Kumba Iron Ore Limited · JSE:KIO
Kumba Iron Ore — FY2023 Earnings Presentation
48 slides from Kumba Iron Ore's earnings presentation, Feb 20, 2024
Slide 1: 2023 Annual results
KUMBA IRON ORE LIMITED 2023 Annual results 20 February 2024
Slide 2: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute an offer to sell or No assurance can be given that such future results will be achieved; actual events or the solicitation of an offer to buy shares in Kumba. Further, it does not constitute a results may differ ma
Slide 3: Agenda
Agenda Business overview Mpumi Zikalala Financial performance Bothwell Mazarura Looking ahead Mpumi Zikalala 3
Slide 4: 2023 business overview
2023 business overview Safety EBITDA Attributable free cashflow 0.98 TRIFR R45.7bn R14.9bn 2022: 1.55 TRIFR 2022: R37.3bn¹ 2022: R10.4bn Production Enduring stakeholder value Dividend declared 35.7Mt 2022: 37.7Mt R71.1bn 2022: R63bn R15.1bn 2022: R14.5bn 1. Adjusted EBITDA represents net operating p
Slide 5: Business reconfiguration to sustain our competitiveness
Business reconfiguration to sustain our competitiveness Market volatility Operating context Logistics constraints Volume & cost pressures Reconfigure business Our response Cost optimisation focus Supporting logistics improvement Cost efficiencies: R2.5-R3.0bn for FY2024 Value targeted Product premiu
Slide 6: Sustainability performance
Sustainability performance 6
Slide 7: Committed to safe & sustainable operations
Committed to safe & sustainable operations Safety Health & wellness Environment LTI TRIFR 1 Fatality Occupational diseases (new cases)1 Freshwater used (ML) 2.06 1.74 1.55 0.80 0.98 1 17 18 8 28 17 8 0 0 0 7,952 7,154 7,028 8,099 7,772 2019 2020 2021 2022 2023 2019 2020 2021 2022² 2023 2019 2020 202
Slide 8: Empowering & supporting our communities
Empowering & supporting our communities 85 schools & Training colleges Local employment >76 000 learners supported >2 300 community members >39 000 jobs created since 2018 Small & medium enterprises Comprehensive health care Connecting communities >500 beneficiaries incubation programme & GBV suppor
Slide 9: Enduring stakeholder value of R71bn created
Enduring stakeholder value of R71bn created BEE business Capital suppliers investment R23bn R9.9bn Income tax Host community R8.9bn suppliers R6.6bn Mineral royalty R2.0bn Salaries and Owners of benefits Kumba R7.0bn R15.1bn Employed from Empowerment Direct social N. Cape partners investment 77% R37
Slide 10: Operational performance
Operational performance 10
Slide 11: Stable and capable operations
Stable and capable operations Waste1 Production Finished stock Mine Port 216.8Mt 35.7Mt 70% 30% Total 2022: 204.3Mt 2022: 37.7Mt 7.8Mt 2022 Ore railed to port Sales Mine Port 92% 8% 36.3Mt 37.2Mt Total 7.1Mt 2023 2022: 35.9Mt 2022: 36.6Mt 1. Includes Kapstevel South waste of 17.8Mt in 2022 & 24.6Mt
Slide 12: Production slowdown to rebalance the value chain
Production slowdown to rebalance the value chain Finished stockpile (Mt) Total waste (Mt) Total production (Mt) +15% -21% -23% -26% 60.3 59.6 10.0 9.8 9.0 55.1 9.3 9.3 8.0 8.0 50.9 7.8 14.8 13.8 46.0 1.0 0.6 1.8 7.1 7.3 0.6 15.3 3.0 8.6 3.1 3.0 2.9 2.3 15.8 1.3 5.5 7.0 7.4 7.2 6.5 39.8 35.1 45.5 45.
