Valterra Platinum Limited · JSE:VAL
Valterra Platinum — Anglo American Platinum — H1 2018 Earnings Presentation
51 slides from Valterra Platinum's earnings presentation, Jul 23, 2018
Slide 1: Anglo American Platinum 2018 Interim Results Presentation
ANGLO AMERICAN PLATINUM 2018 INTERIM RESULTS PRESENTATION 23 July 2018 Mogalakwena mine
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American Platinum Limited (“Anglo American Platinum”) and comprises the written materials/slides for a presentation concerning Anglo American Platinum. By attending this presentation and/or reviewing the slides you agree t
Slide 3: 2018 Interim Results Agenda
2018 INTERIM RESULTS AGENDA 1. Safety & sustainability performance Chris Griffith 1. Operational performance Chris Griffith 2. Financial results Ian Botha 3.P G PGM market review Chris Griffith M 3. Positioning for the future Chris Griffith 3
Slide 4: Safe Production Delivering Value
SAFE PRODUCTION DELIVERING VALUE Strong operational performance ✓ Increasing margin ✓ Improving return on capital ✓ PGM production increase EBITDA margin ROCE 4% 21% 22% for H1 2018 up from 15% in H1 2017 up from 9% Generating cash ✓ Strong balance sheet ✓ Industry leading returns ✓ Free cash flow f
Slide 5: Strong Operating & Financial Results… & We've Been Busy
STRONG OPERATING & FINANCIAL RESULTS…& WE’VE BEEN BUSY Sale of RBP shares ✓ Acquisition of Glencore’s interest in Mototolo ✓ R390m R0.8bn gross proceeds from placement upfront consideration and estimated nominal deferred consideration at R1bn, (total NPV R1.5bn) (25) Disposal of BRPM interest ✓ Laun
Slide 6: Safety & Sustainability Performance
2018 INTERIM RESULTS SAFETY & SUSTAINABILITY PERFORMANCE Chris Griffith Monitoring readings on the copper coolers on the Polokwane smelter furnace
Slide 7: Safety Indicators Materially Improved
SAFETY INDICATORS MATERIALLY IMPROVED Fatalities & total recordable case injury frequency rate (TRCFR)(2) TRCFR improvement 8.36 TRCFR 8.37 42% per 1 million hours worked, but sadly one loss of life through bee stings 5.69 5.08 Safety turnaround in place: 2.93 • Management commitment to safety and e
Slide 8: Re-imagining Mining to Improve People's Lives
RE-IMAGINING MINING TO IMPROVE PEOPLE’S LIVES PGMs allow solutions to global problems How we’re doing: ESG(3) performance Air quality • Autocatalysis • Heat and energy decarbonisation through renewable hydrogen production • Carbon capture and usage Top 2 mining company globally in ISS Oekom Corporat
Slide 9: Operational Performance
2018 INTERIM RESULTS OPERATIONAL PERFORMANCE Chris Griffith 300 tonne haul truck at Mogalakwena
Slide 10: Record Production from Mogalakwena
RECORD PRODUCTION FROM MOGALAKWENA Total PGM Production (‘000 ounces) PGM production increase 492 539 641 19% +19% 73 EBITDA margin 62 58 251 295 45% 226 Economic free cash flow(5) 273 208 226 R2.1bn H1 2016 H1 2017 H1 2018 at AISC(4) of $253/ platinum ounce sold, despite build up of WIP inventory P
Slide 11: Mogalakwena – Highlighting Underlying Performance
MOGALAKWENA – HIGHLIGHTING UNDERLYING PERFORMANCE Mining Concentrating Value enhancing Shovel loading rate (tonnes / hr) Tonnes milled (million) PGM ounces (‘000 ounces) +34% +35% 721 870 980 1,100 c.1,150 2,322 c.+60% 2,153 6.9 2,066 6.9 126 6.3 5.8 116 1,916 5.0 104 89 509 452 396 1,727 327 6.3 6.
