Tharisa Plc · JSE:THA
Tharisa — H1 FY2017 Earnings Presentation
38 slides from Tharisa's earnings presentation, May 2017
Slide 1: Interim Results May 2017
INTERIM RESULTS ESULTS MAY 2017
Slide 2: Disclaimer
DISCLAIMER These Presentation Materials are for information purposes only and must not be used or relied upon for the purpose of making any investment decision or engaging in any investment activity. Whilst the information contained herein has been prepared in good faith, neither Tharisa plc (the “C
Slide 3: Introduction to Tharisa
INTRODUCTION TO THARISA UNIQUE APPROACH . Co-producer of PGMs and chrome ‒ Global top 5 producer of chrome concentrates LOW COST OPERATION . Lowest cost quartile in the industry ‒ Shallow, mechanised long life open pit HIGHLY CASH GENERATIVE . Major mine development capital investment complete . Ann
Slide 4: Tharisa's Journey
THARISA’S JOURNEY DISCOVERING DEVELOPING DELIVERING SENIOR CAPITAL SEED CAPITAL PRE IPO LISTING TOTAL DEBT FUNDING US$65m US$245m US$48m US$482m US$123m H1 2004 2006 2008 2009 2011 2012 2013 2014 2016 2017 PROSPECTING PROSPECTING MINING FIRST GENESIS VOYAGER CHALLENGER LISTED ON JSE LISTED ON LSE RE
Slide 5: Investment Case
INVESTMENT CASE EV/EBITDA PE AT CONSENSUS (CY2017E) 45 45 24.9 38.9 21.5 33.7 13.3 10.2 9.4 9.1 8.2 7.7 6.8 6.1 10.8 11.4 9.6 4.1 US$1104 US$11323.9 US$1103 US$885 4.7 US$736 8.3 5.3 5.9 5.9 6.3 2.4 3.4 Tharisa ARM Anglo Exxaro Kumba Rio Tinto South 32 BHP Billiton Glencore Amplats Northam Implats R
Slide 6: Operational Highlights
OPERATIONAL HIGHLIGHTS REEF MINED CHROME CONCENTRATE PRODUCTION ↑3.8% ↑5.4% 2.45 Mt 636.8 kt (2016: 2.36 Mt) (2016: 604.4 kt) PGM PRODUCTION SPECIALTY GRADE PRODUCTION ↑15.2% ↑44.1% 69.1 koz 152.5 kt (2016: 60.0 koz) (2016: 105.8 kt) 6
Slide 7: Improved Productivity
IMPROVED PRODUCTIVITY REEF MINED ↑3.8% PGM PRODUCTION ↑15.2% CHROME PRODUCTION ↑5.4% Mtpa 5PGE+Au kozpa Mtpa 1.3 4.8 5.0 1.2 147.4 1.1 1.1 4.2 1.1 3.9 132.6 3.3 118.0 78.2 57.4 2.4 69.1 0.6 FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017 FY2013 FY2014 FY2015 FY2016 FY2017 7
Slide 8: Financial Review
FINANCIAL REVIEW 8
Slide 9: Results Highlights
PGM BASKET PRICE CHROME CONCENTRATE PRICE RESULTS HIGHLIGHTS US$760/oz (2016: US$686/oz) ↑10.8% US$278/t ↑162.3% (2016: US$106/t) REVENUE NET CASH GENERATED FROM OPERATIONS ↑103.6% ↑142.9% US$175.1m US$44.2m (2016: US$86.0m) (2016: US$18.2m) EBITDA HEPS ↑451.0% ↑1 500.0% US$81.0m US$ 16 cents (2016:
Slide 10: Strong Financial Performance
STRONG FINANCIAL PERFORMANCE GROUP REVENUE ↑103.6% EBITDA ↑451.0% HEPS ↑1 500.0% 100 80.00% 25 US$ millions US$ millions US$ cents 78.00% 300 .0 50.00% 76.00% 74.00% 47.0% 45.00% 90 72.00% 70.00% 20 81.0 68.00% 16 250 .0 240.7 246.8 80 66.00% 64.00% 15 40.00% 62.00% 215.5 219.6 60.00% 58.00% 70 56.0
Slide 11: Summary of Results
SUMMARY OF RESULTS INCOME STATEMENT HIGHLIGHTS SEGMENTAL ANALYSIS PGMs CHROME US$ millions H1 FY2017 H1 FY2016 Change US$ millions H1 FY2017 H1 FY2016 H1 FY2017 H1 FY2016 Revenue 175.1 86.0 103.6% Gross profit 19.0 12.1 63.4 9.0 Gross profit 82.4 21.1 290.5% Gross profit margin 44.5% 33.8% 47.8% 17.
