Slide 1: Annual Results presentation for the year ended 31 December 2019
Annual Results presentation for the year ended 31 December 2019 MERAFE RESOURCES 1 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
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: Agenda
Agenda KEY FEATURES 1 MARKET REVIEW 2 OPERATIONAL REVIEW 3 FINANCIAL REVIEW 4 DIVIDEND 5 OUTLOOK 6 MERAFE RESOURCES 3 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 4: Key features
MERAFE RESOURCES 4 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 5: Disappointing performance reflecting difficult market conditions
Disappointing performance reflecting difficult market conditions SAFETY OPERATIONAL • Regrettably, 1 fatality • Lower ferrochrome production • TRIFR improved by 24% year on year • Costs under pressures, especially from administered prices MARKET FINANCIAL • Global uncertainty persists dampening mark
Slide 6: Market review
MERAFE RESOURCES 6 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 7: 2019 prices under pressure
2019 prices under pressure UG2 Merchant prices Ferrochrome Merchant prices 49% - 70% European benchmark ferrochrome price (USD/t) (USc/lb) (USc/lb) 300 120 180 250 100 150 200 80 120 150 60 90 100 40 60 50 20 30 0 0 0 2017Q1 2017Q2 2017Q3 2017Q4 2018Q1 2018Q2 2018Q3 2018Q4 2019Q1 2019Q3 2019Q4 2020Q
Slide 8: China's market dominance entrenched
China’s market dominance entrenched Global stainless steel production (%) Global ferrochrome demand (%) 4,8 5,5 3,8 4,2 19,8 21,6 18,2 9,0 20,1 9,9 13,2 14,4 4,8 5,5 5,6 6,3 2019 2018 2019 2018 56,5 52,1 64,2 60,3 USA Western Europe Japan China Other Source for both charts: CRU MERAFE RESOURCES 8 RE
Slide 9: Growth in stainless steel production and ferrochrome demand
Growth in stainless steel production and ferrochrome demand Global stainless steel production (mt) Global ferrochrome demand (mt) 13,7 60 14 13,3 51,1 51,9 12,2 48,5 2,5 50 12 2,7 10,3 2,1 11,0 9,2 10 40 8 30 8,8 29,3 7,5 8,0 25,8 26,6 6 20 4 3,2 3,2 2,9 10 2 0,7 0,7 0,7 7,4 7,4 6,8 1,3 1,3 1,2 0 3,
Slide 10: Ferrochrome production responded to demand; Ore imports into China also increased
Ferrochrome production responded to demand; Ore imports into China also increased Global ferrochrome production (mt) Chrome ore imports into China (mt) 16 18 14,0 15,9 13,6 12,6 0,9 15 13,9 14,3 1,5 1,0 0,7 0,9 0,7 0,7 12 1,3 1,4 0,3 0,6 1,3 1,8 0,9 0,7 1,3 1,4 12 0,4 0,3 1,3 0,5 1,0 1,3 1,1 8 3,6 9
Slide 11: Operational review
MERAFE RESOURCES 11 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 12: The safety of all employees remains paramount
The safety of all employees remains paramount Total Recordable Injury Frequency Rate (TRIFR) 5 • Regrettably one fatality during 2019 4,17 4,15 3,74 • TRIFR improved to 2.56 from 3.39 in December 2018 4 3,39 • Safety of our employees remains a critical focus area with the goal of achieving zero harm
Slide 13: Several operational disruptions
Several operational disruptions Ferrochrome production (kt) 500 407 • Negative growth of 9% in ferrochrome production 395 393 377 371 400 to 371kt 300 • Electricity curtailments disrupted operations 200 • Community protests led to production stoppage • Cut-backs due to market conditions 100 0 FY 201
Slide 14: Costs continue to rise
Costs continue to rise Total production costs per tonne increased by 12%, influenced by: • Increase in reductants prices • Increase in labour costs, effective 1 July 2019 • Increase in electricity prices, effective 1 April 2019 • Lower production tonnages The following helped keep costs increases un
Slide 15: Financial review
MERAFE RESOURCES 15 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 16: Revenue
