Valterra Platinum Limited · JSE:VAL
Valterra Platinum — Anglo American Platinum — FY2016 Earnings Presentation
42 slides from Valterra Platinum's earnings presentation, Feb 15, 2017
Slide 1: Anglo American Platinum 2016 Annual Results Presentation
ANGLO AMERICAN PLATINUM 2016 ANNUAL RESULTS PRESENTATION 15 FEBRUARY 2017 PGI – Platinum wedding bands
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared for Anglo American Platinum Limited and the entities in the Anglo American Platinum group (“Anglo American Platinum”) and comprises the written materials/slides for a presentation concerning Anglo American Platinum. By attending th
Slide 3: Agenda
AGENDA • Overview of 2016 • Operations • Financials • Markets • Strategy • Outlook
Slide 4: Overview of 2016
OVERVIEW OF 2016 CHRIS GRIFFITH, CHIEF EXECUTIVE OFFICER Hydraulic shovel loading a truck at Mogalakwena Mine
Slide 5: Overview of 2016: Delivering change, building a resilient business
OVERVIEW OF 2016 Delivering change…building a resilient business… Unit cost (Rand / platinum ounce) (1) • Zero harm remains the priority +1.4% • PGM pricing remained weak 19,545 19,266 • Strong operational performance up 2% • Unit cost increase of only 1.4% • R3.5 billion of free cash flow generated
Slide 6: Operational Review
OPERATIONAL REVIEW CHRIS GRIFFITH, CHIEF EXECUTIVE OFFICER Precious Metals Amandelbult ChromeRefinery Plant
Slide 7: Safety, Health & Environment
SAFETY, HEALTH & ENVIRONMENT Disappointing fatality performance… Safety Number of fatalities – own mine operations • Tragically, 7 fatalities occurred during 2016 • Overall safety trend showing strong improvement 25 – LTIFR (2) reduced by 26% to 0.73 7 – TRCFR (3) reduced by 31% to 1.05 6 3 2 2007 2
Slide 8: Operational Performance in 2016
OPERATIONAL PERFORMANCE IN 2016 Efficiencies improving at operations… • Total platinum production up 2% to 2.38 million ounces Total platinum production (million ounces) (5) • Retained own mine operations up 5% to 956,000 2.36 2.34 2.38 ounces – Mogalakwena up 5% to 412,000 ounces – Amandelbult up 7
Slide 9: Mogalakwena
MOGALAKWENA Another record performance… • Award winning safety performance – 6 million fatality Platinum production (‘000 ounces) (5) free shifts 412 392 31 • Record production performance: 375 23 341 22 – Total production up 5% to 412,000 ounces 16 369 381 – Total tonnes milled up 8% 353 325 • Baob
Slide 10: Amandelbult
AMANDELBULT Success visible in production performance… • Tragically 2 fatalities in 2016 Platinum production (‘000 ounces) (5) 467 • Strong production performance up 7%: 437 – Improved operational efficiencies in underground 373 mining – Open pit production added 41,000 ounces 219 • Chrome plant com
Slide 11: Joint Venture Operations
JOINT VENTURE OPERATIONS Record production performance… Lost time injury frequency rate (LTIFR) (2) • Tragically 6 fatalities occurred across the joint venture 0.84 operations 0.69 0.62 0.64 • LTIFR stable at 0.64 in 2016 • Strong mining performance up 2% to 785,000 ounces: 2013 2014 2015 2016 – Mod
Slide 12: Non-core Operations - Rustenburg & Union
NON-CORE OPERATIONS - RUSTENBURG & UNION Rustenburg sale complete…operational improvements at Union… Production (‘000 ounces) (5) Operating free cash flow (Rm) (7) Rustenburg 630 460 • Tragically 4 fatalities in 2016 83 • Total platinum production down 4% to 460,000 ounces 570 478 257 192 377 281 85
Slide 13: Refined Production & Sales Volume in 2016
REFINED PRODUCTION & SALES VOLUME IN 2016 Refined production impacted by the Waterval smelter run-out… Total refined platinum production (million ounces) Refined platinum production 2.46 • Platinum refined production down 5% to 2,335 koz 2.38 2.33 – Impacted by the Waterval smelter run out by 65,000
Slide 14: Financial Review
PLATINUM FINANCIAL REVIEW IAN BOTHA, FINANCE DIRECTOR Valcambi Suisse 500g Platinum Bar
Slide 15: Summary of 2016 Results
SUMMARY OF 2016 RESULTS Balance sheet strengthened… Headline Earnings per share (Rand/share) Key financials 7.13 R billion 2015 2016 1.62 5.99 Basket price (Rand / Pt ounce) 24,203 25,649 4.78 7.84 Sales revenue 59.8 62.0 1.70 3.64 EBITDA EBITDA 8.6 9.1 (1.31) (9) (0.48) (3.25) (1.02) EBIT ⁽⁷⁾ 3.4 4