Slide 12: Increasing Margins
PGM SHARED COSTS CHROME SHARED COSTS INCREASING MARGINS 25% (2016: 50%) 75% (2016: 50%) PGM REVENUE AND GROSS PROFIT MARGIN CHROME REVENUE AND GROSS PROFIT MARGIN US$ millions US$ millions 170.4 ,180 .0 70.00% 90.0 0 70.00% 83.1 81.5 161.2 163.7 ,160 .0 80.0 0 60.00% 60.00% 70.0 0 70.4 ,140 .0 138.1
Slide 13: Funding
ESTIMATED NEW FLEET FUNDING REPLACEMENT COST c. US$135.0m CURRENT OWNER MINING TRANSITION US$ millions H1 FY2017 FY2016 US$ millions Total interest bearing debt 38.4 67.1 Fleet purchase 22.3 Long term 10.5 24.0 Lease equipment (approximate capital portion)** 6.3 Short term* 27.9 43.1 28.6 Debt servi
Slide 14: Strong Cash Flow Generation
STRONG CASH FLOW GENERATION SUMMARISED CASH FLOW STATEMENT OPERATIONALLY CASH GENERATIVE US$ millions US$ millions H1 FY2017 H1 FY2016 Cash flow from operating activities 44.2 18.2 44.2 Investing cash flows (8.8) (6.6) 28.8 Financing cash flows (24.9) (23.6) 15.4 18.2 Net increase/(decrease) in cash
Slide 15: Costs in the Lowest Quartile
STRIPPING RATIO AVERAGE EXCHANGE RATE COSTS IN THE LOWEST QUARTILE 8.4 m3:m3 ZAR:US$ 13.6 ↓9.3% (2016: 6.8 m3:m3) (2016: 15.0) UNIT COSTS CASH COST PER TONNE MILLED (US$) H1 FY2017 H1 FY2016 Change All in cost per Pt ounce sold (1 123) 402 - All in cost per 42% chrome tonne sold 88 85 3.5% 259.0 174
Slide 16: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION STRONG BALANCE SHEET TREASURY AND WORKING • Comfortable debt to CAPITAL equity ratio – target of • Maintain a buffer against 15.0% commodity price • No hedges on production volatility • Ensure ready access to working capital SHAREHOLDER RETURNS GROWTH OPPORTUNITIES • R
Slide 17: Operational Review
OPERATIONAL REVIEW 17
Slide 18: Safety
SAFETY COMPARATIVE LTIFR RATE (March 2017) SAFETY AND HEALTH A PRIORITY Per million hours worked . Safety remains a top priority and Tharisa strives for zero harm . Lost Time Injury Frequency Rate (LTIFR) of 0.17 per 200 000 25.00 man hours worked 20.00 15.00 10.00 5.00 0.00 Tharisa Minerals 18
Slide 19: Operational Highlights
OPERATIONAL HIGHLIGHTS KEY OPERATIONAL METRICS FY2017 GUIDANCE H1 FY2017 H1 FY2016 Change Reef mined kt 2 449.1 2 358.6 3.8% MINERAL RESOURCE MINERAL RESOURCE MINERAL RESERVE Stripping ratio m3:m3 8.4 6.8 23.5% AND RESERVE 877.7 Mt 98.9 Mt 1.58 g/t 6PGE+Au 1.50 g/t 5PGE+Au 20.5% Cr2O3 20.1% Cr2O3 PG
Slide 20: Transition to Owner Mining Model
TRANSITION TO OWNER MINING MODEL INHOUSE INSOURCING Mining Expertise Drilling Plant & Equipment Skills Mine management 184 yellow ~900 mining fleet machines employees Geologists transferred In-pit supervisors Consideration US$22.3m US$6.3m Surveyors Financed Deferred Ongoing Engineers Cash by paymen
Slide 21: Owner Mining Model
OWNER MINING MODEL INSOURCING Effective date Dependent on fulfilment of conditions precedent with a long stop date of 30 September 2017 Conditions precedent • South African Competition Authorities approval • Extract shareholder approval • MCC shareholder approval • Approval of Tharisa’s senior debt
Slide 22: Chrome and PGM Market Dynamics
CHROME AND PGM MARKET DYNAMICS 22
Slide 23: PGM Market
PGM BASKET PRICE PGM MARKET US$760/oz ↑10.8% (2016: US$686/oz) PLATINUM DEMAND AND SUPPLY 2017 THARISA’S PGM BASKET . Demand is driven by the autocatalyst, jewellery, industrial Ir Au and investment sectors Rd 4.5% 0.2% 9.4% . Supply expected to be weaker due to lower price, with lower capital inves
Slide 24: Stainless Steel – Tharisa's Ultimate Market for Chrome