Revenue 4% decrease in revenue from prior year to R5.379bn • Ferrochrome revenue decreased by 8% to R4.455bn from prior year • Chrome ore revenue increased by 22% to R910m from prior year • A significant increase in chrome ore tonnes sold and a marginal decrease in ferrochrome volumes sold • Lower f
Slide 17: Earnings
Earnings • Headline loss per share of 1.8c for the year • Commodity prices key contributor to the loss HEPS full year (cents) 40 36 30 27 21 20 14 10 8 0 (2) (10) FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019 MERAFE RESOURCES 17 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 18: EBITDA under pressure
EBITDA under pressure Reconciliation EBITDA from Venture: 2018 vs 2019 120% 100% 8% 80% 60% (65%) (5%) 16% 40% (1%) 2% 1% (16%) (9%) 20% 100% 31% 0% EBITDA 2018 Volume - Cr Revenue prices Inflation Inventory NRV Foreign Standing Carbon tax Royalty tax Other EBITDA 2019 Ore adj exchange charges MERAF
Slide 19: EBITDA reconciliation to profit
EBITDA reconciliation to profit EBITDA reconciliation to profit (R’m) 500 392 (467) (1 846) (1 362) 0 (500) (1 000) 508 (1 500) 55 (3) (2 000) Merafe's share of Depreciation Impairment Net finance Current Deferred Net loss EBITDA @20.5% income tax tax after tax MERAFE RESOURCES 19 RESULTS PRESENTATI
Slide 20: Focus remains on driving efficiencies to counter negative macro influences
Focus remains on driving efficiencies to counter negative macro influences 2019 2018 Ferrochrome revenue R’m R’m Variance • Driven by lower prices and sales volumes Ferrochrome revenue 4 455 4 849 (8%) Chrome ore revenue Chrome ore revenue 910 747 22% • Driven by lower prices and higher sales volume
Slide 21: Balance sheet weighed on by increased inventory levels
Balance sheet weighed on by increased inventory levels As at As at 31 Dec 2019 31 Dec 2018 Inventories R’000 R’000 Decrease due to: Current assets • NRV adjustment of R133 million for the year • Closing FeCr finished goods of 131kt represent 4- Inventories 2 008 799 2 042 621 5 months stock Trade an
Slide 22: Generation of cash from operations
Generation of cash from operations Reconciliation of net cash (R’000) 1 250 000 1 000 000 750 000 (150 642) (531 473) (4 228) (1 374) 500 000 761 043 250 000 280 855 354 181 0 Opening Cash from Sustaining Dividend Repayment Other Closing cash * operating activities capex of borrowings cash * Include
Slide 23: Significant headroom on facilities
Significant headroom on facilities Venture Merafe Merafe (Merafe’s share) head office total 1. Merafe's 20.5% of the Venture’s As at 31 December 2019 R’m R’m R’m increased $175 million overdraft Closing cash 143 211 354 facilities 2. Merafe's 20.5% of the Venture's Cash and $100 million working over
Slide 24: Dividend
MERAFE RESOURCES 24 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 25: Dividend declarations
Dividend declarations • The Board has declared a gross cash final ordinary dividend of R100m • Final dividend amounts to 4c per share • Total dividend for the year is R100m (2018: R351m) • As a headline loss was generated, dividend based on availability of excess cash and solvency & liquidity consid
Slide 26: Outlook
MERAFE RESOURCES 26 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
Slide 27: Outlook
Outlook • Global uncertainty persists • Modest growth in stainless steel • No major expansionary projects planned • Capex budget earmarked for sustaining capex to maintain asset integrity and meet compliance requirements • Balance sheet remains ungeared with facilities headroom in excess of R1bn • F
Slide 28: MERAFE RESOURCES RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019
MERAFE RESOURCES 28 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2019