Slide 12: Amandelbult Turn Around Progressing
AMANDELBULT TURN AROUND PROGRESSING Total PGM Production (‘000 ounces) PGM production increase 409 398 433 9% as ramp-up of Dishaba UG2 continues +9% EBITDA margin 110 99 100 103 17% 96 up from 3% 94 Economic free cash flow(5) 214 204 220 R159m H1 2016 H1 2017 H1 2018 at AISC(4) of $891/ platinum ou
Slide 13: Amandelbult – Unlocking Full Value & Potential
AMANDELBULT – UNLOCKING FULL VALUE & POTENTIAL Chrome strategy driving value with …reducing AISC to target of …with more value delivery to steady mining improvement… $820 and generating cash… come through modernisation Chrome AISC $ / platinum ounce sold(4) Yield % 1. Develop Dishaba UG2 – utilising
Slide 14: Unki – Strong Production from Strategic Asset
UNKI – STRONG PRODUCTION FROM STRATEGIC ASSET Total PGM Production (‘000 ounces) Total PGM production increase 79 85 93 9% +9% 16 EBITDA margin 14 13 33 36 33% 30 26% normalised for sale of treasury bills(6) Economic free cash flow(5) 38 41 36 H1 2016 H1 2017 H1 2018 R311m at AISC(4) of $491/ platin
Slide 15: Joint Ventures & POC Increase Margins
JOINT VENTURES & POC INCREASE MARGINS Total PGM ounces produced H1 2018 EBITDA margin PGM production increase 1,308 1,395 27% +7% Impact of 14% 4% Mototolo ore from JVs and POC (excl. Bokoni) stockpile Joint venture and associates • Mototolo up 26% 1,091 • Modikwa up 6% 1,033 • Kroondal up 6% POC •
Slide 16: Refined Production and Sales Will Be Higher in H2
REFINED PRODUCTION AND SALES WILL BE HIGHER IN H2 PGM - M&C production, refined production, sales volumes & inventory Refined PGM production down Pt - Increase in WIP Drawdown in refined Pt 160 (40) 5% Sales volumes up (excl. trading) Dec 2017 June 2018 Dec 2017 June 2018 3% supported by draw down o
Slide 17: Financials
2018 INTERIM RESULTS FINANCIALS Ian Botha Mogalakwena mine
Slide 18: Strong Financials
STRONG FINANCIALS Headline earnings per share EBITDA Headline earnings (R/Share) 12.82 R6.8bn R3.4bn increase of 70% up 4.5x 12.00 ROCE (%) Net cash 2.85 3.93 Underlying (8) 22% R0.5bn Once-off 0.82 up from 9% from net debt of R1.8bn at 2017 accounting year end (1.08) entries H1 2017 H1 2018 …and de
Slide 19: Diversified PGM Dollar Prices and Cost Savings Driving Earnings
DIVERSIFIED PGM DOLLAR PRICES AND COST SAVINGS DRIVING EARNINGS EBITDA (R billion) H1 2018 vs. H1 2017 3.6 0.6 Pd 1.8 (1.0) 2.0 6.8 0.2 (0.6) 6.0 Rh 1.0 Stock count (1.4) movement Ir & Ru 0.7 4.0 Ni 0.4 Pt (0.3) 108 H1 2017 Price Currency CPI Costs & Associates H1 2018 volume 19
Slide 20: Increasing Mining and EBITDA Margins
INCREASING MINING AND EBITDA MARGINS H1 2017 H1 2018 15% 21% 34% 27% 23% 4% 22% 21% 15% 11% 11% 23% (9) POC JV mined share Own mines POC JV mined share Own mines 20
Slide 21: Continued Strong Cost Performance
CONTINUED STRONG COST PERFORMANCE R /Pt oz produced R /PGM oz produced Input cost inflation 3% 3% 4.8% 20,105 (10) 19,571 H1 2017 4.6% 9,265 2018 Guidance (11) 8,954 R19,600 – R20,200 per platinum ounce produced H1 2017 H1 2018 H1 2017 H1 2018 21
Slide 22: Continued Working Capital Reduction, Despite Temporary WIP Build-up
CONTINUED WORKING CAPITAL REDUCTION, DESPITE TEMPORARY WIP BUILD-UP Working capital reduction (R billion) Working capital days 2.5 33 Days (0.3) 2017 year end 26 Days 3.1 WIP (1.9) Measured ore stockpile 6.2 (0.7) Finished goods (1.1) 5.4 R1.8bn 2017 year end R1.8bn Customer prepayment R5.7bn 2017 y
Slide 23: Capital Higher in H1 2018 in Line with Guidance
CAPITAL HIGHER IN H1 2018 IN LINE WITH GUIDANCE (12) Capital expenditure (Rbn) H1 2018 capital expenditure 4.7 – 5.2 0.6 R1.8bn 0.8 – 1.0 SO2 abatement project R2.5bn 1.8 for 2018 to 2023 to achieve global best practice 3.3 – 3.6 0.1 1.3 0.4 Capitalised waste stripping 0.2 1.3 1.1 H1 2017 H1 2018 20
Slide 24: Strong Balance Sheet, Driven by Improving Cash Generation
STRONG BALANCE SHEET, DRIVEN BY IMPROVING CASH GENERATION Net (debt) / cash (Rbn) Stronger free cash flow (Rbn) R2.3bn improvement R1.3bn up from R(1.0)bn in H1 2017 0.5 4.1 1.4 0.3 2.3 1.2 1.1 2.3 1.1 0.9 (1.8) 1.8 1.9 2.1 R1.3bn FCF (0.4) (0.6) (0.8) R(1.0)bn (0.3) FCF (0.9) (1.9) (5.9) H1 2017 20
Slide 25: Disciplined Capital Allocation
