African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — H1 F2015 Earnings Presentation
36 slides from African Rainbow Minerals's earnings presentation, 2015
Slide 1: Executive Chairman statement on headline earnings
“ARM’s headline earnings were negatively impacted primarily by the decline in US Dollar commodity prices. Costs were well controlled at most operations. ARM is focussing on improving productivity, reducing costs and optimising cash flow.” Patrice Motsepe Executive Chairman 1
Slide 2: Overview and strategy
Nchwaning Manganese Ore Mine Overview and strategy Patrice Motsepe, Executive Chairman 2
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 Area Manganese Ore Nickel, PGMs & Chrome M
Slide 5: Salient features
Salient features Headline earnings decreased by 56% to R1 026 million (1H F2014: R2 341 million). Headline earnings per share were 473 cents (1H F2014: 1 084 cents). Basic earnings were negatively impacted by exceptional items of R225 million, the largest of which related to a R222 million unrealise
Slide 6: Salient features
Salient features Costs were well controlled at most operations. The iron ore, manganese alloy, chrome ore and Two Rivers operations achieved below inflation increases and the coal operations achieved a decrease in unit production costs. Lubambe Mine copper production increased to 12 563 tonnes (1H F
Slide 7: Salient features
Salient features Two River’s life of mine will be increased by approximately 30 years by ARM’s acquisition of the Tamboti Platinum (Pty) Ltd mining right on a property adjacent to Two Rivers and through the addition of portions of the Buffelshoek, Kalkfontein and Tweefontein farms into the Two River
Slide 8: Safety
Safety ARM maintained a good safety record in the six months under review. The Lost Time Injury Frequency Rate (LTIFR) improved to 0.40 per 200 000 man- hours (1H F2014: 0.41 per 200 000 man-hours). Two Rivers Mine completed two million fatality-free shifts on 5 September 2014. Nkomati Mine complete
Slide 9: Headline earnings
Headline earnings Headline earnings per share (cents) 1 200 1 081 1 084 1 000 937 851 816 800 734 678 654 593 600 473 400 214 200 0 F2010 F2011 F2012 F2013 F2014 F2015 First half (1H) Second half (2H) 9
Slide 10: EBITDA margins
EBITDA margins EBITDA margins by commodity 58% Iron ore 39% 43% Coal (GGV) 37% 37% Manganese ore 32% 30% PGM 28% 11% Chrome 18% 29% Nickel 17% 10% Manganese alloy 3% -6% Copper -21% -30% -10% 10% 30% 50% 70% 1H F2014 1H F2015 10
Slide 11: ARM strategy
ARM strategy Quality growth Operational continues in efficiencies ARM’s 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 managemen
Slide 12: Operational efficiencies
Operational efficiencies ARM’s objective is that all operations to be below the 50th percentile Two Rivers Platinum Lubambe Copper Goedgevonden Coal (2016) Khumani Iron Ore Manganese Manganese Ore Smelters Dwarsrivier Modikwa Platinum Chrome Ore Nkomati Nickel Beeshoek Iron Ore Commodity Unit cash c
Slide 13: Acquisition and partnerships
Acquisition and partnerships Continuing to assess acquisitions and joint venture opportunities ARM acquired Tamboti Platinum (Pty) Ltd for a consideration of R400 million. Tamboti is the holder of a mining right over a property adjacent to Two Rivers Mine. ARM is in discussions with its partner, Imp
Slide 14: Two Rivers Mine Improvement
Two Rivers Mine Improvement Two Rivers life of mine will be increased by approximately 30 years. Current Two Rivers mining area. Acquisition of the prospecting right from Impala has been completed. As a result effective from 6 February 2015 ARM shareholding in Two Rivers reduces from 55% to 51%. Pro
