African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — FY2019 Earnings Presentation
39 slides from African Rainbow Minerals's earnings presentation, Aug 30, 2019
Slide 1: Chairman's statement on F2019 headline earnings
“Headline earnings increased by 9% to R5.2 billion as the iron ore division delivered its highest reported earnings. A final dividend of R9.00 per share is declared. An interim dividend of R4.00 per share was paid in April 2019 bringing the total dividend for F2019 to R13.00 per share.” Patrice Mots
Slide 2: 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 3: Results overview
Results overview Executive Chairman: Patrice Motsepe Khumani Iron Ore Mine 3
Slide 4: Group structure
Group structure 1 100% 100% 10% 51% 13.8% Gold: Platinum Ferrous Coal Harmony PGMs Iron Ore Coal 41.5% Modikwa2 50% Khumani 20% Participative Coal 54% Two Rivers 50% Beeshoek Business (PCB)3 Nickel, PGMs & Chrome Manganese Ore Coal 50% Nkomati 50% Nchwaning 51% Goedgevonden 50% Gloria (GGV)3 PGM Exp
Slide 5: Safety
Safety The Lost Time Injury Frequency Rate (LTIFR) increased from 0.38 to 0.42 per 200 000 man-hours. Despite our commitment to zero harm at all our operations a colleague, Mr Thomas Maluleke, was fatally injured at Modikwa Mine on 27 March 2019. Khumani Mine achieved a LTIFR of 0.08 per 200 000 man
Slide 6: Salient features: Earnings
Salient features: Earnings Headline earnings Adjusted headline earnings** 9% to 35% to R5.2 billion R5.2 billion F2018: R4.8 billion* F2018: R3.8 billion Segmental EBITDA Basic earnings 16% to 22% to R9.3 billion R3.6 billion F2018: R8.0 billion* F2018: R4.6 billion* * The F2018 headline and basic e
Slide 7: Salient features: Dividends and financial position
Salient features: Dividends and financial position Total dividend Dividends received from Assmang 30% to R3.3 billion R13.00 per share F2018: R3.0 billion F2018: R10.00 per share Attributable ARM Coal debt Net cash at 30 June 2019 10% to 161% to R1.8 billion R2.6 billion F2018: R2.0 billion At 30 Ju
Slide 8: Headline earnings analysis (R million)
Headline earnings analysis (R million) 6 000 5 226 ** * 49** 5 000 4 814 5 177** 977* 4 000 3 837* 3 196 3 000 2 000 1 744 1 051 1 000 0 F2015 F2016 F2017 F2018 F2019 * The F2018 headline earnings included a net fair value gain of R977 million on restructuring of the ARM Coal debt. ** F2019 headline
Slide 9: Headline earnings and dividends (cents per share)
Headline earnings and dividends (cents per share) 3 000 2 718 ** 2 526 * 25** 2 500 2 693** 513* 2 000 2 013* 1 684 1 500 1 300 1 000 1 000 803 900 650 750 494 500 350 225 400 250 0 F2015 F2016 F2017 F2018 F2019 Headline earnings per share Final dividend per share Interim dividend per share * F2018
Slide 10: Capital allocation guiding principles
Capital allocation guiding principles Application of funds GROW EXISTING BUSINESS MERGERS AND ACQUISITIONS INVEST IN DEBT EXISTING BUSINESS REPAYMENT DIVIDEND PAYMENTS SHARE REPURCHASE AND/OR SPECIAL DIVIDENDS 10
Slide 11: Guiding dividend formula
Guiding dividend formula ARM will aim to pay ordinary dividends to shareholders equal to approximately 40-70% of annual dividends received from its group companies. ARM will aim to pay an interim and a final dividend. The weighting between the interim and final dividends is likely to result in the f
Slide 12: Cost curve position
Cost curve position ARM is focused on maximising margins at each operation. PCB Coal operations Modikwa Platinum GGV Coal Beeshoek Iron Ore Two Rivers Platinum Khumani Iron Ore Sakura Ferroalloys Cato Ridge Black Rock Ferromanganese Manganese Nkomati Ore Nickel Commodity Unit cash cost 25% 50% 75% 1
Slide 13: Operational review
