Merafe Resources Limited · JSE:MRF
Merafe Resources — H1 2013 Earnings Presentation
33 slides from Merafe Resources's earnings presentation, August 2013
Slide 1: Results Presentation for the six months ended 30 June 2013
INVESTED INLONG-TERM SUSTAINABLE PARTNERSHIPS e nT MERAFE RESOURCES LIMITED M Results Presentation For the six months ended 30 June 2013 MERAFE Presented by Zanele Matlala (CEO) and Ditabe Chocho (CFO) Re ee RST
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: Quote from the CEO
Quote from the CEO “We managed to achieve headline earnings per share of 4 cents for the six-month period, despite the difficult operating environment. We are delighted to report that good progress has been made on our flagship Lion II smelter project which is on track to be commissioned at the end
Slide 4: Agenda
Agenda a, Key features 2. Sustainability 3. Market review 4. __ Financial review 5. Outlook Annexures M MERAFE
Slide 5: Key features
Key features *
Slide 6: Key features
Key features * Increase in production of 23% * Increase in revenue of 19% ¢ Decrease in EBITDA from R263m to R210m * Decrease in HEPS from 5.5 cents to 3.8 cents ¢ Operating cash flows of R234m ¢ The Venture’s R5bn Project Lion II is on schedule and within budget re MERAFE
Slide 7: Sustainability
Sustainability #
Slide 8: Sustainability
Sustainability * Safety — Regrettably two fatalities —TRIFR — 4.27 * Labour issues — Eastern mines unprotected strike which resulted in the dismissal of more than 1 200 employees — Wage negotiations are ongoing re MERAFE
Slide 9: Market review
Slide 10: 7% increase in stainless steel production
7% increase in stainless steel production 25 000 ©2012 June actual tonnes in 000 = 2013 June estimated tonnes in 000 7% 20 000 t 15 000 17% 10 000 t 2% § 000 4 t t : : : i | ct Hii ii | San ee L 589/645 1011/1 070 1167/1 231 1593/1 S60 1694/1 594 4084/4003 | |7823/9117 | |17961/19220 Others NAFTA in
Slide 11: 4% increase in ferrochrome demand
11 4% increase in ferrochrome demand 6000 » 82012 June actuaitonnesin’000 = 2013 June estimated tonnes in ‘000 4% t $000 + 4000 4 13% 3000 4 t 2000 4 1% 1000 - 7% 3% 11% 6% 11% 4 _ aro 248/231 259/268 397/352 322/340 413/368 938/930 231772613 | | 4894/5 102 NAFTA india Others Japan S Koreas Eu China
Slide 12: 3% increase in ferrochrome production
3% increase in ferrochrome production 6000 » 2012 June actual tonnes in ‘000 = 2013 June estimated tonnes in ‘000 3% 5.000 + t 4000 3000 + ; 13% 2000 + 3 19% 3% 1000 + 18% 10% 35% t t oe - . _ iio — = 177/148 184/170 171/230 459/545 S37/8S1 1 S96/1 798 1591/1 390 4685/4 829 Others Russia! Eu india K
Slide 13: Chrome ore imports into China increased 26%
Chrome ore imports into China increased 26% period on period 2013 (June year-to-d Albania 357 296 Algeria = 1 = Australia 208 501 233 Brazil 60 29 ~ India 439 310 66 Indonesia 13 16 - Iran 330 448 204 Kazakhstan 94 89 67 Madagascar 86 118 §3 Mozambique 24 11 19 Oman 645 426 298 Pakistan 440 472 261
Slide 14: Volatility in the market during 2013
14 Volatility in the market during 2013 Ferrochrome price Sen! in Use/lb Q1 2013 112.5 Positive signs in the Chinese, North American and European markets coupled with further Eskom buy-back arrangements Q2 2013 127 Global economic uncertainty, weakening Rand, concerns about Chinese growth and lower
Slide 15: Financial review
inancial
Slide 16: Key financial features
Key financial features Revenue EBITDA HEPS Capex Net debt June 2013 16 M MERAFE ehewweces
Slide 17: Revenue
Revenue Ferrochrome sales tonnes 137kt 10% : : L | June 2012 June 2013 Rand/Dollar exchange rate 9.2 : a June 2012 June 2013 17 Average benchmark ferrochrome price 125 UScilb June 2012 4% June 2042 June 2013 R180m June 2013 MERAFE
Slide 18: Key contributors to lower EBITDA
Key contributors to lower EBITDA * Mining division costs — Development costs — Strike related costs — Inflationary increases ¢« Smelting division costs — Inflationary increases (power, fuel and labour) * Foreign exchange losses M MERAFE
Slide 19: Decrease of 2% in production costs per tonne of ferrochrome