DISCIPLINED CAPITAL ALLOCATION Capital allocation framework Balanced capital allocation R5.6bn • Free cash flow Cash flow Discretionary after capital sustaining options capital • Sustaining capex (R2.0bn) • Capitalised waste stripping Balance sheet flexibility to support • Dividend for H2 2017 paid
Slide 26: PGM Market Review
2018 INTERIM RESULTS PGM MARKET REVIEW Chris Griffith Palladium grain
Slide 27: Stronger Basket Price, Supported by Palladium and Rhodium
STRONGER BASKET PRICE, SUPPORTED BY PALLADIUM AND RHODIUM Indexed price (3 Jan 2017 = 100)(14) USD platinum price decrease 175 400 3% achieved prices year-on-year 150 300 USD basket price increase 125 200 26% achieved prices year-on-year 100 100 Rand basket price increase 75 0 Jan 2017 Apr 2017 Jul
Slide 28: Overall Outlook for 3E Demand Positive
OVERALL OUTLOOK FOR 3E DEMAND POSITIVE Platinum (net demand)(15) Palladium (net demand)(15) Rhodium (net demand)(15) Industrial Industrial Jewellery 21% 15% Industrial 29% 39% Investment 3% Autocatalyst Autocatalyst 85% Autocatalyst 79% 29% • Industrial demand strong • Automotive consumption very st
Slide 29: Positioning for the Future
POSITIONING FOR THE FUTURE Chris Griffith Head of the slot borer machine at Twickenham mine
Slide 30: Simplifying the Portfolio to Deliver Strong Returns
SIMPLIFYING THE PORTFOLIO TO DELIVER STRONG RETURNS Mototolo & Modikwa JV Mogalakwena Amandelbult Unki Processing Der Brochen Kroondal JV EBITDA margin ROCE Production in H1 of cash cost-curve 21% up from 15% in H1 2017 22% annualised, up from 70% including the exit of BRPM 9% in H1 2017 30
Slide 31: Our Differentiated Value Proposition
OUR DIFFERENTIATED VALUE PROPOSITION Quality assets & Capital discipline & Long term sustainability operational excellence shareholder returns 70% production in H1 of the cost Strong balance sheet and Project studies on value-add curve earnings growth optionality Only open-pit PGM mine of Focused ca
Slide 32: How We Create Value – What's Next for AAP
HOW WE CREATE VALUE – WHAT’S NEXT FOR AAP Our Strategy Launch of the AP Ventures fund in conjunction with the PIC • Built a strong track record as part of Anglo American Platinum’s Develop the market for PGM Investment Programme PGMs • Decision to separate the fund’s activities into an independent V
Slide 33: How We Create Value – What's Next for AAP
HOW WE CREATE VALUE – WHAT’S NEXT FOR AAP Our Strategy Focus on achieving greater operational excellence Develop the market for 1 Achieving world benchmark performance PGMs • Continuous improvement, pushing to, and beyond, world best benchmarks +31% +34% Tonnes loaded (mt) Mogalakwena rope shovel op
Slide 34: How We Create Value – What's Next for AAP
HOW WE CREATE VALUE – WHAT’S NEXT FOR AAP Our Strategy Mogalakwena expansion through a third concentrator Develop the market for • Conceptual project studies showing third concentrator most value PGMs accretive expansion option, in conjunction with continued operational excellence • Optimal value ac
Slide 35: How We Create Value – What's Next for AAP
HOW WE CREATE VALUE – WHAT’S NEXT FOR AAP Our Strategy Acquisition of Mototolo and integration with Der Brochen Develop the market for • AAP to purchase Glencore’s 39% interest in Mototolo JV PGMs • A high quality, fully mechanised operation • Secures significant infrastructure, allowing synergies b
Slide 36: Revised 2018 Guidance
REVISED 2018 GUIDANCE • Strong production performance in H1 results in an increase in guidance - PGM production of 4.85 to 5.10 million ounces (from 4.75 to 5.00 million ounces) - Platinum production of 2.40 to 2.45 million ounces (from 2.35 – 2.40 million ounces) - Palladium production remains betw
Slide 37: To Conclude…
TO CONCLUDE… ✓ Overall safety performance improved ✓ Strong operational performance ✓ Industry leading returns to shareholders ✓ Simplification and enhancement of the portfolio for best value ✓ On a pathway to deliver next phase of value 37
Slide 38: Q&A
Q&A Run-of-mine stockpile area at Mogalakwena North concentrator
Slide 39: Appendix
APPENDIX Lab processor at PMR
Slide 40: Focus Remains on Health, Environment & Social Investment
