Merafe Resources Limited · JSE:MRF
Merafe Resources — FY2014 Earnings Presentation
31 slides from Merafe Resources's earnings presentation, March 2015
Slide 1: Results Presentation
Results Presentation For the year ended 31 December 2014 Presented by Zanele Matlala (CEO) and Kajal Bissessor (FD)
Slide 2: Legal notice/disclaimer
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 Resource
Slide 3: Key agenda
Key agenda 01. Key features 02. Operational review 03. Market review 04. Financial review 05. Outlook Annexures Merafe Resources Ltd | Results presentation for the year ended 31 December 2014 3
Slide 4: Key features
01 Key features 4
Slide 5: Key features
Key features Power and ore consumption efficiencies efficiencies* OPERATIONAL MARKET • Ferrochrome production of 334kt • 7,5% increase in global stainless steel • TRIFR of 4.63 production • Cash production cost increases of 9% • 11% increase i iin global l b l fferrochrome h d demand d • 9% increase
Slide 6: Operational review
02 Operational review 6
Slide 7: Operational review
Operational review – Increase of 5% in ferrochrome production p Project Lion II Additional maintenance in H2 2014 at Lydenburg smelter – Regrettably two fatalities – TRIFR of 4.63 – Platinum industry strike impacted chrome ore costs chrome h ore sales l volumes l – Wage negotiations Wester
Slide 8: Operational review (continued)
Operational review (continued) Project j Lion II – safe and successful completion p – 9.6m continuous man hours worked without a lost time injury – Already producing above 80% of design capacity – Ramp-up Ramp up to full capacity expected in mid 2015 – Expected variance of 7% above budget – Expected
Slide 9: Market review
03 Market review 9
Slide 10: Global market review
Global market review GLOBAL STAINLESS STEEL GLOBAL FERROCHROME GLOBAL FERROCHROME PRODUCTION DEMAND PRODUCTION 7.5% increase 11% increase 9% increase to 41.6mt (2013: 38.7mt) to 11.3mt (2013:10.2mt) to 11.3mt (2013:10.4mt) 18% NAFTA 38% NAFTA 13% South Africa 5% Japan 2,5% EU 6% EU 12% China 11% Chi
Slide 11: Ferrochrome market review
Ferrochrome market review European benchmark ferrochrome prices Rising demand in Europe, doubts about security of 2013 Usc/lb 2014 Usc/lb Change electricity supply in SA and the Q1 112.5 118 +5% 5% platinum strike Q2 127 122 (4%) Q3 112.5 119 +6% Slowdown in some regions and softer Q4 112.5 115 +2%
Slide 12: Chrome ore imports into China
Chrome ore imports into China 2012 2013 2014 Change Ch in ´000 t in % South Africa 4,490 6,736 5,748 -14.7 1,008 Turkey 1,840 1,988 1,280 -35.6 Others Oth Iran Oman 426 687 489 -28.8 Pakistan Albania 782 I ndia 310 168 63 -62.8 Oman Others Iran Pakistan 472 482 339 -29.7 29.7 Pakistan Turkey Albania
Slide 13: Financial review
04 Financial review 13
Slide 14: Key financial features
Key financial features 3% % 5% % 22% % REVENUE EBITDA HEPS EBITDA in R R’millions millions 650 589 600 558 530 550 500 450 380 400 350 314 300 250 200 150 100 50 0 2010 2011 2012 2013 2014 Merafe Resources Ltd | Results presentation for the year ended 31 December 2014 14
Slide 15: Revenue up by 3%
Revenue up by 3% 1% 2% 13.5% 9% 31% Average European Average Ferrochrome Ferrochrome Chrome ore benchmark Rand/US$ sales tonnes revenue revenue ferrochrome exchange rate price 2014: 316kt 2014 2014: 118 2014 118.5USc/lb 5USc/lb 2014:10.9 2014 10 9 2014: R3270m 2014 2014 R339m 2014: 2013: 314kt 2013:
Slide 16: Ferrochrome cash production costs increase by 9% per tonne
Ferrochrome cash production costs increase by 9% per tonne 3% - Chrome ore costs (strike action in platinum industry and Western mines, more mined ore used)) 1.6% - impact of imported reductants 2.5% - Lion II start-up costs 1.9% - other increases Merafe Resources Ltd | Results presentation for the
Slide 17: EBITDA reconciliation to profit