Decrease of 2% in production costs* per tonne of ferrochrome Negatively impacted by: j lower EBITDA contributors § increased winter production Positively impacted by: 7 ferrochrome production volumes T efficiencies at plants T recovery from slag * including fixed costs, standing charges and head-off
Slide 20: Reconciliation of EBITDA to profit
R milion 20 Reconciliation of EBITDA to profit 200 (26) 150 100 50 (145) ro — (9) (1) FA 1 cad —x . a 04 t Mert'’s Comorate Oepredation Netfinancng Curenttax Deferredtax Prioryear Prot 20.5% of costs andimpairment costs expense expense — overprovision EBITDA fom the venture ™ MERAFE ehewweces
Slide 21: Balance sheet
Balance sheet Total non-current assets Property, plant and equipment Total current assets Inventories Trade and other receivables Current tax asset Cash and cash equivalents Assets held for sale Total assets 21 As at As at 30 June 2013 31 December 2012 Reviewed Audited R’000 R’000 Movement 2 902 009
Slide 22: Balance sheet (continued)
22 Balance sheet (continued) As at As at 30 June 2013 31 December 2012 Reviewed Audited R’000 R’000 Movement Total non-current liabilities 1215 224 1 132 929 Loans and borrowings 571 791 523 872 9% Provision for close down and restoration costs 54 800 57 892 Deferred tax 588 633 551 165 Total curren
Slide 23: Net debt bridge
Net debt bridge R million 300 - Bal 196 100 + -100 4 (80) Sai (200) -300 4 ~400 (441) -500 4 (525) 600 Net debt at Cash flows from Expansionary Sustaining Net debt at 31 December operating capex capex WO June 2013 2012 activities* Closing net debt at 30 June 2013 (525) Cash at 30 June 2013 46 Debt a
Slide 24: Lion II is on track and within budget
24 Lion Il is on track and within budget Project cost (Merafe’s portion Commissioning Description at 20.5%) date Progress Lion II smelter complex 360 000 tpa of ferrochrome smelting R1 billion Q4 2013 | On track to be capacity and development of completed on Magareng mine schedule and | within budge
Slide 25: Financing of Lion II
25 Financing of Lion Il R’million Total project cost (Merafe’s 20.5%) 1 000 Less: Capital expenditure to 30 June 2013 (650) Capital expenditure outstanding 350 Cash on balance sheet 46 ABSA debt* 240 Glencore warehousing facility (Merafe’s 20.5%)** 100 Glencore overdraft facilities (Merafe’s 20.5%)*
Slide 26: Outlook
\N ir TE ' va VAN
Slide 27: Outlook
Outlook ¢ Stainless steel production is expected to grow by 7% in 2013 and by 5% in the long-term which is expected to increase demand for ferrochrome. * Weare well positioned to take advantage of the increase in demand for ferrochrome: Cost performance of Rustenburg piant on par with our other non-
Slide 28: MERAFE
MERAFE
Slide 29: Annexures
Annexures
Slide 30: Ferrochrome Industry Cost Curve
Ferrochrome Industry Cost Curve 140.0 - HM -+ Charge Cr Benchmark (Q3): 120 0 USS ct 112.5 per Ib 8 °o S o Cost in US$ ct per Ib Cr Content 2012: USS ct 88.0 per Ib Y-t-D 2013: USS ct 83.5 perlb July 2013: USS ct 81.1 perlb Heinz H. Pariser T 0.0 10.0 200 300 40.0 50.0 60.0 Share of Production, in %
Slide 31: Stainless Production by Grade
Share of Production, in % Stainless Production by Grade Global Grade Structure 200 Series Production Share 40 136.0] PER 3 "Traditional" aloe j Producers * | oS | “_—_— ff / 7 nz 0 | 7.34 8 separ toner iovnGesiarnaes coisa ~ o o o - Source: Heinz H Pariser! July 2013 22 a o o on i) o ~ w ~“ oo 53.8
Slide 32: Average power price, in US$ per kWh
Average power price, in US$ per kWh Globally Rising Power Prices 0.14 Al data based on average powerpricesand exchange rates for the yearsstated / South African Projection basedion Exchange Rate of ZAR 9.5 per US$ 0.12 0.10 @ # 2011/12 -% Pa HS mete “ 2069/10 210 20 GJ ~ 0.08 Pe, 200 3 2012 bis O20
Slide 33: Asia — Centre of Stainless Demand
Asia — Centre of Stainless Demand 35 7 ~ Others sJapan % Total Asia of 30 - mAmerica Global Demand mEU 25 - = Other Asia = China NO o Stainless Steel Demand, Mill t a 10 5 % China of Global Demand ZH A 0 Source: Heinz H Pariser! July 2013 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 80.0 > ial