STAINLESS STEEL – THARISA’S ULTIMATE MARKET FOR CHROME GLOBAL CRUDE STAINLESS STEEL PRODUCTION GLOBAL [Mt] ~7.5% CHINA CHINA 50 ~3% ~12% 45 40 35 30 25 20 15 10 5 0 2008 2009 2010 2011 2012 2013 2014 2015 2016(e) 2017(f) Source: ISSF 24
Slide 25: Chrome Market
CHROME CONCENTRATE CHROME CONCENTRATE PRICE PRICE CHROME MARKET Q1: US$250/t Q2: US$338/t US$278/t ↑162.3% (2016: US$106/t) DEMAND AND SUPPLY 2017 THARISA CHROME GRADES . Demand for metallurgical grade chrome concentrate is driven Specialty CHEMICAL GRADE FOUNDRY GRADE by its use in the manufacture
Slide 26: Outlook
OUTLOOK 26
Slide 27: Uniquely Positioned for the Future
UNIQUELY POSITIONED FOR THE FUTURE LEADING NATURAL RESOURCES GROUP Globally significant diversified low cost operations Record financial and operational period, robust business model LEVERAGING GROWTH STRATEGIC OBJECTIVE INNOVATION MARKETING AND CAPITAL DISCIPLINE INITIATIVES LOGISTICS PLATFORM Grow
Slide 28: Delivering on Our Promises
DELIVERING ON OUR PROMISES • Ore mined up 3.8% IMPROVED • PGM concentrate produced 15.2% higher VOLUMES • Chrome concentrate produced 5.4% higher RECOVERIES • PGM recovery improved to 78.3% UP • Chrome recovery improved to 63.4% • EBITDA up 451.0% RECORD FINANCIALS • HEPS climbs 1 500% CASH COSTS •L
Slide 29: Annexures
ANNEXURES 29
Slide 30: Corporate Structure
CORPORATE STRUCTURE ONE YEAR LSE TOP SHAREHOLDINGS JSE % INFORMATION PRIMARY LISTING STANDARD LISTING MAIN (11 MAY 2017) (11 MAY 2017) BOARD Medway Developments 46.3 Short name THA THS Rance Holdings 15.8 Price ZAR21.00 GBp125.00 High – 52 week ZAR29.74 GBp165.00 Fujian Wuhang Stainless Steel 10.9 L
Slide 31: Corporate Structure
CORPORATE STRUCTURE Tharisa(1) (Cyprus) 100% 100% 100% 74% Arxo Resources Dinami Arxo Logistics Tharisa Minerals (2) (Cyprus) (Guernsey) (South Africa) (South Africa) TRADING TRADING LOGISTICS SERVICES MINING AND PROCESSING 100% Arxo Metals (South Africa) BENEFICIATION AND R&D Tharisa Mine (1) Prima
Slide 32: Value Chain
VALUE CHAIN THARISA MINERALS RESOURCE MINING PROCESSING 877.7 Mt resource 18 year open pit LOM 400 ktpm nameplate capacity MID TIER OPEN PIT PGM AND 98.9 Mt reserve of which 80.2 Mt 40 year underground extension Genesis Plant (100 ktpm) CHROME CONCENTRATE CO- open pit Voyager Plant (300 ktpm) PRODUC
Slide 33: Mining Five MG Seams
MINING FIVE MG SEAMS RESOURCES AND RESERVES GENERALISED CROSS SECTION SHOWING THE MG CHROMITITE LAYERS AT PLANNED DEPTH . Steady state mining rate of 5.0 Mtpa with an average stripping ratio of Bench = 20m 9.7 (m3:m3 basis) MINERAL RESOURCE 200m . 877.7 Mt Reef dip east: 9-12° . 1.58 g/t 6PGE+Au Ree
Slide 34: Innovative Approach
— INNOVATIVE APPROACH Xn iTi\e m SPIRALS 4 PRIMARY MILLING a" FLOTATION 4 SPIRALS L, <a J I\e al CIO) ai TAILINGS : ee DISPATCH <— SECONDARY ayy, =~ = MILLING thar'sa
Slide 35: Processing
PROCESSING KEY FACTS INDEPENDENT PROCESSING PLANTS . Process plants are owned and operated by Tharisa GENESIS PLANT . Each plant operates independently, . Capacity: 100 ktpm ROM providing flexibility and limiting potential . Processes reef layers with lower process disruptions PGM and higher chromit
Slide 36: Marketing, Sales and Logistics
MARKETING, SALES AND LOGISTICS MARKETING AND SALES LOGISTICS . PGM concentrate offtake . Integrated platform to agreement with Impala mitigate logistics risks . Agency agreement with and providing a Noble Resources for competitive advantage metallurgical chrome . Road transportation concentrate of P
Slide 37: Notes
Notes
Slide 38: Tharisa
tharisa