Operational review Chief Executive Officer: Mike Schmidt Two Rivers Platinum Mine 13
Slide 14: Headline earnings/(loss) by division / operation
Headline earnings/(loss) by division / operation 12 months ended 30 June Reviewed Audited R million % change 2019 2018 ARM Platinum 112 420 (73) Two Rivers Mine 322 306 5 Modikwa Mine* 105 105 - Nkomati Mine (315) 9 ARM Ferrous 4 960 3 528 41 Iron ore division 3 397 1 672 103 Manganese division 1 61
Slide 15: Headline earnings analysis (R million)
Headline earnings analysis (R million) 5 500 35% 169 49 5 226 5 177 1 432 (109) 5 000 4 814 (977) 4 500 4 000 3 837 (152) 3 500 3 000 F2018 Net fair F2018 Platinum Ferrous Coal Corporate F2019 Net F2019 headline value gain adjusted adjusted fair value headline earnings headline headline and re- earn
Slide 16: Diversified earnings
Diversified earnings EBITDA split by commodity (%) 100% 3% 5% 4% 8% 5% 80% 12% 14% 27% 29% 38% 60% 46% 58% 50% 40% 37% 54% 8% 20% 4% 2% 25% 30% 17% 19% 16% 0% (3%) (3%) (6%) -20% F2015 F2016 F2017 F2018 F2019 PGM Nickel Iron Ore Manganese Chrome Coal (GGV) Copper 16
Slide 17: EBITDA margin by commodity
EBITDA margin by commodity 39% Iron ore 49% 48% Manganese ore 42% 25% PGMs 26% 33% Coal (GGV only) * 26% 29% Manganese alloy ** 14% 11% Nickel (16%) (20%) (10%) 0 10% 20% 30% 40% 50% 60% F2018 F2019 * Excludes fair value and re-measurement adjustments. ** Excludes Sakura Ferroalloys. 17
Slide 18: F2019 vs F2018 unit cost changes
F2019 vs F2018 unit cost changes Manganese alloy: Sakura 18% Manganese ore 15% Coal: GGV and PCB 14% Manganese alloy: South African Operations 14% PGM: Two Rivers and Modikwa** 13% Nickel* 10% Iron ore 8% 0% 5% 10% 15% 20% 25% * The change in nickel unit costs refers to C1 cash costs net of by-produ
Slide 19: ARM Ferrous
ARM Ferrous Khumani Iron Ore Mine 19
Slide 20: ARM Ferrous
ARM Ferrous Attributable profit before tax variance analysis (R million) Changes in on-mine unit production costs (%) 10 000 2 163 296 Sakura 18% 8 000 6 886 1 585 (1 431) 6 000 (366) Manganese ore 15% 4 639 4 000 Increase SA manganese alloy operations 14% 2 000 Decrease 0 Iron ore 8% F2018 Exchange
Slide 21: Iron ore (100% basis)
Iron ore (100% basis) Salient features unit F2019 F2018 % change • Headline earnings up 103%. Export sales 000 14 430 14 302 1 volumes tonnes Local sales 000 3 114 3 572 (13) • Sales volumes lump ratio volumes tonnes increased from 54% to 60%. Sales lump:fines 60:40 54:46 ratio Change in on-mine uni
Slide 22: Iron ore unit cost analysis
Iron ore unit cost analysis All in export iron ore unit costs on a 62% Fe equivalent basis (US$/t) 80 Increase Decrease 70 7,80 60,49 14,33 60 6,79 50 29,90 46,16 40 30 20 16,00 10 0 On-mine Logistics, Capital Other 64% to 65% Quality F2018 F2019 costs freight and expenditure Fe delivered differenti
Slide 23: Manganese ore (100% basis)
Manganese ore (100% basis) Salient features % unit F2019 F2018 change • Production volumes were 8% lower Export sales 000 3 321 3 080 8 due to shut-down of the Gloria Mine volumes tonnes conveyor and commissioning of Local sales 000 113 97 16 volumes tonnes new infrastructure (as part of the Change
Slide 24: Manganese alloys
Manganese alloys Salient features % 100% basis unit F2019 F2018 change • Manganese alloys sales volumes Sales volumes: South 000 150 138 9 at the South African operations African operations tonnes increased by 9%. Sales volumes: Sakura 000 248 240 3 tonnes Change in unit production costs: South % 14
Slide 25: ARM Platinum
ARM Platinum Modikwa Platinum Mine 25
Slide 26: ARM Platinum
ARM Platinum Attributable profit before tax variance analysis (R Changes in on-mine unit production costs (%) million) 2 500 Increase PGM: Two Rivers 314 17% Decrease 2 000 651 1 500 (415) Nickel 10% 1 044 1 000 787 (808) PGM: Modikwa 9% 500 0 0% 5% 10% 15% 20% 25% 30% F2018 Exchange US Dollar Volum
