Merafe Resources Limited · JSE:MRF
Merafe Resources — Non-Deal Roadshow (November 2008)
31 slides from Merafe Resources's roadshow presentation, November 2008
Slide 1: Merafe Resources Limited
Merafe Resources Limited November 2008
Slide 2: Disclaimer
2 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
Slide 3: Corporate Structure
3 Corporate Structure 20.5% 79.5% of of EBITD EBITD A A Xstrata-Merafe Chrome Venture Formed 1 July 2004 Largest ferrochrome producer in the world (±20% market share) Opportunity to invest directly into Xstrata’s ferrochrome business
Slide 4: Share price information
4 Share price information ZAR US$ Market capitalisation* 2.3bn 224m Share price* 0.94 0.09 1 year high 4.34 0.42 1 year low 0.85 0.08 Shares outstanding 2.45 billion shares *As at 11 November 2008 US$ amounts based on exchange rate of R10.32:$ at 11 November 2008
Slide 5: Shareholder analysis
5 Shareholder analysis Major shareholders – October 2008 Royal Bafokeng Resources 29% The IDC 22% SA 38% Offshore 11%
Slide 6: Merafe's share price performance relative to Mining Index
6 Merafe’s share price performance relative to Mining Index 180 6-Aug-08 The collapse of major 160 international financial Interims results: institutions in recent weeks Revenue +123% have thrown global markets 140 EBITDA +387% into turmoil EPS +525% 120 Rebased to 100 100 80 13-Oct-08 60 Q4 Europea
Slide 7: Xstrata-Merafe, the world's largest ferrochrome producer
7 Xstrata-Merafe, the world’s largest ferrochrome producer Chelyabinsk, Russia Vargön Alloys, Sweden ASA Metals, South Africa 2% 2% 2% Ferbasa, Brazil 2% Zimasco, Zimbabwe 2% Others 15% Outokumpu, Finland 3% Assmang Chrome, South Xstrata Merafe PSV Africa 20% 3% Hernic Ferrochrome, South Africa 5% S
Slide 8: Operations overview
8 Operations overview SMELTERS CAPACITY Wonderkop 520 kt FeCr - 6 furnaces (Conventional) Rustenburg 440 kt FeCr - 6 furnaces (Conventional) Boshoek 240 kt FeCr – 2 furnaces (Outokumpu) Lydenburg 400 kt FeCr - 4 furnaces (Premus) Lion 360 kt FeCr - 2 furnaces (Premus) Total • 1 960 kt in production
Slide 9: Barriers to entry
9 Barriers to entry Low barriers to entry, a thing of the past: • Capital cost of building smelters have gone up over 500% • Lead time for critical items needed for construction now 3 years • Power supply - when will power be available for new projects? • Shortage of available quality ore reserves •
Slide 10: What Merafe said in Q2 and Q3 2008
10 What Merafe said in Q2 and Q3 2008 • Slow down in global stainless steel production due to: traditional northern hemisphere summer shutdowns stockists/buyers expecting nickel prices to come down resulting in destocking • Specific to China (in addition to the above) were stainless steel cut ba
Slide 11: What happened in Q4 2008?
11 What happened in Q4 2008? • Nickel prices continue to fall ($12,000/t) • Global economic collapse of financial markets • Chrome ore trade has dried up • Surplus stocks of ferrochrome and chrome ore at plants, SA ports and Chinese ports • Marginal producers dumping ferrochrome in spot market • Mar
Slide 12: Xstrata-Merafe production cut backs
12 Xstrata-Merafe production cut backs • Temporary suspension of six furnaces • 500,000/t of annual planned ferrochrome production • Three furnaces at Rustenburg • Two furnaces at Lydenburg • One furnace at Wonderkop • 80,000/t reduction in ferrochrome production for 2008 • Furnaces will be switched
Slide 13: Major ferrochrome production cut backs (kt)
13 Major ferrochrome production cut backs (kt) 2008 Projected production 8,152 Announced cut backs* Xstrata-Merafe 500 Samancor 600 Assmang 150 Hernic 190 EtiKrom 90 China 700 ENRC 340 IFM 100 India 300 Total 2,970 (36%) * Annualised Data: Merafe estimates based on recent announcements
Slide 14: Ferrochrome prices
14 Ferrochrome prices European benchmark ferrochrome prices 2.5 2.05 1.92 1.85 2 US $/lb 1.5 1.21 1 1 0.82 1 0.75 0.5 0 Q1'07 Q2'07 Q3'07 Q4'07 Q1'08 Q2'08 Q3'08 Q4'08
Slide 15: High carbon ferrochrome spot prices
15 High carbon ferrochrome spot prices
Slide 16: Ferrochrome price analysis over the last 25 years