Slide 16: EBITDA Variance
EBITDA VARIANCE Improved earnings from strong cost delivery and weaker Rand… 2016 vs. Restated 2015 (R billion) Once-off: – R0.8bn Uncontrollable: – R1.8bn Controllable: + R3.1bn 9.1 8.6 0.4 (1.5) 7.8 0.7 (2.5) 3.0 6.0 5.0 (0.3) (4.3) (9) (11) (10) (13) (11) (12) 2015 Stock gain Restructuring Price
Slide 17: Unit Cost
UNIT COST Cost control keeping unit cost escalation below CPI and input cost inflation… Unit cash cost escalation AAP’s input cost inflation (%) R/Pt oz 1.4% 1.4% 20,850 10.2% 20,350 Reduction in +R400 Mogalakwena (1,111) YOY Capitalised 1,439 Waste in 2017 19,545 2016 guidance R19,250 – R19,750 AAP
Slide 18: Rightsizing Overheads
RIGHTSIZING OVERHEADS R700 million lower than 2015… The target… Delivery outperforming target (35)% (35)% 5.4 5.4 (1.0) 4.2 (0.7) 3.4 3.5 (0.3) (0.5) 3.0 (0.3) 2014 Overhead Rustenburg Union End state 2014 2015 2016 Rustenburg 2016 pro Union reduction exit exit (10 Months) forma Rustenburg exit …wit
Slide 19: Capital Expenditure
CAPITAL EXPENDITURE Disciplined capital allocation continues… • Focus on low capex, fast payback, value accretive Capital expenditure (R billion) (16) projects • Continued strong SIB governance 3.7 – 4.2 3.7 2017: 0.8 – 1.0 3.4 • Unki smelter Projects 1.2 • Dishaba UG2 0.6 • Smelter furnace rebuild
Slide 20: Working Capital
WORKING CAPITAL Actively managed down… Trade working capital (R billion) Customer prepayment 13.3 • 5 year contract • c.$250 million ($150 million in 2016, c.$100 million in 2017) (2.8) • No incremental cost • Metal pricing at spot on the date of sale (2.0) Inventory reduction (‘000 ounces) (0.4) 8.
Slide 21: Net Debt
NET DEBT Generated R3.5bn free cash flow from operations… Net debt (R billion) Net debt (R billion) 14.6 Net debt : EBITDA Opening net debt 1 January 2016 12.8 12.8 Cash flow from operations (10.5) Restructuring costs 0.3 2.6 7.3 Capex and capitalised waste stripping 4.7 1.5 0.8 Cash tax paid 1.1 Ot
Slide 22: Markets Review
MARKETS REVIEW CHRIS GRIFFITH, CHIEF EXECUTIVE OFFICER Hydrogenious – Hydrogen supply system for a hydrogen filling station
Slide 23: Market Prices
MARKET PRICES Average US Dollar PGM prices were lower year-on-year in 2016… USD platinum price (USD / ounce) US Dollar platinum price remains below peak 2015 1300 Y-o-y (6.0)% levels US Dollar per ounce 1200 • Average platinum price was down 6% year-on-year 1100 1000 • The platinum price fell in H2
Slide 24: Platinum Market
PLATINUM MARKET Platinum in deficit in 2016 due to strong industrial and investment demand… Demand: 0.4% growth JM platinum supply & demand 2016 vs 2015 (18) Δ% • Higher y-o-y consumption in the automotive, industrial, Thousand Ounces Demand 2015 2016 Y-o-Y and investment sectors • Autocat: Gross 3,
Slide 25: Platinum Market - Automotive
PLATINUM MARKET - AUTOMOTIVE Strong European sales support platinum demand… Global light duty vehicle sales (2016 vs 2015) (19) • Autocat demand grew during 2016: 12% – Sales in Western Europe up 6% – Slightly higher loadings due to Euro 6b legislation 6% 5% – Diesel fell to 49.6% market share, but
Slide 26: Platinum Market - Jewellery
PLATINUM MARKET - JEWELLERY Chinese jewellery demand for gold and platinum weakens in 2016… • Global jewellery demand fell in 2016 Chinese platinum jewellery demand (‘000 ounces) (20) 2,500 • Chinese jewellery market struggled due to: 2,000 – Destocking – Softer consumer confidence 1,500 – Shift in
Slide 27: Platinum Market - Investment
PLATINUM MARKET – INVESTMENT Japanese investment strong again in 2016… Platinum ETF holdings (million ounces) (22) • Overall investment flows healthy last year 3.0 - Platinum ETF holdings stable over the last few years 2.5 Million Ounces 2.0 - Physical investment in Japanese bars continued 1.5 to be
Slide 28: Palladium Market
