African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — 1H F2016 Earnings Presentation
32 slides from African Rainbow Minerals's earnings presentation, 2016
Slide 1: ARM achieved very good unit cash cost control (Chairman quote)
“ARM achieved very good unit cash cost control at most operations and maintained a robust financial position in a low commodity price environment.” Patrice Motsepe Executive Chairman
Slide 2: Overview and strategy
Khumani Iron Ore Mine Overview and strategy Patrice Motsepe, Executive Chairman
Slide 3: Disclaimer
Disclaimer Certain statements in this report constitute forward looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, pla
Slide 4: Group structure
Group structure 100% 100% 10% 51% 100% 100% 14.6% Gold: Platinum Ferrous Coal Copper Exploration Harmony PGMs Iron Ore Coal Copper PGMs 41.5% Modikwa1 50% Khumani 20% Participating Coal 40% Lubambe and 51% Two Rivers2 50% Beeshoek Business Lubambe Extension Manganese Ore Nickel, PGMs & Chrome Mangan
Slide 5: Salient features
Salient features Headline earnings decreased by 51% to R507 million (1H F2015: R1 026 million). Headline earnings per share were 233 cents compared to 473 cents in the corresponding period. Basic earnings were a loss of R996 million (1H F2015: R801 million basic earnings) and were impacted mainly by
Slide 6: Salient features
Salient features Capital expenditure reduced by 27% to R589 million (1H F2015: R810 million) while attributable capital expenditure at ARM Ferrous was R779 million (1H F2015: R802 million). ARM’s financial position remains robust despite the commodity market downturn. The Lubambe Copper Mine plan is
Slide 7: Salient features
Salient features Ministerial consent was received in December 2015 for the disposal of ARM’s 50% shareholding in Dwarsrivier Chrome Mine. Completion of the transaction is expected to occur by 31 March 2016. ARM and Impala Platinum have agreed to increase ARM’s shareholding in Two Rivers Mine from 51
Slide 8: Safety
Safety ARM maintained a good safety record in the six months under review. The Lost Time Injury Frequency Rate (LTIFR) for 1H F2016 improved to 0.32 per 200 000 man-hours (1H F2015: 0.40). Beeshoek Mine completed 13.5 years fatality-free. Modikwa, Lubambe and Black Rock mines achieved two, three and
Slide 9: Headline earnings per share
Headline earnings per share Headline earnings per share (cents) 1 200 1 081 1 084 1 000 937 816 800 678 654 600 473 400 330 233 200 0 F2012 F2013 F2014 F2015 F2016 First half (1H) Second half (2H) 9
Slide 10: EBITDA margins
EBITDA margins Segmental EBITDA margins by commodity (%) 39% Iron Ore 36% 37% Coal (GGV) 30% 28% PGM 22% 18% Chrome* 19% 22% Manganese 14% 17% Nickel (3%) -21% Copper** (41%) (50%) (40%) (30%) (20%) (10%) 0 10% 20% 30% 40% 50% 1H F2015 1H F2016 * The Chrome Division includes Dwarsrivier Chrome Mine
Slide 11: ARM strategy
ARM strategy Quality growth continues in Operational ARM’s existing efficiencies portfolio of commodities Acquisitions and Africa partnerships Entrepreneurial Profit and cash flow Owner operator Partner of choice management focused World-class Partnering with communities, workers Employer of choice
Slide 12: Operational efficiencies
Operational efficiencies ARM’s objective is to ensure that all operations are below the 50th percentile Two Rivers Platinum Lubambe Copper** Goedgevonden Coal PCB Coal Operations Cato Ridge Ferromanganese * Manganese Ore Nkomati Nickel Khumani Iron Ore Beeshoek Iron Ore Modikwa Platinum Commodity Un
Slide 13: Operational review
Nkomati Nickel Mine Operational review Mike Schmidt, Chief Executive Officer
Slide 14: Headline earnings/(loss) by operation/division
Headline earnings/ (loss) by operation/ division six months ended 31 December R million 2015 2014 % change ARM Platinum (9) 277 (103) Two Rivers Mine 155 176 (12) Modikwa Mine (47) - - Nkomati Mine (117) 101 (216) ARM Ferrous 599 833 (28) Iron ore division 478 591 (19) Manganese division 97 236 (59)
Slide 15: Contribution of commodities in our diversified portfolio
Contribution of commodities in our diversified portfolio Segmental EBITDA split by commodity (%) 100% 3% 5% 6% 4% 8% 12% 11% 6% 20% 14% 80% 11% 10% 60% 57% 45% 55% 59% 44% 71% 40% 8% 10% 20% 5% 8% 24% 26% 17% 16% 19% 13% 0% -2% -20% F2011 F2012 F2013 F2014 F2015 1H F2016 Copper Coal (GGV) Chrome Man
Slide 16: Changes in average realised US Dollar prices and average exchange rate
Changes in average realised US Dollar prices and average exchange rate 1H F2016 versus 1H F2015 average realised US Dollar prices and average exchange rate changes (%) 24% Increase Decrease (13%) (20%) (24%) (26%) (26%) (29%) (34%) (33%) (39%) (43%) Nickel Rhodium Export Export Platinum Chrome Palla
Slide 17: Changes in sales volumes
Changes in sales volumes 1H F2016 versus 1H F2015 sales volume changes (%) Increase 48% Decrease 27% 14% 9% 10% 4% 6% 3% (8%) (29%) (33%) GGV Manganese Copper Manganese Nkomati Iron Nickel PGM Dwarsrivier Two GGV export alloys ore* chrome ore chrome ore Rivers Eskom coal concentrate chrome coal conc