Slide 13: Ongoing logistics constraints impacting our business
Ongoing logistics constraints impacting our business Logistics and production volumes¹ (Mt) Collaboration programme Contracted capacity Increasing availability of train slots, locomotives and wagons Strike (~6-7Mt) impact Reducing train turnaround times ~1.0 Expediting procurement of spares Completi
Slide 14: Reconfiguring business in line with logistics outlook
Reconfiguring business in line with logistics outlook Costs to be contained despite lower production Cost optimisation Reconfiguration process Production ~35-37Mtpa (FY24–26) 88% 83% 84% 84% 84% 80% 5% Waste ~155-170 Mtpa (FY24) 40.9 22% Rephased Kolomela waste, lower Outlook period strip ratio, opt
Slide 15: Financial performance
Financial performance 15
Slide 16: 2023 financial results
2023 financial results Average realised FOB price EBITDA margin HEPS US$117/t 53% R70.80 2022: US$113/t 2022: 50% 2022: R56.19 C1 costs Break-even price DPS US$41/t US$62/t R46.80 2022: US$40/t 2022: US$68/t 2022: R45.00 16
Slide 17: Prices supported by stimulus; margins limited premia
[OFFICIAL] Prices supported by stimulus; margins limited premia Platts 62 Fe Index, Monthly Average $/t Mill margins ($/t) 160 50% 300 Covid restrictions; Steel output cut 45% 150 China stimulus : ~RMB4tn (~3% of GDP) 250 Supply disruptions : LKAB, FMG 40% 140 35% 200 130 30% 120 25% 150 110 20% 100
Slide 18: Product & customer strategy
Product & customer strategy Fe qualities (%) Price premium over Platts 62 FOB ($/wmt) Lump premium+Fe Price premium 25 18 3 17 13 3 15 6 0 5 63.7 62.1 61.5 60.2 57.7 15 11 22 13 10 Kumba Vale BHP Rio Tinto FMG Market share 2019 2020 2021 2022 2023 outside China Lump : Fine ratio (%) 49% 2023 Realise
Slide 19: EBITDA reflects currency & price benefits
EBITDA reflects currency & price benefits Sales volumes C1 costs Average FOB price Price premium1 Average R/US Inflation Freight rates 2023 37.2Mt US$41/t US$117/wmt US$5/t R18.45 6.1% US$16/t 2022 36.6Mt US$40/t US$113/wmt US$0/t R16.37 6.7% US$18/t Rm (2,089) (942) 83 9,572 45,707 1,039 (2,650) 3,
Slide 20: Continued focus on costs
Continued focus on costs Sishen unit cost (R/t) Cost optimisation programme 34 (15) 21 589 589 40 29 12% 508 479 18% 2023 +6% +16% R1.0bn saved on target Kolomela unit cost (R/t) 70% 30 (67) 17 (13) 519 26 490 482 482 Optimised mine plan +6% -7% Contractor optimisation 2022 Inflation and Total afte
Slide 21: Capital expenditure focus on safety & asset integrity
Capital expenditure focus on safety & asset integrity Capex¹ Rbn 10.2 9.9 8.0 -9.0 Capex guidance ~R1bn lower in 2024 3.2 Expansion 3.0 0.5 – 0.6 Discretionary capex streamlined, 5.0 -5.5 while preserving optionality Sustaining 4.5 5.3 Safety, asset integrity & reliability prioritised Deferred strip
Slide 22: Disciplined capital allocation
Disciplined capital allocation Cashflow after sustaining capital Additional shareholder returns r fte tal to 2. C R23.3bn a pi a ba R0.5bn cash dividends ng w ome di c sustainih flo s mitvidend 1. Cas ment Base dividends 2023 Net cash Attributable R15.9bn free cash flow R14.9bn R13.2bn end of period
Slide 23: Efficient balance sheet
Efficient balance sheet Rbn 33.2 Working capital 8.1 Optimise finished stock & WIP stock Streamline & improve supply chain efficiency 19.6 2.6 Liquidity well managed 15.1 14.5 15.1 R16bn of revolving credit facilities 2.8 1.1 Linked to balance sheet covenants Balance sheet supports business sustaina
Slide 24: Looking ahead
Add image options Looking ahead 24
Slide 25: Green steel transition & quality underpin premia
[OFFICIAL] Green steel transition & quality underpin premia 2030 emission reduction goals & decarbonisation projects1 Positive outlook on product quality premiums Long-term real (2023$) price forecasts by Wood Mackenzie (December 2023) 65-62 Premium, % of 62 50% target H2-DRI 2019-23 Average 13 23%