Slide 15: Growth
Growth Quality growth in ARM’s portfolio of commodities Exploration/ Project development Steady state Declining feasibility and ramp-up (>15 years life-of-mine) operations Beeshoek Iron Ore Mine Thermal coal mines Manganese smelters Manganese ore mines Two Rivers Platinum Mine Modikwa Platinum Mine
Slide 16: ARM Exploration
ARM Exploration Africa The final phase of exploration on the Rovuma prospecting areas has been concluded. The Rovuma geological report is being evaluated. The way forward is currently under review with Rovuma Resources. ARM’s exploration is focussing on brownfields projects 16
Slide 17: Operational review
Nkomati Nickel Mine Operational review Mike Schmidt, Chief Executive Officer 17
Slide 18: Divisional contribution to headline earnings
Divisional contribution to headline earnings six months ended R million December 2014 2013 % change ARM Platinum 277 363 (24) ARM Ferrous* 833 2 153 (61) ARM Coal (10) (34) 71 ARM Copper (233) (122) (91) ARM Exploration (40) (24) (67) Gold - - Corporate and other* 199 5 >250 ARM Headline Earnings 1
Slide 19: Contribution of commodities in our diversified portfolio
Contribution of commodities in our diversified portfolio EBITDA split by commodity 100% 80% 60% 40% 20% 0% -20% F2010 F2011 F2012 F2013 F2014 1H F2015 Copper Coal (GGV) Chrome Manganese Iron Ore Nickel PGM The proportional EBITDA contribution from manganese, PGM and coal is increasing. The iron ore
Slide 20: Segmental profit variance analysis
Segmental profit variance analysis Unaudited profit variance analysis – Profit from operations before exceptional items (R million) Factors subject to market conditions Factors subject to management’s control 5 000 4 500 782 (2 193) 4 000 3 619 3 500 3 000 2 500 (212) (335) 2 000 (81) 107 1 687 1 50
Slide 21: Changes in sales volumes
Changes in sales volumes 1H F2015 vs. 1H F2014 sales volume changes (%) 100% 86% 80% Increase Decrease 60% 39% 40% 20% 20% 14% 1% 0% (4%) (3%) (7%) (11%) (11%) (20%) (40%) (34%) GGV Copper * Nickel PGMs FeMn Iron Manganese PCB PCB GGV Chrome Eskom ore ore Eskom export coal export concentrate coal co
Slide 22: Changes in average US Dollar realised prices and average exchange rate
Changes in average US Dollar realised prices and average exchange rate 1H F2015 versus 1H F2014 US Dollar realised prices and exchange rate changes (%) 40% 30% 27% Increase 22% Decrease 20% 14% 11% 9% 10% 1% 0% (10%) (6%) (10%) (20%) (17%) (18%) (30%) (40%) (45%) (50%) Iron Export Manganese Copper *
Slide 23: Unit cost changes by commodity
Unit cost changes by commodity 1H F2015 versus 1H F2014 on-mine production unit cost changes (%) Increase PCB Coal -18% Decrease GGV Coal -9% Copper *. -4% Inflation (CPI) at 5.9% Iron ore 2% Nickel 3% Chrome ore 4% Manganese alloys 4% PGM: Two Rivers 4% Manganese ore 19% PGM: Modikwa 21% -25% -20%
Slide 24: ARM Ferrous: Iron ore
ARM Ferrous: Iron ore Iron ore operational performance (100% basis) Realised US Dollar iron ore export prices 1H 1H % decreased by 45%. F2015 F2014 change Export sales 000 5 999 6 697 (10) volumes tonnes Local sales 000 1 461 1 041 41 volumes tonnes Export iron ore sales were lower due to loading pr
Slide 25: ARM Ferrous: Manganese ore
ARM Ferrous: Manganese ore Manganese ore operational performance (100% basis) Sales volumes were maintained but production decreased as lower than 1H 1H % expected ore grades were intersected in F2015 F2014 change certain mining areas. Export sales 000 1 383 1 368 1 volumes tonnes 000 Local sales vo