Slide 18: Unit cost changes by commodity
Unit cost changes by commodity 1H F2016 versus 1H F2015 on-mine unit production cost changes (%) Increase Copper * (23%) Decrease Nickel ** (12%) Inflation (CPI) at 5% Iron ore (12%) PGM: Two Rivers and Modikwa (1%) Coal: GGV and PCB 0% Manganese ore 4% Manganese alloys *** 16% (30%) (25%) (20%) (15
Slide 19: Segmental profit variance analysis
Segmental profit variance analysis Unaudited profit variance analysis – Profit from operations before special items (R million) Factors subject to market conditions Factors subject to management’s control 4 000 1 848 (2 755) 3 500 Increase 3 000 Decrease 2 500 2 000 1 687 1 500 260 1 051 1 000 (206)
Slide 20: 1H F2016 unit cash cost by operation
1H F2016 unit cash cost by operation Unit US Dollar Unit Unit Rand Cost Cost* ARM Platinum Two Rivers Mine per 6E ounce 5 368 394 Modikwa Mine per 6E ounce 7 970 586 C1 cash cost per pound net of Nkomati Mine 60 4.40 by products ARM Ferrous Iron ore division per tonne (FOB)** 402 29.55 Manganese ore
Slide 21: ARM Ferrous: Iron ore
ARM Ferrous: Iron ore Iron ore operational performance (100% basis) The iron ore operations achieved a 12% 1H 1H % reduction in on-mine unit costs. F2016 F2015 change Export sales 000 6 558 5 999 9 volumes tonnes Local sales 000 1 362 1 461 (7) volumes tonnes Change in on-mine Khumani increased its
Slide 22: ARM Ferrous: Manganese ore
ARM Ferrous: Manganese ore Manganese ore operational performance (100% basis) On-mine unit production costs increased by only 4% compared to a 19% increase in 1H 1H 1H % F2016 F2015 change F2015. Export sales 000 1 433 1 383 4 volumes tonnes Local sales 000 38 39 (3) volumes* tonnes Change in unit T
Slide 23: ARM Ferrous: Manganese alloys
ARM Ferrous: Manganese alloys Manganese alloys operational performance (100% basis) Sales volumes have been reduced as a result of a decision to close down uneconomical 1H 1H % F2016 F2015 change furnaces. 000 Sales volumes 80 112 (29) tonnes Change in unit % 16 4 production costs Capital Rm 2 17 (8
Slide 24: ARM Platinum: PGM
ARM Platinum: PGM PGM operational performance (100% basis) Good unit cost control was achieved at the Modikwa and Two Rivers mines. 1H 1H % F2016 F2015 change Production 000 oz 437 207 396 813 10 Modikwa Mine production volumes and unit costs are improving steadily. Modikwa cash cost R/oz 6E 7 970 8
Slide 25: ARM Platinum: Modikwa Mine restructuring
ARM Platinum: Modikwa Mine restructuring North 1 Shaft is performing well and commissioned two new operating levels with conveyor belts. Equipping of South 2 Shaft is accelerating and is expected to commission in May 2016. Mining at South 1 Shaft will be phased out over time and the labour will be r
Slide 26: ARM Platinum: Nkomati Mine
ARM Platinum: Nkomati Mine Nickel C1 cash costs net of by-products All underground mining was stopped in 1H F2016 1H F2015 % change December 2015. On-mine cash cost US$/lb 4.54 6.07 (25) Off-mine cash cost US$/lb 2.78 2.56 9 By-product credits US$/lb (2.92) (3.63) (20) C1 cash cost US$/lb 4.40 5.00
Slide 27: ARM Coal: GGV and PCB
ARM Coal: GGV and PCB GGV and PCB operational performance (100% basis) GGV Mine reduced production volumes due to oversupply in the seaborne market and 1H 1H % F2016 F2015 change mining through a lower seam width area. Total export sales Mt 8.93 8.93 - volumes Total Eskom sales Mt 2.44 2.09 17 volum
Slide 28: ARM Copper: Lubambe Mine
ARM Copper: Lubambe Mine Lubambe Mine operational performance (100% basis) A number of plans for the way forward for the mine are being evaluated to reduce cash 1H F2016 1H F2015 % change requirements from the partners and preserve Milled tonnes 000t 715 860 (17) its resource value. Mill head grade
Slide 29: ARM Copper: Lubambe Mine
ARM Copper: Lubambe Mine From March 2016 tonnes milled will be reduced to 80 000 tonnes per month yielding 14 000 tonnes of copper per annum for 2-3 years. All ramp waste capital development has been stopped. The mine’s labour complement has been reduced. Mine ramp up to full production is expected
Slide 30: Net debt to equity ratio
Net debt to equity ratio 31 December 31 December R million 30 June 2015 2015 2014 Short-term borrowings (1 357) (1 557) (1 371) Long term borrowings (2 767) (2 363) (2 511) Total gross borrowings (4 124) (3 920) (3 882) Cash and cash equivalents 1 444 1 976 2 257 Net debt (2 680) (1 944) (1 625) Net
Slide 31: Capital allocation: segmental analysis
Capital allocation: segmental analysis Capital expenditure (R million)* 5 000 Actual 1H F2016: R1 368 million 4 500 4 321 4 000 3 489 3 500 3 326 3 000 2 918 2 500 2 400 2 300 2 200 2 000 1 500 1 000 500 0 F2012a F2013a F2014a F2015a F2016e** F2017e** F2018e** ARM Platinum ARM Ferrous ARM Coal ARM C
Slide 32: Thank you
We do it better FaxtM African Rainbow Minerals ES Thank you 32
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