Merafe Resources Limited · JSE:MRF
Merafe Resources — FY2017 Earnings Presentation
24 slides from Merafe Resources's earnings presentation, 2018
Slide 1: Results Presentation for the Year Ended 31 December 2017
RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2017 PRESENTED BY ZANELE MATLALA (CEO) AND KAJAL BISSESSOR (FD) i Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
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 1. Key highlights 2. Market review 3. Operational review 4. Financial review 5. Outlook 3 Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
Slide 4: Key highlights
1 Key highlights 4 Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
Slide 5: Solid performance within the context of a volatile operating environment
Solid Performance within the context of a volatile operating environment Safety Operational • Regrettably, one fatality • Increase in ferrochrome production, • 10% improvement in TRIFR since reaching a record high December 2016 • Costs well managed within a high mining inflation environment Market F
Slide 6: Market review
2 Market review 6 Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
Slide 7: 2017 Ferrochrome price environment characterised by high volatility
2017 Ferrochrome price environment characterised by high volatility UG2 Metal Bulletin 42% Ferrochrome Metal Bulletin 50% European Benchmark (USD/t) (USc/lb) Ferrochrome Price (USc/lb) 450 160 200 180 400 140 160 350 120 140 300 100 120 250 80 100 200 80 60 150 60 40 100 40 50 20 20 - - - 7 Merafe R
Slide 8: China remains the key player in stainless steel production
China remains the key player in stainless steel, accounting for 53.3% of global production and 61% of global ferrochrome demand Global Stainless Steel Production Global Ferrochrome Demand (FY 2017) (FY 2017) 6.2% 4.8% 18.8% 17.2% 11.5% 15.3% 5.6% 6.5% 53.3% 61.0% USA Western Europe Japan China Other
Slide 9: Sector fundamentals remain strong as stainless steel production and ferrochrome demand increase
Sector fundamentals remain strong as global stainless steel production and ferrochrome demand increase for third consecutive year Global Stainless Steel Production Global Ferrochrome Demand (mt) (mt) 50 48.3 mt 45.6 mt 13 45 12.2 mt 42.1 mt 9.1 11.4 mt 8.2 40 11 10.5 mt 2.1 7.6 1.8 35 1.7 9 30 25.7
Slide 10: Ferrochrome production reacted to market conditions; ore imports into China increased
Ferrochrome production reacted to market conditions; Ore imports into China also increased Global Ferrochrome Production Chrome Ore Imports into China (mt) (mt) 14 16 12.3 mt 13.9 mt 12 14 0.7 11.0 mt 10.7 mt 0.5 2.2 0.5 0.6 1.3 12 10 0.6 10.6 mt 0.6 10.4 mt 0.5 1.0 1.1 0.9 1.3 10 1.3 1.5 1.2 8 1.1
Slide 11: Operational review
3 Operational review 11 Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
Slide 12: Ensuring the safety of all our employees remains key
Ensuring the safety of all our employees remains key to building a stable production environment • Regrettably one fatality during the period • Overall, TRIFR improved to 3.74, from 4.15 in December 2016 • Safety remains the number 1 priority for the Venture with a goal of achieving zero harm • Educ
Slide 13: Reaping rewards of initiatives undertaken to drive efficiency
Reaping rewards of initiatives undertaken to drive efficiency • Ferrochrome production increased to a new record of 395kt Installed capacity utilisation of 82% Annual production records achieved at Lion and Wonderkop smelters Annual pellet production records at Tswelopele and Bokamoso • No sig
Slide 14: Total costs well managed within a high mining inflation environment
Total costs well managed within a high mining inflation environment • Total production costs per tonne increased by 9% with key contributors being: Increase in reductant prices; Increase in UG2 input prices; Increase in labour costs, effective 1 July 2017; Increase in electricity prices of 2
Slide 15: Financial overview
4 Financial overview 15 Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
Slide 16: Record revenue and healthy profit
Record Revenue and healthy profit • 3% increase in revenue y-o-y to R5 889m Strength of the Rand partially offset the impact of the pricing environment Ferrochrome revenue up by 5% y-o-y to R5 163m setting a new record Chrome ore revenue down by 7% y-o-y to R726m. Realised chrome ore prices lo
Slide 17: EBITDA reconciliation to profit
EBITDA reconciliation to profit 1,800 1 705 1,600 40 1,400 1,200 368 19 1,000 47 914 R'm 800 411 600 400 200 0 Merafe's 20.5% of Corporate costs Depreciation Net financing costs Current tax expense Deferred tax income Profit EBITDA from the Venture 17 Merafe Resources Ltd | Results presentation for
Slide 18: Benefitted from upswing but continuing to drive efficiencies
Benefitted from upswing but continuing to drive efficiencies to counter negative macro influences 2017 2016 Ferrochrome Revenue R’m R’m Variance • Driven by higher prices but partially offset by stronger Rand and lower sales volumes Ferrochrome revenue 5 163 4 923 5% Chrome ore revenue 726 778 (7%)
Slide 19: Strengthening of the balance sheet enables greater flexibility
Strengthening of the balance sheet enables greater flexibility in the future Inventories • Increase is a function of higher raw materials and finished goods balances. As at As at • The increase in raw materials is mainly due to higher chrome ore stock levels at a higher 31-Dec-17 31-Dec-16 average c
Slide 20: Strong operational cash generation enabled significant reduction in net debt
Strong operational cash generation enabled a significant reduction in net debt levels Reconciliation of total (net debt)/cash (R’m) 800 1,636* 600 600 400 200 - -200 -400 (409) (1) -600 -800 (403) -1,000 (176) (47) -1,200 Opening Expansionary capex Sustaining capex Dividends paid Exchange rate Cash
Slide 21: Significant headroom on facilities
Significant headroom on facilities Merafe and Venture Merafe Head Total Cash Working Capital loan Office debt Net cash R'm R'm R'm R'm Closing – 31 Dec 2017 672 (72) - 600 Total facilities – 31 Dec 2017 (241)¹ (254)² (200)³ (695) Total utilised – 31 Dec 2017 - (72) - (72) Headroom – 31 Dec 2017 (241
Slide 22: Outlook
5 Outlook 22 Merafe Resources Ltd | Results presentation for the year ended 31 December 2017
Slide 23: Outlook
Outlook • 2018 commenced with robust demand and pricing, Rand however is stronger • 2018 growth rate of stainless steel production projected to be 4,1%* • 2019 to 2021 growth rate of 3%* per annum for stainless steel production indicating strong demand for chrome • Our strong balance sheet, strong c
Slide 24: Questions?
QUESTIONS? i Merafe Resources Ltd | Results presentation for the year ended 31 December 2017