Slide 26: ARM Ferrous: Manganese alloys
ARM Ferrous: Manganese alloys Manganese alloy operational performance (100% basis) Sales volumes decreased as a decision was taken to shut down two unprofitable 1H 1H % F2015 F2014 change furnaces at Cato Ridge Works. 000 Sales volumes 112 117 (4) tonnes Change in % 4 12 production unit cost The rem
Slide 27: ARM Ferrous: Dealing with the current commodity cycle
ARM Ferrous: Dealing with the current commodity cycle ARM Ferrous interventions to deal with the current commodity cycle Review of all capital expenditure and renewed focus on operational efficiency and elimination of bottlenecks. Reduction of operating costs at the Black Rock Mine, this will includ
Slide 28: ARM Platinum: PGM
ARM Platinum: PGM PGM operational performance (100% basis) Two Rivers once again delivered an excellent operational performance with 1H 1H % headline earnings increasing by 12%. F2015 F2014 change Production 000 oz 396 813 426 695 (7) Modikwa cash cost R/oz 8 029 6 639 21 Modikwa’s production and co
Slide 29: ARM Platinum: Nickel
ARM Platinum: Nickel Nickel C1 cash costs net of by-products Nickel produced decreased to 10 587 tonnes (1H F2014: 11 859) due to lower 1H 1H % grade areas being mined in the pit, F2015 F2014 change consistent with the mine plan. On-mine cash cost US$/lb 6.07 5.61 8 Off-mine cash cost US$/lb 2.56 2.
Slide 30: ARM Platinum: Dealing with the current commodity cycle
ARM Platinum: Dealing with the current commodity cycle ARM Platinum interventions to deal with the current commodity cycle A recovery plan for the Modikwa Mine has been developed and is being evaluated. Execution of the Modikwa recovery plan is expected to enhance efficiencies and head grade whilst
Slide 31: ARM Coal: GGV and PCB
ARM Coal: GGV and PCB GGV and PCB operational performance (100% basis) Goedgevonden delivered an excellent operational performance increasing 1H 1H % saleable production by 17% and reducing F2015 F2014 change costs by 9%. Total export sales Mt 8.93 7.10 26 volumes Total Eskom sales Mt 2.09 2.59 (20)
Slide 32: ARM Coal: Dealing with the current commodity cycle
ARM Coal: Dealing with the current commodity cycle ARM Coal’s interventions to deal with the current commodity cycle Closure of high cost underground operations at Tweefontein. Just over 100 employees have taken pension or severance packages, while others have been redeployed. A decrease in waste st
Slide 33: ARM Copper: Lubambe
ARM Copper: Lubambe Lubambe Mine operational performance (100% basis) Lubambe tonnes mined increased by 1H F2015 1H % F2014 change 34%. Milled tonnes 000t 860 716 20 Mill head grade % Cu 1.83 1.97 (7) Concentrator % 80.0 75.0 recovery Copper tonnes 12 563 10 567 19 produced Copper sold tonnes 12 718
Slide 34: ARM Copper: Dealing with the current commodity cycle
ARM Copper: Dealing with the current commodity cycle ARM Copper’s actions to deal with the current commodity cycle Ramp-up of the Lubambe Mine has been slower than planned due to bad ground conditions and the undulating, variable reef width and reef dips which has resulted in grade dilution. Changes
Slide 35: Capital allocation: segmental analysis
Capital allocation: segmental analysis Capital expenditure (R million)* 5 000 4 500 4 321 Actual 1H F2015: R1 612 million 4 000 3 494 3 489 3 500 3 200 3 000 2 918 2 900 2 500 2 450 2 000 1 500 1 000 500 0 F2011a F2012a F2013a F2014a F2015e F2016e F2017e ARM Platinum ARM Ferrous ARM Coal ARM Copper
Slide 36: Thank you
We do it better FaxtM African Rainbow Minerals EE ES Thank you 36
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