EBITDA reconciliation to profit 700 651 600 (62) 500 400 R'm 300 (237) 214 (51) (39) 200 (48) 100 0 Merafe's 20.5% of Corporate costs* Depreciation Net financing costs Current tax expense Deferred tax Profit EBITDA from the expense Venture * Includes R17m restructuring costs (R13m severance pay and
Slide 18: HEPS Comparison – 2014 vs 2013
HEPS Comparison – 2014 vs 2013 HEPS impact (cents) Depreciation (asset scrappings, Project Lion II) (2.0) Borrowing g costs expensed p ((0.5)) Restructuring costs at Merafe head-office (0.5) Standing charges – strike related / Lydenburg (1.5) rebuilds TOTAL (4.5) Merafe Resources Ltd | Results prese
Slide 19: 2014 – H1 to H2 comparison
2014 – H1 to H2 comparison H2/H1 variance % Ferrochrome sales volumes (15) Chrome ore sales volumes (35) Average European Benchmark Ferrochrome price (3) Chrome ore prices (3) Tough market conditions in Mathematical discount to benchmark (6) second half, lower net prices Exchange rate 3 in China Rev
Slide 20: Capital expenditure
Capital expenditure Capital expenditure Project About R50m Lion II expected to be spent in 2015 180 208 174 247 Sustaining 2014 increase Capex due to furnace 424 397 rebuilds at Lydenburg 231 196 smelter 2011 2012 2013 2014 Expansionary Sustaining Merafe Resources Ltd | Results presentation for the
Slide 21: Balance sheet
Balance sheet As at As at 31 D December b 2014 31 D December b 2013 Audited R’000 Audited R’000 Total non-current assets 3 252 680 3 112 960 Property, plant and equipment 3 239 162 3 099 988 Deferred tax assets 13 518 12 972 Total current assets 2 148 467 1 903 622 Inventories 1 435 799 1 132 986 Tr
Slide 22: Balance sheet (continued)
Balance sheet (continued) As at As at 31 December 2014 31 December 2013 Audited R’000 Audited R’000 T t l non-currentt liabilities Total li biliti 1 366 153 1 326 838 Loans and borrowings 549 909 576 311 P i i ffor close Provision l d down and d restoration t ti costs t 129 029 111 456 Deferred tax
Slide 23: Debt and facilities
Debt and facilities NET OVERDRAFT MOVEMENT 400 306 300 200 100 35 0 -11 -28 -21 -100 -200 -162 -196 -300 -247 Net overdraft at Cash from Expansionary Sustaining Loans raised Dividend paid Other items Net overdraft at 31 Dec 2013 operating capex capex 31 Dec 2014 activities Utilised facilities at 31
Slide 24: Outlook
05 Outlook 24
Slide 25: Outlook
Outlook • Venture has developed significant competitive advantages and is well positioned for the future • Remain excited about our future in this industry • No significant expansionary capital going forward • Committed to returning cash to shareholders Merafe Resources Ltd | Results presentation fo
Slide 26: Questions
Questions Merafe Resources Ltd | Results presentation for the year ended 31 December 2014 26
Slide 27: Annexures
Annexures 27
Slide 28: Historic ferrochrome prices
Historic ferrochrome prices 1 50 1.50 1 50 1.50 Europe USA Charge Cr er Price 1.40 6-8%C, 60%Cr 6-8%C, 60-65% Cr Benchmark (EU) 1.40 Charrge Cr Pric 1.30 1.30 na Tende US $ / Ib 1.20 1.20 1.10 1.10 es & Chin ce (quarte nthly) in U 1.00 1.00 0.90 0.90 Spot Price (mon erly) in US 0.80 0.80 0.70 China
Slide 29: Ferrochrome Producer Ranking 2014
Prod duction, in ´0 000 t 0 200 400 600 800 1,000 1,200 1,400 1,600 Glencore e / Merafe 1,800 Ka azchrome 35% © Heinz H. Sammancor Cr Ou utokumpu H Pariser Tianyi MMetallurgy EHUI MMetallurgy >200 Hernic 25% 200 kt Xin nganglian ASSA Metals Minttal Group IMFA IFML Ferbasa Zimasco Merafe Resources Lt
Slide 30: Ferrochrome Currencies' Exchange Rate Fluctuation
Ferrochrome Currencies’ Exchange Rate Fluctuation 160 KZT 150 BRR 100 x, 2008 = 1 140 INR eciation ZAR per U 130 EUR Depre cal Curency p Rate Index 120 SEK 110 (loc Exchange R 100 Appreciatiion 90 RMB © Heinz H. Pariser 80 2010 2011 2012 2013 2014 2015 Merafe Resources Ltd | Results presentation for
Slide 31: THANK YOU
THANK YOU