Valterra Platinum Limited · JSE:VAL
Valterra Platinum — Anglo American Platinum — FY2017 Earnings Presentation
50 slides from Valterra Platinum's earnings presentation, Feb 19, 2018
Slide 1: Anglo American Platinum 2017 Annual Results Presentation
ANGLO AMERICAN PLATINUM 2017 ANNUAL RESULTS PRESENTATION 19 February 2018 Mogalakwena mine
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American Platinum Limited (“Anglo American Platinum”) and comprises the written materials/slides for a presentation concerning Anglo American Platinum. By attending this presentation and/or reviewing the slides you agree t
Slide 3: 2017 Annual Results Agenda
2017 ANNUAL RESULTS AGENDA 1. Safety & sustainability performance Chris Griffith 1. Business performance Chris Griffith 2. Financial results Ian Botha 3.P G PGM market review Chris Griffith M 3. Positioning for the future Chris Griffith 3
Slide 4: Delivering on Our Commitments
DELIVERING ON OUR COMMITMENTS Repositioning the portfolio ✓ Cost control and earnings ✓ Strong balance sheet ✓ Production in H1 of cost curve Unit cost reduction Net Debt 70% 2% R1.8bn from 40% in 2012 to R19,203 /platinum ounce decrease of 75% Loss-making production cut EBITDA margin & ROCE Free ca
Slide 5: Safety & Sustainability Performance
2017 RESULTS SAFETY & SUSTAINABILITY PERFORMANCE Chris Griffith Groenfontein vegetable project at Mogalakwena
Slide 6: Fatalities Unacceptable – Other Indicators Improve
FATALITIES UNACCEPTABLE – OTHER INDICATORS IMPROVE Fatalities & total recordable case injury frequency rate (TRCFR)(2) TRCFR improvement 18 1.83 2.1 14% 16 TRCFR 1.52 1.6 14 1.40 LTIFR(3) improvement 12 10 1.05 0.90 1.1 14% to 0.63 versus 0.73 in 2016 8 0.6 6 7 6 6 Safety turnaround in place: 4 0.1
Slide 7: Significant Progress Made on Improving Health
SIGNIFICANT PROGRESS MADE ON IMPROVING HEALTH Number of deaths from tuberculosis (TB) & TB incidence rates TB death reduction 70 1,340 71% 1,500 1,020 to 4 in 2017 60 63 987 1,000 660 582 50 51 500TB incidence rate reduction TB incidence rates 40 30 0 12% to 582 per 100,000, lower than the 27 South
Slide 8: Ongoing Environmental Improvements
ONGOING ENVIRONMENTAL IMPROVEMENTS Environmental management Impact management Greenhouse gas emissions down Water utilisation down Level 3-5 environmental incidents(4) 8% 1% zero at 4.6 vs target of 5.03 (MtCO2e) at 1.02m3/t milled since 2013 Energy intensity down SO2 abatement project Waste to land
Slide 9: Significant Investment Made in Local Communities
SIGNIFICANT INVESTMENT MADE IN LOCAL COMMUNITIES Social Labour Plan 2 (SLP 2) Amandelbult chrome plant Projects completed in 2017 Amandelbult Chrome plant held by BEE & communities 16 projects 26% • 8 schools and educational projects • 5 infrastructure projects • 3 healthcare and clinic projects Ama
Slide 10: Business Performance
2017 RESULTS BUSINESS PERFORMANCE Chris Griffith Amandelbult chrome spiral plant
Slide 11: Striving for Operational Excellence
STRIVING FOR OPERATIONAL EXCELLENCE Total PGM Production (‘000 ounces) PGM production increase 4,856 4,974 5,008 1% despite Bokoni and Maseve closures & 1,053 1,054 temp closure of Mototolo concentrator 1,039 Mined productivity up 1,480 1,539 1,557 16% year-on-year increase based on PGM ounces / emp
Slide 12: Record Production from Mogalakwena
RECORD PRODUCTION FROM MOGALAKWENA Total PGM Production (‘000 ounces) PGM production increase 936 980 1,098 12% 125 116 114 EBITDA margin 509 430 452 48% 464 Free cash flow from operations 392 412 R4bn 2015 2016 2017 at AISC of $340/ platinum ounce sold(6) Platinum Palladium Other PGMs & gold 12
Slide 13: Amandelbult Turnaround Plan Advancing
AMANDELBULT TURNAROUND PLAN ADVANCING All-in sustaining cost ($/platinum ounce sold) Total PGM production decrease ~25% 3% 1,072 to 858,000 PGM ounces 1,046(7) Chrome production 955 820 654kt generating R577 million of attributable operating FCF EBITDA margin Actual 2016 H1 2017 achieved prices Actu
Slide 14: Unki – Strong Production from Strategic Asset