Slide 26: Global steel production to grow this year
[OFFICIAL] Global steel production to grow this year Crude steel production in China (Mt) Rest of World1 crude steel production (Mt) and steel prices ($/t) +1.6% +5.5% 1000 50 950 49 1,018 1,019 1,036 637 603 603 48 55 900 51 83 83 51 50 47 69 71 71 850 46 125 140 150 800 45 750 44 966 936 952 176 1
Slide 27: 2024 full year guidance
2024 full year guidance Total production (Mt) Total sales (Mt) C1 cash costs (≤US$/t1) Capital expenditure (Rbn) 2024 35 – 37 36 – 38 38 8.0 – 9.0 2025 35 – 37 39 2026 35 – 37 40 Production Waste Unit costs Strip ratio LoA Sishen ~26Mt 135 – 145Mt R520 – 550/dmt ~4 | LoA ~3.3² ~15 years⁴ Kolomela ~1
Slide 28: Sustaining our competitiveness & unlocking value
Sustaining our competitiveness & unlocking value Business fundamentals Unlock value & position for the future Organisational Operational safety, Improving cost High quality Long-term effectiveness stability & capability competitiveness product premium stakeholder value 28
Slide 29: Annexures
[OFFICIAL] Annexures 29
Slide 30: Average realised price reflects weaker steel demand
[OFFICIAL] Annexure 1 Average realised price reflects weaker steel demand Average realised FOB export price (US$/t) Price drivers Average market prices¹: US$15/t P62 CFR China price average: US$120/t (2022: US$120/t) (2) 5 Fe premium average: ~US$3 per 1% Fe (2022 ~US$4 per 1% Fe) (16) 3 Lump premiu
Slide 31: EBITDA analysis
[OFFICIAL] Annexure 2 EBITDA analysis Rm 2023 2022 % change Total sales volumes (Mt) a 37 36 2 Benchmark price ($/t) 120 123 (2) Product premiums ($/t) 15 11 37 Freight ($/t) (16) (19) (14) Realised FOB price ($/dmt) 119 115 4 On-mine unit costs ($/t) (30) (29) 3 Logistics (rail & port) ($/t) (10) (
Slide 32: Sensitivity analysis
[OFFICIAL] Annexure 3 Sensitivity analysis Sensitivity analysis (1% change) – EBITDA impact (Rm) (576) Export volume 576 (779) Export price 779 (812) Currency 812 (1,000) (800) (600) (400) (200) 0 200 400 600 800 1,000 Change per unit of key operational drivers, each tested independently Sensitivity
Slide 33: Logistics constraints impact on sales
[OFFICIAL] Annexure 4 Logistics constraints impact on sales Mt 2023 2022 % change H2 23 H1 23 % change Railed to port (incl. Saldanha Steel) 36.3 35.9 1 17.9 18.4 (3) Sishen mine (incl. Saldanha Steel) 26.1 25.6 2 12.9 13.2 (2) Kolomela mine 10.2 10.3 (1) 5.0 5.2 (4) Total sales 37.2 36.6 2 18.3 18.
Slide 34: Operating margin reflects lower revenue
[OFFICIAL] Annexure 5 Operating margin reflects lower revenue Rm 2023 2022 % change H2 2023 H1 2023 % change Revenue 86 234 74 032 16 47 955 38 279 25 Operating expenses1 (45 529) (47 152) (3) (24 781) (20 748) 19 Operating profit 40 705 26 880 51 23 174 17 531 32 Operating margin (%)1 47.2 36.3 10.
Slide 35: Break-even price driven by lower costs, weaker rand
[OFFICIAL] Annexure 6 Break-even price driven by lower costs, weaker rand Platts 62% break-even price (US$/t) 1 5 68 1 2 2 2 1 63 62 2022 Opex Price SIB Total after Lump Currency Freight Royalties 2023 premium controllables premium Controllables ($5) Non-controllables ($1) 35
Slide 36: Revenue analysis
[OFFICIAL] Annexure 7 Revenue analysis 2023 2022 % change H2 2023 H1 2023 % change Total sales (Rm) 80 322 66 824 20 44 987 35 335 27 Tonnes sold (wmt) 37.2 36.6 2 18.3 18.9 (3) US Dollar per tonne (wmt) 117 113 4 132 103 28 Rand per tonne (wmt) 2 159 1 826 18 2 458 1 870 31 Shipping operations (Rm)
Slide 37: Revenue impacted by price and sales