Slide 27: PGMs (100% basis)
PGMs (100% basis) Salient features % unit F2019 F2018 change • Rand PGM basket prices increased by 29% and 26% for Production 6E PGM 729 833 792 583 (8) ounces Modikwa and Two Rivers mines, respectively. Modikwa cash cost R/oz 6E 10 027 9 197 9 Two Rivers cash cost R/oz 6E 8 001 6 822 17 • Total PGM
Slide 28: Update on Two Rivers Mine grade
Update on Two Rivers Mine grade • UG2 grades mined in Main and North declines ranged from 3.5g/t to 5.0 g/t (6E). • Mineral reserve grades West and South of the mined areas are lower. • The partners are considering installing additional milling capacity to increase PGM volumes to approximately 380 0
Slide 29: Nickel (100% basis)
Nickel (100% basis) Salient features C1 unit cash costs net of by-products • Earnings impacted by a negative unit F2019 F2018 % change mark-to-market adjustment of On-mine cash cost* US$/lb 10.88 10.95 (1) R130 million. Off-mine cash cost US$/lb 0.82 0.83 (1) • Nickel production volumes By-product c
Slide 30: ARM Coal
ARM Coal Goedgevonden Coal Mine 30
Slide 31: ARM Coal
ARM Coal Attributable profit before tax variance analysis (R million) Changes in on-mine unit production costs (%) 1 200 1 060 (885) 1 000 Coal: PCB 18% Increase Decrease 800 600 400 190 332 96 (121) 146 (153) 200 175 142 Coal: GGV 8% 0 F2018 Fair Fair F2018 Exchange US Volume Costs F2019 Re- F2019
Slide 32: GGV and PCB (100% basis)
GGV and PCB (100% basis) Salient features % Unit F2019 F2018 change • Earnings were negatively impacted by a decline in seaborne coal Export sales volumes Mt 14.22 16.29 (13) prices. Domestic sales volumes Mt 8.18 5.59 46 GGV on-mine production R/t 380 351 8 costs • R362 million was repaid on the AR
Slide 33: Capital allocation
Capital allocation FD: Abigail Mukhuba Black Rock Manganese Ore Mine 33
Slide 34: Capital allocation guiding principles
Capital allocation guiding principles Sources of funds Cash generated from operations (including cash distributions received) | debt | equity Application of funds INVEST IN DEBT GROW EXISTING Internal growth EXISTING BUSINESS REPAYMENT BUSINESS capital Maintenance and Remaining within efficiency acc
Slide 35: Allocation of capital
Allocation of capital Analysis of movements in net cash and cash equivalents (R million)* 10 000 Sources of funds Investing in Interest and debt Dividends existing business repayments paid 9 000 Increase 3 323 ( 309) Decrease ( 931) 8 000 ( 341) 7 000 (281) 184 (2 206) 6 000 2 123 5 000 (233)* 4 239
Slide 36: Net cash and debt position
Net cash and debt position R million 30 June 2019 30 June 2018 Cash and cash equivalents (before borrowings)* 4 632 3 291 Total borrowings (2 031) (2 296) Long-term borrowings (1 095) (1 744) Short-term borrowings (936) (552) Net cash* 2 601 995 Total equity 29 703 27 378 Net cash to equity ratio 8.
Slide 37: Capital expenditure: Segmental analysis
Capital expenditure: Segmental analysis* 4 000 3 500 3 326 3 449 3 200 3 239 3 000 2 918 2 800 2 383 2 464 2 500 2 352 2 000 1 500 1 000 500 0 F2014a F2015a F2016a F2017a F2018a F2019a F2020e ** F2021e ** F2022e ** ARM Platinum ARM Ferrous ARM Coal ARM Copper * Capital expenditure includes (i) defer
Slide 38: Additional slides
Additional slides Beeshoek Iron Ore Mine 38
Slide 39: Six-monthly headline earnings (R million)
Six-monthly headline earnings (R million) 3 500 3 025 3 000 2 869 2 500 2 341 2 201 2 000 1 945 1 767 1 693 1 503 1 500 1 026 1 000 718 507 544 500 0 * ** F2014 F2015 F2016 F2017 F2018 F2019 First half (1H) Second half (2H) 39
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