UNKI – STRONG PRODUCTION FROM STRATEGIC ASSET Total PGM Production (‘000 ounces) Total PGM production increase 142 162 166 2% 26 27 24 EBITDA margin 61 64 52 33% 24% normalised for sale of treasury bills(10) 75 75 Free cash flow from operations 66 2015 2016 2017 R0.6bn at AISC of $612 per platinum o
Slide 15: Joint Ventures & POC Producing Stable Margins
JOINT VENTURES & POC PRODUCING STABLE MARGINS Total PGM ounces produced EBITDA margin Total PGM production decrease 2,640 2,577 20% 2% including Rustenburg own mined production in 2016 1,336 POC(11) Joint venture and associates • Modikwa up 10% 2,029 • Kroondal up 2% • BRPM up 8% 9% • Mototolo down
Slide 16: Strong Processing in H2 – Led to Increase in Sales
STRONG PROCESSING IN H2 – LED TO INCREASE IN SALES Refined PGM production PGM sales volumes Refined production & sales up 5,116 5,382 7% & 6% Backlog 200 Backlog 200 4,787 & stock 5,058 & stock gain gain Additional refined production 5,182 200koz 4,916 including 100koz platinum Strong production due
Slide 17: Financials
2017 RESULTS FINANCIALS Ian Botha Inserting explosives into drill holes - Mogalakwena
Slide 18: Delivering on Our Commitments
DELIVERING ON OUR COMMITMENTS Headline earnings per share (R/Share) EBITDA Headline earnings 14.82 R12.0bn R3.9bn increase of 32% increase of 108% 7.13 17.83 ROCE (%) Net debt 9.46 Underlying (1.31) Restructuring (0.04) 18% R1.8bn costs (2.96) up from 9% reduction of R5.5bn (1.02) Impairment & IFRS
Slide 19: 'Controllables' Driving Earnings
‘CONTROLLABLES’ DRIVING EARNINGS EBITDA (R billion) 2017 vs. 2016 4.5 12.0 (0.3) 4.7 (4.3) 3.2 9.1 (1.7) 1.3 7.8 Ore stockpiles 108 measured 2016 Price Currency CPI Cost & volume Bokoni 2017 19
Slide 20: Continued Strong Cost Performance
CONTINUED STRONG COST PERFORMANCE R /Pt oz produced R /PGM oz produced Input cost inflation 2% 5% 19,545 19,203 (12) 4.5% down from 6.9% 9,298 (13) 2018 Guidance 8,871 R19,600 – R20,200 per platinum ounce produced 2016 2017 2016 2017 20
Slide 21: 70% of AAP Production Now in H1 of Cost Curve
70% OF AAP PRODUCTION NOW IN H1 OF COST CURVE AAP production on cost curve Rightsizing overheads (Rbn) Overhead reduction guidance 48% 30% 6.3 R0.3bn H2 post Union exit 60% Structurally changed cost base 3.3 • Restructured cost base • Outperforming peer group 70% • Less exposure to inflationary cost
Slide 22: Continued Capex Discipline
CONTINUED CAPEX DISCIPLINE Rbn 2017 capital expenditure 4.7 – 5.2 SO2 Abatement 0.6 R4.0bn 0.8 – 1.0 SIB and project capex 4.0 0.6 • Prioritise stay in business capex to maintain asset integrity • Focus on low capex, fast payback project spend 3.3 – 3.6 3.3 Capitalised waste stripping 2017 2018 guid
Slide 23: Stronger Margins Supporting Cash Flow
STRONGER MARGINS SUPPORTING CASH FLOW Improving group EBITDA margin % Improving operating FCF (Rbn) 18% R2.4bn increased from 15% increased 9% 32% 5.5 5.4 Customer 2.6 2.0 Prepayment 20% Net proceeds 1.4 on asset 1.2 sales 1.8 9% 8% Free cashflow from 2.2 operations 2.4 1.9 (0.1) (0.2) Bokoni Own mi
Slide 24: A Strong Balance Sheet
A STRONG BALANCE SHEET Net debt (Rbn) Net debt / EBITDA ratio Gearing ratio(14) 75% YOY 75% YOY 12.8 1.5x 4.3% down from 15.5% Liquidity headroom(15) 7.3 0.8x R20.6bn increased from R14.9bn 1.8 0.2x 2015 2016 2017 2015 2016 2017 24
Slide 25: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION Capital allocation framework Focus on sustaining capex & net debt reduction R10.2bn • Free cash flow Cash flow Discretionary after capital sustaining options capital (R4.1bn) • Sustaining capex (16) Balance sheet flexibility to support base dividend (R5.5bn) • Reductio
Slide 26: Strong Results Allow Dividend Resumption
STRONG RESULTS ALLOW DIVIDEND RESUMPTION Improving earnings Dividend policy EBITDA Headline EPS • Pay-out of 30%, based on headline earnings for each reporting period R12.0bn R14.82 /share • Additional returns to shareholders to be considered in accordance with capital allocation framework Balance s
Slide 27: PGM Market Review
2017 RESULTS PGM MARKET REVIEW Chris Griffith Platinum grain
Slide 28: Price Improvement Offset by ZAR Strengthening