[OFFICIAL] Annexure 8 Revenue impacted by price and sales Rm Revenue drivers 86 234 9 076 5 912 Controllables 74 032 3 383 (1,297) 1 040 Total sales volumes: Increased to 37.2Mt 7 208 (2022: 36.6Mt) Lump premium: Average US$0.15/dmtu (2022: US$0.20/dmtu) 80 322 Market premium: US$5.4/t1 66 824 (2022
Slide 38: Operating expenditure analysis
[OFFICIAL] Annexure 9 Operating expenditure analysis Rm 2023 2022 % change H2 2023 H1 2023 % change Raw materials & consumables 2 636 2 472 7 1 141 1 495 (24) Net movement in inventories (3 279) (4 633) (29) (1 164) (2 115) (45) Inventory written down to NRV (63) 185 (>100) (44) (19) >100 Contractor
Slide 39: Opex benefit of stock, forex and lower shipping costs
[OFFICIAL] Annexure 10 Opex benefit of stock, forex and lower shipping costs Rm 43 105 924 (499) (1,380) 40 259 1,168 862 xx 1,771 7,530 6,668 3 364 (518) 5,655 7,035 29,920 26,556 2022 Mining Stock Deferred Non-cash and forex Shipping Selling and 2023 operations movement stripping distribution Mini
Slide 40: Operating expense reconciliation
[OFFICIAL] Annexure 11 Operating expense reconciliation Rm 2023 2022 % change H2 2023 H1 2023 % change Cost of goods sold 29 920 26 556 13 16 579 13 341 24 Cost of goods produced 26 124 22 572 16 13 507 12 617 7 Production costs 28 108 25 619 10 14 256 13 852 3 Sishen mine 20 866 18 620 12 10 480 10
Slide 41: Unit cost analysis by mine
[OFFICIAL] Annexure 12 Unit cost analysis by mine Sishen Kolomela % H2 H1 % % H2 H1 % (Rm) 2023 2022 change 2023 2023 change 2023 2022 change 2023 2023 change Production costs 20 866 18 620 12.1 10 480 10 386 0.9 7 242 6 999 3.5 3 776 3 466 8.9 WIP (2 530) (2 969) (14.8) (564) (1 966) (71.3) (810) (
Slide 42: Sishen and Kolomela mines
[OFFICIAL] Annexure 13 Sishen and Kolomela mines Unit cash cost structure (R/t) 589 490 479 137 119 482 108 106 61 116 99 99 47 148 80 129 114 87 76 27 18 71 25 19 8 15 12 9 124 145 148 111 (13) (59) (58) (88) Sishen mine Sishen mine Kolomela mine Kolomela mine 2022 2023 2022 2023 Deferred stripping
Slide 43: Sishen and Kolomela mines
[OFFICIAL] Annexure 14 Sishen and Kolomela mines Unit cash cost structure (%) 20 21 21 24 17 10 10 17 15 15 25 26 15 18 14 5 14 3 4 3 1 3 2 2 25 22 26 22 Sishen mine Sishen mine Kolomela mine Kolomela mine 2022 2023 2022 2023 Other Energy Drilling and blasting Maintenance Outside services Fuel Labou
Slide 44: Capital expenditure analysis
[OFFICIAL] Annexure 15 Capital expenditure analysis Rm 2023 2022 2024F Approved expansion 3 055 3 181 500 – 600 Deferred stripping 1 588 2 512 2 500 – 2 900 Sishen 1 455 1 585 2 000 – 2 200 Kolomela 133 927 500 – 700 SIB 5 300 4 457 5 000 – 5 500 Sishen 4 268 2 879 3 800 – 4 200 Kolomela 1 032 1 578
Slide 45: Life extension projects
[OFFICIAL] Annexure 16 Life extension projects Kolomela: Kapstevel South (KSS) pit Sishen: Ultra high dense media separation (UHDMS) plant Construction of Major Mining Infrastructure completed Under review due to the business reconfiguration process Rephased a portion of waste mining The value drive
Slide 46: Robust, efficient balance sheet
[OFFICIAL] Annexure 17 Robust, efficient balance sheet Rbn 2023 total dividend declared R46.80 per share 15.9 23.3 Dividend payout ratio 3.5 10.3 66% 2.5 13.2 7.8 Dividend yield¹ 9.3 2.9 7.6% 2022 Cash flow after Base Discretionary 2023 Final Pro-forma Net cash sustaining capital dividends capital N
Slide 47: Working capital driven by higher inventories & receivables
[OFFICIAL] Annexure 18 Working capital driven by higher inventories & receivables Rm (1,808) 5,168 20,755 4,635 12 760 63% 2022 Inventories Receivables Payables 2023 47
Slide 48: Margin analysis
[OFFICIAL] Annexure 19 Margin analysis 161 117 113 113 108 96 69 67 62 54 33 31 39 40 41 2019 2020 2021 2022 2023 C1 unit cash cost ($/t) EBITDA ($/t) Achieved FOB price Based on exchange rate of R18.45/US$1 48