline earnings by half year
Headline earnings by half year Headline earnings (R million) 2 500 2 331 2 232 1 997 2 000 1 812 1 562 1 454 1 406 1 500 1 260 1 000 454 500 85 0 F2009 F2010 F2011 F2012 F2013 First half (1H) Second half (2H) Headline earnings for 2H F2013 are 66% more than 1H F2013 22
Slide 23: The non-ferrous assets deliver
The non-ferrous assets deliver Platinum Division Coal Division ,600 ,160 ,148 ,527 ,140 ,500 Contribution to headline earnings Contribution to headline earnings ,120 ,400 ,100 (R million) (R million) ,300 ,80 ,60 ,52 ,200 ,40 ,100 ,60 ,20 ,0 ,0 F2012 F2013 F2012 F2013 23
Slide 24: Improvement in safety record
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 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12 3 month moving average 12 month moving average No fatalities on ARM managed mines in F2013 24
Slide 25: Significant sales volume increases
Significant sales volume increases F2013 vs. F2012 sales volumes (% change) 120% 102% 100% 80% 71% 60% 40% 22% 20% 11% 11% 9% 0% -2% -4% -20% -40% -60% -49% -56% -80% Dwarsrivier Nickel GGV GGV PGMs Iron ore Manganese ore Ferromanganese Nkomati chrome Ferrochrome chrome ore Eskom coal Export coal co
Slide 26: Fall in US Dollar realised prices
Fall in US Dollar realised prices F2013 vs. F2012 realised prices (% change) 20% 15% 10% 5% 0% -5% -10% -15% -20% -25% -30% Rhodium Iron ore Nickel Export coal Chrome FeMn Copper Platinum Palladium Manganese Exchange ($/oz) ($/t) ($/lb) ($/t) concentrate ($/t) ($/lb) ($/oz) ($/oz) ore rate ($/t) ($/
Slide 27: Spot price comparison to F2013
Spot price comparison to F2013 Spot prices on 20 August 2013 vs. F2013 realised prices (% change) 25% 20% 15% 10% 5% 0% -5% -10% -15% -20% Gold Export coal Nickel Rhodium Copper Platinum Chrome FeMn Palladium Exchange Manganese Iron ore ($/oz) ($/t) ($/lb) ($/oz) ($/lb) ($/oz) concentrate ($/t) ($/o
Slide 28: Unit cost changes by commodity
Unit cost changes by commodity F2013 vs. F2012 on-mine production unit cost (% change) Manganese ore Iron ore Manganese alloys PGM: Two Rivers PGM: Modikwa Chrome ore Coal: PCB Coal: GGV Nickel Mining producer price Chrome alloys inflation at 7% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% Iron ore
Slide 29: Analysis of costs
Analysis of costs ARM Ferrous ARM Platinum ARM Coal Production unit costs at GGV Costs were well controlled. Two Unit costs increased mainly due to reduced as a result of increased Rivers built up a 305 000 tonne UG2 overburden waste stripping, the saleable production volumes. PCB is stockpile. cess
Slide 30: 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 8 000 1,263 (1,565) ,229 (1,223) 7 500 2,003 7 000 6 500 6 000 (,330) (,57) 5,537 5 500 5,216 5 000 4 500 4 000 F2012 Ex
Slide 31: ARM Platinum growth
ARM Platinum growth PGM and nickel production (100% basis) ,900 26 000 ,786 24 000 ,800 23 220 22 000 ,708 ,689 ,680 ,700 20 000 ,622 18 000 ,600 6E PGM thousand ounces 16 000 Nickel tonnes ,500 14 000 14 004 ,400 12 000 10 000 ,300 9 666 10 100 8 000 ,200 6 000 4 000 ,100 4 495 2 000 ,0 0 F2009 F20
Slide 32: Significant improvement in Nkomati operational performance
Significant improvement in Nkomati operational performance Nickel produced (thousand tonnes) Average recoveries (%) ,25.0 ,23.2 80% 75% ,20.0 75% ,14.0 70% ,15.0 65% 65% ,10.1 65% ,9.7 ,10.0 60% 60% ,5.0 55% ,0.0 50% F2010 F2011 F2012 F2013 F2010 F2011 F2012 F2013 Average milling grade (% nickel con
Slide 33: ARM Ferrous
ARM Ferrous Iron ore and manganese ore sales volumes (million tonnes)* ,18.0 ,16.1 ,16.0 ,14.8 ,14.0 ,12.0 ,9.8 ,10.0 ,10.0 ,8.0 ,7.4 ,6.0 ,4.0 ,3.1 ,2.9 ,2.9 ,2.9 ,2.2 ,2.0 ,0.0 F2009 F2010 F2011 F2012 F2013 Iron Ore Manganese ore *Manganese ore sales exclude intragroup sales. 33
Slide 34: ARM Coal
ARM Coal The Goedgevonden Mine produced 8.2 million tonnes saleable against 6.3 million tonnes in F2012 and a mine design of 6.7 mtpa. GGV achieved a unit cost decrease of 14% to R171 per saleable tonne. 71% of the capital for the Tweefontein Optimisation Project (TOP) has been committed to date. Th
Slide 35: ARM Copper
ARM Copper The concentrator plant at the Lubambe Copper Project was commissioned in October 2012, two months ahead of schedule and produced 14 871 tonnes of copper. Project capital expenditure of $469 million in nominal terms including costs capitalised to end April 2013. The mine is addressing chal