PRICE IMPROVEMENT OFFSET BY ZAR STRENGTHENING Indexed price (1 Jan 2017 = 100)(17) USD platinum price decrease 225 3.9% 200 175 USD basket price increase 150 12.2% 125 100 Rand basket price increase 75 Jan 17 Mar 17 Jun 17 Feb 17 Oct 17 Apr 17 Jul 17 Nov 17 Dec 17 May 17 Aug 17 Sep 17 2.2% Pt Pd Rh
Slide 29: 3E PGMs in Overall Deficit
3E PGMS IN OVERALL DEFICIT 3E fundamental balance (‘000 ounces)(18) Total 3E demand increase Pt Pd Rh 95 Pt Pd Rh Pt 125 Pd Rh 2.6% on a gross basis 30 26 (107) Total 3E supply increase (202) (268) 1.4% (356) boosted by higher recycling 2017 3E deficit (‘000 ounces) (670) 2015 2016 2017 519koz 3E de
Slide 30: Pt Demand Balanced Across Key Demand Segments
Pt DEMAND BALANCED ACROSS 3 KEY DEMAND SEGMENTS Net demand 2017 (%)(19) Gross platinum demand down Pt Pd 4.5% Investment year-on-year 6% Industrial Autocat 20% Industrial 33% 33% Gross palladium demand up 8.8% year-on-year Gross rhodium demand up Jewellery 28% Autocat 80% 3.5% year-on-year 30
Slide 31: Automotive PGM Demand Expected to Grow
AUTOMOTIVE PGM DEMAND EXPECTED TO GROW Global light duty automotive sales outlook (million units)(20) Total light duty 3E outlook to 2024 94 million 109 million positive Pt Fuel cells as internal combustion engine Pure electric remains the dominant drive train (battery & fuel cells) Pd Hybrid 15m te
Slide 32: Pt Demand from Automotive Sector Resilient
Pt DEMAND FROM AUTOMOTIVE SECTOR RESILIENT Platinum auto demand split(21) Forecast platinum auto demand(22) Total platinum demand increase Global Heavy 2% CAGR over 2017-2024, excluding impact of Duty Diesel 15% Europe Light substitution Duty Diesel ~ 3 Moz 51% Global Light Heavy duty diesel outlook
Slide 33: Industrial Demand Remains Strong
INDUSTRIAL DEMAND REMAINS STRONG Net demand 2017 (%)(23) Platinum outlook Pt Pd positive following 6% growth in 2017 Other Other Chemical 12% Chemical 40% 25% 36% Electrical 25% Palladium outlook mildly negative Glass 15% Rhodium outlook Fuel cells 2% Petroleum & gas-to-liquid Electrical 9% Dental 2
Slide 34: Jewellery: 2017 Mixed, Outlook More Positive
JEWELLERY: 2017 MIXED, OUTLOOK MORE POSITIVE Net demand 2017 (%)(24) China remains challenging ROW 4% short term India 10% Europe 10% negative Japan 5% Europe, Japan, North America North America neutral 14% China 57% Strong growth from India strong positive 34
Slide 35: Consistent Investment Demand for Three Decades
CONSISTENT INVESTMENT DEMAND FOR THREE DECADES Net platinum investment demand (‘000 ounces)(25) Total platinum investment 900 350koz 800 in 2017, down from 620koz in 2016 700 600 Total palladium disinvestment 500 400 -365koz in 2017 300 200 100 Platinum investment outlook 0 -100 positive 1985 1987 1
Slide 36: PGMs and Pt Total Global Primary Supply – At Best Flat
PGMS AND Pt TOTAL GLOBAL PRIMARY SUPPLY – AT BEST FLAT 3E Primary supply (‘000 ounces)(26) Current production outlook negative 2017-2024 Expansion Replacement Replacement capex unlikely to offset production decline in base production Base Expansion projects subject to constraints 2017 2018 2024 due
Slide 37: Overall Outlook for 3E Demand Positive
OVERALL OUTLOOK FOR 3E DEMAND POSITIVE Platinum Palladium Rhodium stable positive positive growth in demand from heavy duty strong growth in automotive sector both automotive and industrial demand diesel and industrial sectors to outweigh heavily outweighs marginal declines in to grow decline in Eur
Slide 38: Positioning for the Future
POSITIONING FOR THE FUTURE Chris Griffith Robotics arm at the laboratory at Polokwane smelter
Slide 39: A Fundamentally Different Business
A FUNDAMENTALLY DIFFERENT BUSINESS MORE EFFICIENT MORE COMPETITIVE BETTER RETURNS Productivity improvement Production in H1 cost curve Dividend reintroduced 58% 70% R3.49 /share up since 2012 up from 40% in 2012 Overhead cost reduction EBITDA margin ROCE 48% 18% 18% down since 2012 up from 11% in 20
Slide 40: Our Value Proposition
OUR VALUE PROPOSITION Quality assets & Capital discipline & Long term sustainability operational excellence shareholder returns 70% production in H1 of the cost Balance sheet strength Project studies ongoing curve Only open-pit PGM mine of Capital allocation discipline Grow demand for PGMs scale in
Slide 41: What Next for Anglo American Platinum?