FOCUS REMAINS ON HEALTH, ENVIRONMENT & SOCIAL INVESTMENT Tuberculosis (TB) deaths and TB incidence rates (per 100,000) TB incidence rate reduction 60 1,020 987 53% 1,000 50 National average (781) to 271 per 100,000 as at end of May 51 800 2018 660 600 40 582 Level 3-5 environmental 400incidents(16)
Slide 41: Net Debt and Cash Flow by Mine (Based on Sold Volumes)
NET DEBT AND CASH FLOW BY MINE (BASED ON SOLD VOLUMES) (2.0) (0.4) 5.8 (1.4) 0.9 (0.9) 0.5 1.1 (0.8) (0.6) (1.8) R1.3bn Investment in Net debt 100% Economic Economic Cash tax and Cash from SIB and Project associates, Free cash Customer Net proceeds Net cash Operation December Operating interest free
Slide 42: Cost Breakdown
COST BREAKDOWN Costs reflective of AAP Own mined and Joint Venture share of production and costs at operations. Excludes all purchase of concentrate costs and volume, overhead and marketing expenses. 2015 Cost base (Rbn) Volum e % PGM volum e (koz) Labour Contractors Materials Utilities Sundries Ope
Slide 43: Momentum Building for Fuel Cells and Hydrogen
MOMENTUM BUILDING FOR FUEL CELLS AND HYDROGEN • Hyundai teams with Audi on fuel cells - Automakers will share patent licensing and OEMs parts to streamline costs continue • GM to develop fuel cells for aircraft - Part of their strategy to rapidly reduce fuel investing cell costs for deployment in th
Slide 44: Pt Demand Balanced Across Key Demand Segments
Pt DEMAND BALANCED ACROSS 3 KEY DEMAND SEGMENTS Gross demand 2018 (000 ounces)(19) Gross platinum demand down Pt Pd 3.2% year-on-year Industrial Jewellery Industrial 27% 30% 20% Gross palladium demand up 2.2% year-on-year Investment 3% Autocatalyst Gross rhodium demand down Autocatalyst 40% 80% 3.4%
Slide 45: Automotive PGM Demand to Continue to Grow
AUTOMOTIVE PGM DEMAND TO CONTINUE TO GROW Global light duty automotive sales outlook (million units)(20) Diesel car sales decline 96 million 112 million 1.9% Pd CAGR over 2018-2025 Pure electric Hybrid 22m Rh 5m Hybrid Gasoline/hybrid sales increase Pd 72m Gasoline 74m 3.0% CAGR over 2018-2025 Rh To
Slide 46: Pt Demand from Automotive Sector Resilient
Pt DEMAND FROM AUTOMOTIVE SECTOR RESILIENT Platinum auto demand split(20) Forecast platinum auto demand(21) Total platinum demand decrease 0.5% CAGR over 2018-2025, excluding Europe Light Global Heavy Duty Diesel impact of substitution Duty Diesel c.3 Moz 15% 50% Global Heavy duty diesel outlook Lig
Slide 47: Industrial Demand Remains Strong
INDUSTRIAL DEMAND REMAINS STRONG Net demand 2018 (000 ounces)(19) Platinum outlook Pt Pd positive following 12% growth in 2017 Other Chemical 15% Chemical 25% 35% Other 40% Palladium outlook neutral Glass 15% Electrical 25% Rhodium outlook Fuel Dental cells Electrical 25% 2% Petroleum & gas-to-liqui
Slide 48: Jewellery: 2018 Mixed, Outlook More Positive
JEWELLERY: 2018 MIXED, OUTLOOK MORE POSITIVE Net demand 2018 (000 ounces)(22) China remains challenging short term ROW India 4% Europe 10% negative 11% Japan 6% Europe, Japan, North America North America neutral 14% Strong growth from India China 55% strong positive 48
Slide 49: Consistent Investment Demand for Three Decades
CONSISTENT INVESTMENT DEMAND FOR THREE DECADES Net platinum investment demand (000 ounces)(23) Total platinum investment 900 +350 koz 800 in 2017 700 600 Total palladium disinvestment 500 400 300 -365 koz in 2017 200 100 Growth outlook 0 -100 positive 1985 1987 1989 1991 1993 1995 1997 1999 2001 200
Slide 50: 3E Primary Supply to Remain Stable
3E PRIMARY SUPPLY TO REMAIN STABLE 3E Primary supply (000 ounces)(24) Current production outlook negative 2018-2025 Replacement capex 13,407 unlikely to compensate for declines in current production profile Processing capacity, water and mine economics to act as 2017 2018 2025 Base Replacement Expan
Slide 51: Foot Notes
FOOT NOTES (1) Free cash flow is defied as cash flow from operations, less SIB and waste capital, less project capital, less cash tax and net interest paid, less investment in associates, funding and other. (2) TRCFR is a measure of the rate of all injuries requiring treatment above first aid per 1,
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