Slide 36: ARM Copper: Extension Area
ARM Copper: Extension Area Total resource (indicated + inferred) Vale/ARM JV AMEC Description estimate statement Variance % change 2010 Feb 2013 Resource tonnage Mt 75.70 105.00 29.30 39% Total Copper grade % 2.81 3.66 0.85 30% Acid soluble Copper grade % 0.91 0.59 (0.32) (35%) Cobalt grade % - 0.09
Slide 37: Capital expenditure
Capital expenditure Capital expenditure (R million)* 5 000 4 500 4 321 4 000 3 494 3 489 3 500 2 850 2 900 3 000 2 700 2 500 2 000 1 500 1 000 500 0 F2011a F2012a F2013a F2014e F2015e F2016e ARM Platinum ARM Ferrous ARM Coal ARM Copper *The forecasted capital expenditure for F2015 to F2016 is an est
Slide 38: Potential future projects
Potential future projects • Iron ore expansion beyond 16 mtpa • Manganese ore expansion beyond 3 mtpa • Expansion of Modikwa Platinum Mine • Lubambe Copper Extension • Exploration with Rovuma Resources • Thermal coal projects 38
Slide 39: ARM Exploration
ARM Exploration Exploration during F2013 focused on the integration and interpretation of all previously gathered data in Northern Mozambique through the joint venture with Rovuma Resources Limitada (“Rovuma”) The Rovuma Project has a strike length of approximately 100km containing four target clust
Slide 40: Financial position
Financial position EBITDA excluding exceptional items Cash on statement of financial position R million R million 8,000 7,230 5,000 4,632 7,000 6,517 6,531 4,000 3,513 3,668 3,564 6,000 3,039 5,000 4,484 3,000 3,907 4,000 2,000 3,000 2,000 1,000 1,000 ,0 ,0 F2009 F2010 F2011 F2012 F2013 F2009 F2010
Slide 41: Questions
FaxtM African Rainbow Minerals EE ee ee Questions We do it better
Slide 42: Appendix
FaxtM African Rainbow Minerals EE ee ee Appendix We do it better
Slide 43: Transnet's Market Demand Strategy
Transnet’s Market Demand Strategy Manganese Division Coal Division Nchwaning & Gloria Mines Goedgevonden Impunzi And Tweefontein Mines Gauteng Maputo Port North West Johannesburg Mpumalanga Kimberly Iron Ore Division Free State KwaZulu-Natal Beeshoek & Khumani Richards Bay Iron Ore Mines Lesotho Coa
Slide 44: Net cash position
Net cash position Year ended 30 June R million 2013 2012 change Cash and cash equivalents 4 632 3 564 1 068 Long term interest bearing borrowings (3 293) (2 216) (1 077) Short term interest bearing borrowings (699) (1 021) 322 Total interest bearing borrowings (3 992) (3 237) (755) Net cash includin
Slide 45: Income statement
Income statement Year ended 30 June R million 2013 2012 % change Sales 19 844 17 530 13 Profit from operations (before exceptional items) 5 537 5 216 6 Income from investments 268 279 (4) Finance costs (225) (232) 3 (Loss) / income from associate (14) 11 - Exceptional items excluding tax (2 639) (70
Slide 46: Cash flow statement
Cash flow statement Year ended 30 June R million 2013 2012 change Cash generated from operations 6 312 5 969 343 Net finance income 84 108 (24) Dividends received 64 64 - Dividends paid (1 021) (959) (62) Tax paid (1 191) (1 294) 103 4 248 3 888 360 Maintenance capital expenditure (1 452) (1 180) (2
Slide 47: Statement of financial position
Statement of financial position Year ended 30 June R million 2013 2012 Non-current assets 25 387 25 662 Property, plant, equipment and other 20 827 18 910 Investments 3 811 6 313 Other 749 439 Current assets 12 734 9 654 Cash and equivalents 4 632 3 564 Other 8 102 6 090 Total assets 38 121 35 316 T
Slide 48: Cash flow statement
Cash flow statement Cash flow statement analysis – cash and cash equivalents (R million) 12,000 7,921 (1,609) 10,000 (1,021) (1,191) 8,000 (1,452) (2,224) 6,000 ,446 ,139 4,236 4,000 3,227 2,000 ,0 F2012 Cash from Working Dividends Taxation Maintenance Expansionary Net Other F2013 operations capital
Slide 49: Operational summary
Operational summary F2013 F2012 % change Modikwa PGMs in concentrate Ounces, 6E 324 626 304 044 7 Cash cost R/kg, 6E 201 752 188 538 7 Cash operating margin % 17 13 Two Rivers PGMs in concentrate Ounces, 6E 350 443 320 113 9 ARM Platinum Cash cost R/kg, 6E 168 594 153 642 10 (100% basis) Cash operat
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