WHAT NEXT FOR ANGLO AMERICAN PLATINUM? Operational & marketing Low capex, fast pay-back Project studies excellence projects • Amandelbult turnaround – • Mogalakwena North concentrator • Mogalakwena expansion – low capital optimisation optimisation intensity option, utilising existing processing capa
Slide 42: 2018 Guidance
2018 GUIDANCE • Produce, refine and sell 4.75 to 5.00 million PGM ounces - Including 2.3 to 2.4 million platinum ounces and 1.5 to 1.6 million palladium ounces • Unit cost guidance – R19,600 to R20,200 per produced platinum ounce • Capital expenditure guidance – R4.7 to R5.2 billion • Base dividend
Slide 43: Delivering on Our Commitments & Dividend Reinstated
DELIVERING ON OUR COMMITMENTS & DIVIDEND REINSTATED Repositioning the portfolio ✓ Cost control and earnings ✓ Strong balance sheet ✓ Production in H1 of cost curve Unit cost reduction Net Debt 70% 2% R1.8bn from 40% in 2012 to R19,203 /platinum ounce decrease of 75% Loss-making production cut EBITDA
Slide 44: Q&A
Polokwane smelter Real Mining. Real People. Real Difference.
Slide 45: Appendix
APPENDIX Truck at Mogalakwena
Slide 46: Net Debt and Cash Flow by Asset
NET DEBT AND CASH FLOW BY ASSET (4.1) (0.6) 11.2 (3.0) 1.2 (1.8) (1.1) 2.6 (4.9) (0.8) (7.3) R2.4bn Net Debt Cash tax and Funding Net proceeds Net Debt December Cash from SIB & Waste Project net interest associates & Free cash Customer on asset December Operation 2016 operations capital capital paid
Slide 47: Strong Mining Margins and Stable POC Margins
STRONG MINING MARGINS AND STABLE POC MARGINS 2016 2017 32% 28% 19% 20% 18% 15% 9% 9% Total POC JV mined Own mines AAP Total Total POC JV mined Own mines AAP Total share share 47
Slide 48: Supply and Demand Balances
SUPPLY AND DEMAND BALANCES (27) 000 OUNCES PLATINUM PALLADIUM RHODIUM SUPPLY 2017 2016 2017 2016 2017 2016 South Africa 4,365 4,390 2,570 2,575 618 615 Russia 650 705 2,650 2,775 65 85 North America 320 335 865 890 22 24 Zimbabwe 485 490 380 390 40 43 Other 160 160 130 130 5 5 Total Primary Supply 5
Slide 49: Cost Breakdown
COST BREAKDOWN Costs reflective of AAP Own mined and Joint Venture share of production and costs at operations. Excludes all purchase of concentrate costs and volume, overhead and marketing expenses. 2015 Cost base (Rbn) Volum e % PGM volum e (koz) Labour Contractors Materials Utilities Sundries Ope
Slide 50: Foot Notes
FOOT NOTES (1) Excludes funding to Bokoni of R0.8 billion (2) TRCFR is a measure of the rate of all injuries requiring treatment above first aid per 200,000 hours worked (3) LTIFR stands for lost time injury frequency rate and is measured as number of injuries for every 200,000 hours worked (4) Leve
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