16 Ferrochrome price analysis over the last 25 years European benchmark ferrochrome price Current global economic melt SS boom 1 (1984 – 1989) down - Japan, S Korea & Taiwan SS industry affected by oil SS boom 2 Commodities crisis until China, Europe, USA boom 1983 Collapse of China growth USSR Asia
Slide 17: Growth in stainless steel production over the last years
17 Growth in stainless steel production over the last 25 years SS production 35,000 30,000 SS production ('000 t) 25,000 20,000 CAGR 5% 15,000 10,000 5,000 0 83 85 87 89 91 93 95 97 99 01 03 05 07 19 19 19 19 19 19 19 19 19 20 20 20 20 Data: Andrew Jones (CMS)/Merafe
Slide 18: Stainless steel applications
18 Stainless steel applications Cold rolled (CR) flat products represent the largest portion of all stainless steel Application % Share of global CR flats consumption Construction 14% Transport 17% Industrial equipment 25% Catering & household products 33% Welded tubes 6% Other 5% Total 100% Data: C
Slide 19: Production costs
19 Production costs $1.20/lb
Slide 20: Currency gains or losses against US$
20 Currency gains or losses against US$ 150 SA ZAR 140 Chinese Yuan Kazakh Tenge 130 31% (Rebased to 100) 120 110 (0.5%) 100 (0.5%) 90 08/07/01 08/07/13 08/07/25 08/08/06 08/08/18 08/08/30 08/09/11 08/09/23 08/10/05 08/10/17 08/10/29 08/11/10 KAZAKT$ USDZAR CHIYUA$ Data: Datastream – 12 Novembe
Slide 21: Gearing
21 Gearing R’m Closing balance 30 June 2008 608 Preference shares 75 ABSA (Lion Ferrochrome, Wonderkop & Bokamoso) 350 Xstrata 99 Overdraft 84 Debtors discounting facility 190 Current situation Preference shares (R40m 31.12.2008 , R35m 31.3.2009) 75 ABSA 350 Xstrata 0 Overdraft 0 Debtors discounting
Slide 22: Prospects
22 Prospects • Historically destocking process has taken six to nine months • This time ferrochrome producers have reacted very swiftly • This time stainless steel producers are not carrying a lot of stainless steel inventory • When the market turns it will turn quickly • Ferrochrome prices and sale
Slide 23: www.meraferesources.co.za
www.meraferesources.co.za
Slide 24: Appendices
Appendices
Slide 25: Merafe Coal
25 Merafe Coal • Vehicle to pursue coal opportunities in South Africa • 50/50 joint venture between Merafe and Sentula Mining Limited • Prospecting of Schoongezicht and Bankfontein coal deposits is underway • These properties have a total target coal resources of approximately 10m tonnes • Both proj
Slide 26: Average power rates in 2008
26 Average power rates in 2008 Country USc/kWh China 5.1c India 4.9c Japan 4.3c Finland 4.2c Sweden 3.7c Russia 3.2c Brazil 3.2c Zimbabwe 3.0c Iran 2.8c South Africa 2.8c Kazakhstan 1.8c Data: CRU Analysis
Slide 27: Production of Charge/HC ferrochrome
27 Production of Charge/HC ferrochrome 2006 2007 in ‘000 t Material Change 2008 Weight 2009 Change in % In ‘000 t in % In ‘000 t 08 / 07 09 / 08 Charge Brazil 141 164 16.3 165 170 0.6 3.0 Finland 243 242 -0.4 240 241 -0.8 0.4 Sweden 88 80 -9.1 86 110 7.5 27.9 South Africa 2,912 3,549 21.9 3,570 3,65
Slide 28: China chrome ore imports
28 China chrome ore imports 2006 in2007 ‘000 t Material Weight 2008 (1-8) % Change in ‘000 t US$/t in ‘000 t US$/t in ‘000 t US$/t Y-t-D United States 66 122 0 0 759 0.0 Brazil 99 161 106 194 61 412 -9.1 Turkey 741 172 1,083 274 770 459 -1.1 Albania 83 152 230 252 94 412 -48.2 Kazakhstan 144 157 198
Slide 29: Xstrata-Merafe challenge to contain costs – Lion Ferrochrome
29 Xstrata-Merafe challenge to contain costs – Lion Ferrochrome The Venture anticipated the changes in the South African production environment and invested in efficiencies: 5 4.8 Specific Energy 4.5 Consumption (MWh/T) 4.1 4 3.5 3.5 3 2.5 2.4 2 Premus O utokumpu Conventional DC Arc
Slide 30: Xstrata-Merafe challenge to contain costs – Lion Ferrochrome (cont.)
30 Xstrata-Merafe challenge to contain costs – Lion Ferrochrome (cont.) Comparative resources consumption gives Premus a further edge: 95 Chrome Recovery 70% Coke Consumption 60% 60% 60% 90 90 88 50% 85 Consumption/t 40% % Recovery 80 77 30% 75 20% 20% 70 10% 68 0 65 0% C onventional Outokumpu DC Ar
Slide 31: Bokamoso - improved energy consumption
31 Bokamoso - improved energy consumption Xstrata-Merafe position in regard to the forecast high energy tariffs 4.5 4.1 4.0 3.5 3.5 3.0 3.0 2.5 2.3 2.0 Conventional Bokamoso MWh/tonne Alloy 4.1 3.5 Ore tonne/tonne Alloy 3.0 2.3