PALLADIUM MARKET Palladium in deficit in 2016 due to healthy automotive growth… Demand: 4.6% growth JM palladium supply & demand 2016 vs 2015 (16) Thousand Ounces 2015 2016 Y-o-Y Δ% • Automotive demand firms with Chinese growth a main Demand • Autocat: Gross 7,655 7,840 185 2.4% driver • Industrial
Slide 29: Strategy Review
STRATEGY REVIEW CHRIS GRIFFITH, CHIEF EXECUTIVE OFFICER Process operator at the Precious Metals Refinery
Slide 30: Strategy Review: Three key areas of our strategy
STRATEGY REVIEW Three key areas of our strategy… Our value driven strategy is built around three key deliverables: 1 Repositioning our assets into a value maximising portfolio ˗ Positioned in the first half of the cost curve ˗ At least 70% mechanised mining ˗ More highly skilled work force ˗ Safer o
Slide 31: Repositioning the Portfolio
REPOSITIONING THE PORTFOLIO Restructuring largely complete…repositioning of the portfolio progressing… Restructuring since 2013… …success with repositioning …and rightsizing the overhead the portfolio… R billion (35)% Reshaped Rustenburg Rustenburg sold Pandora SPA signed Restructured Union (0.5
Slide 32: Sale of Union Mine & Masa Chrome
SALE OF UNION MINE & MASA CHROME Another strategic success in the repositioning strategy…with R400m upfront consideration… Strategic Rationale • As announced in 2013, the Union mine is a non-core operation • Significant effort was made to make the mine profitable including: - Closing unprofitable pr
Slide 33: Outlook
OUTLOOK CHRIS GRIFFITH, CHIEF EXECUTIVE OFFICER 30 kW off-grid electricity supply system by Hydrogenious Technologies
Slide 34: Key Messages & 2017 Outlook
KEY MESSAGES & 2017 OUTLOOK Summary of a successful 2016… Key messages • Strong operational performance up 2% • Unit cost increase of only 1.4% • R3.5 billion of free cash flow generated from operations • Net debt reduced by R5.5 billion to R7.3 billion • Solid earnings per share of R7.13 • Signific
Slide 35: Anglo American Platinum
AngloAmerican PLATINUM Real Mining. Real People. Real Difference.
Slide 36: Appendices
PLATINUM APPENDICES Real Mining. Real People. Real Difference.
Slide 37: Net Debt and Cash Flow by Mine
NET DEBT AND CASH FLOW BY MINE Stronger Rand basket price… (0.3) (4.0) (0.6) 10.5 (1.1) 1.4 (7.3) (0.9) (8.7) (9.3) (1.4) 2.0 (12.8) R3.5bn Net Debt Funding of Rustenburg Net Debt December Cash from Restructuring SIB & Waste Project associates & Free cash Net interest Customer proceeds after Decembe
Slide 38: Cost Breakdown
COST BREAKDOWN Sundries and Labour Contractors Consumables Diesel Electricity Water Conventional mines 60% 5% 17% 1% 7% 10% Mechanised mines 40% 25% 20% 4% 4% 7% Open pit 18% 4% 43% 10% 12% 12% Company 40% 6% 24% 3% 12% 15% Company ex Rtb 37% 5% 26% 3% 13% 16% • Non ZAR – 10% of total costs • 100% a
Slide 39: Mogalakwena Waste Stripping
MOGALAKWENA WASTE STRIPPING Waste stripping at Mogalakwena will continue…tonnes mined will remain the same… • Waste Stripping is the process of removing mine waste material (overburden) in order to gain access to ore deposit • Waste stripping in the production phase, which provides improved access t
Slide 40: Platinum Market - Automotive
PLATINUM MARKET – AUTOMOTIVE Trend towards greater electrification of the drivetrain will continue… Forecast annual light duty vehicle production (millions) (19) Automotive market expected to grow 120 • Internal combustion engine market expected to grow 6m 100 2m despite lower market share in the fu
Slide 41: Announced Sale and Purchase Agreements
ANNOUNCED SALE AND PURCHASE AGREEMENTS Major milestones completed in the restructuring of the portfolio… Sale of 42.5% stake in the Pandora joint venture Sale of resources within Amandelbult mining right • Signed a sale and purchase agreement to dispose • On 11 October announced disposal of mineral
Slide 42: Footnotes
FOOTNOTES (1) Unit cost on a produced metal in concentrate basis (2) Lost time in jury frequency rate (LTIFR) based per 200,000 hours worked (3) TRCFR is total recordable case frequency rate (4) 2014 LTIFR normalised for the 5 month long strike (5) Total platinum production is on a metal in concentr
Anglo American Platinum — FY2016 Earnings Presentation on 6ix