Kumba Iron Ore Limited · JSE:KIO
Kumba Iron Ore — FY2021 Earnings Presentation
47 slides from Kumba Iron Ore's earnings presentation, Feb 22, 2022
Slide 1: Annual results presentation, 22 February 2022
22 February 2022
Slide 2: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Kumba. Further, it does not constitute a recommendation by Kumba Iron Ore Limited or any other party to sell or buy shares in Kumbalron Ore Limited
Slide 3: Agenda
Agenda Maximising our potential Sustainability performance Value chain performance Stakeholder value creation Positioning for the future Mpumi Zikalala Bothwell Mazarura Mpumi Zikalala
Slide 4: Maximising our potential
Maximising our potential Near-term priorities, building on Tswelelopele strategy Operational Cost Realising full value excellence efficiencies of premium product Responsible Safety, health and wellbeing of our business people, communities and environment
Slide 5: Continuing to deliver value
Continuing to deliver value Safety Production Attributable free cashflow [OFFICIAL] >5 years Fatality free production Environment 40.9Mt 2020: 37.6Mt EBITDA R3O0.5bn 2020: R20.7bn Dividends per share >6 years Zero (Level 3-5) significant incidents R64.6bon 2020: R45.8fn R105.20 2020: R60.90
Slide 6: Sustainability performance
Sustainability performance
Slide 7: Focus on safe, healthy and sustainable future
[OFFICIAL] Focus on safe, healthy and sustainable future Safety Health Environment ga LT] ——TRC Occupational diseases (new cases) Freshwater used (BL) 77 51 41 39 20 BBE a= ee 207 =6.2018 = 2019) 20202021 2017 2018 2019 = 20202021 207 «2018 = 2019) 2020S 2021 Leading indicator focus More than 75% wo
Slide 8: Towards a healthier environment
Towards a healthier environment Energy usage (%) Carbon emissions (Mt CO,e) [OFFICIAL] Scope 1and 2 47% Scope 2 carbon emissions 20 53% Scope 1 carbon emissions = Scope Diesel # Scope 2 Electricity 2017 2018 2019 2020 2021 Zero Scope 2 CO, emissions by 2030 Carbon neutrality by 2040 Solar PV technic
Slide 9: Shared value created of R89 billion
[OFFICIAL] Shared value created of R89 billion Educational 2021 2020 2021 2020 support of 26 schools and Contributing to South Africa (Rn) Supporting local businesses (Rion) >16 300 Income tax 16.6 10.1 BEE business suppliers 10.3 98 learners Mineral royalty 46 6.0 Host community suppliers 41 37 Pro
Slide 10: Value chain performance
Value chain performance
Slide 11: Maintaining production
[OFFICIAL] Maintaining | 2020: 204.8Mt 2020: 37.6Mt 2020: 38.1Mt 2020: 40.0Mt 2020: 4.8Mt
Slide 12: Good H2 recovery despite weather challenges
[OFFICIAL] Good H2 recovery despite weather challenges Sishen waste movement (Mt) (%)v i m oe 2020 2021 1H21 2H21 Kolomela waste movement (Mt) 13%" i - | 2020 2021 1H21 2H21 2021 Challenges Excessive rain fallin Q1 and saturated clay into Q3 Low spares availability from September Operational efficie
Slide 13: Improving logistics system is our biggest opportunity
[OFFICIAL] Improving logistics system is our biggest opportunity Logistics performance (Mt) Short term interventions (2022) Reduce speed restrictions Target quarterly average copacty Infrastructure maintenance Major port refurbishment completed in 2022 Larger vessels Medium term potential uplift (20
Slide 14: [OFFICIAL]
[OFFICIAL]
Slide 15: Record financial performance
Record financial performance Average realised FOB price EBITDA margin HEPS [OFFICIAL] US$161/t 2020: US$113/t Cost savings 63% 2020: 57% Break-even price R103.65 2020:R71.07 DPS RO.Ibn 2020:R1.3bn! 1. Includes R618 million of Covid-19 related savings US$56/t 2020: US$45/t R103.20 2020: R60.90
Slide 16: Premium prices for premium products
[OFFICIAL] Premium prices for premium products Fe qualities (%) Realised price FOB (US$/wmt) i Fa Vale 115-120(Est,) Kumba Vale Rio Tinto BHP FMG BHP 136 Lump: Fine ratio (%) 97 27 27.6 — a — PMc Kumba Vale Rio Tinto BHP FMG Source: Iron Ore Marketing
Slide 17: Premium through market diversification and quality
[OFFICIAL] Premium through market diversification and quality Traditional markets' share of total sales (%) Price premium over Platts 62 FOB (US$/wmt) Targeting 45-55% of traditional market's share 42 38 57 2015 2019 2020 2021 Targeting 2US$ 2/t of product premium 2015 2019 2020 2021 Lump premium+Fe
Slide 18: Strong margin driving EBITDA
Strong margin driving EBITDA ia S205 (10906) Fame — Controllables Non-controllables | [OFFICIAL] Controllables Sales flat at 40.3Mt Price premium US$3/t (2020: US$1/t) Opex stock movement benefit Non-controllables Revenue up by 27% to R102bn (2020:R80bn) Average Platts FOB price US$136/t (2020: US$9
Slide 19: Inflation mitigated by production gains and savings
[OFFICIAL] Inflation mitigated by production gains and savings Sishen (R/t) “ Cost drivers “= 2 al Mining related inflation of 9%, 31 °° Z 9% 10% Higher direct mining cost driven by — — increased volumes, distances and vertical lifts Kolomela(R/t) 8 8 Waste mining challenges impacting 19 efficiencie
Slide 20: Continuing to unlock savings opportunities
[OFFICIAL] Continuing to unlock savings opportunities Cost saving Rbn Up to R1.0bn R4.1bn value delivered 2018-2021 2021 2022 Achieved Targeting HM Operational improvement MM Overheads lB Supply contract optimisation 20
Slide 21: Value-focused strategy driving margin gains
[OFFICIAL] Value-focused strategy driving margin gains ” TSWELEL@PELE Delivery by 2022 113 108 96 Enhanced price premium 7 69 2US$2/t above lump & Fe premium 94 Improve operational efficiency P101 benchmark performance 35 2018 2019 2020" 2021? C1 unit cash cost sUS$41/t3 mmm C1 unit cash cost ($/t)
Slide 22: Investing in our business, securing our future
[OFFICIAL] Investing in our business, securing our future mee Expansion capex n 10.5-11.5 Kapstevel South UHDMS P101 efficiency programme SIB capex Asset availability and reliability Plant and infrastructure upgrades 25 2.0-2.2 a : Technology and FutureSmart™ mining 2020 2021 2022e = Deferred stripp
Slide 23: Life extension projects
[OFFICIAL] Life extension pro C3 a Hg 4 4 Ly 11H22 verin 1H24 EBITDA margin
Slide 24: Robust, efficient balance sheet
[OFFICIAL] Robust, efficient balance sheet Disciplined capital allocation 2021 total dividend “ Up 69% 367 Dividend payout ratio fe) 100% 129 | 175 08) Dividend yield’ / 2 ) 40 2020 Cash flow after Base Discretionary 2021 Final Pro-forma 2 2 % Netcash sustaining dividends capital Net cash dividend n
Slide 25: Maximising value and delivering sustainable returns
[OFFICIAL] Maximising value and delivering sustainable returns Shareholder value creation (2018-2021) Attributable free cashflow Rbn 33.2 R75.4bn 8.1 Total dividends paid! 19.6 2.6 R77.6on o7 24 Dividend payout ratio 5 Ae) 9 5% 2018 2019 2020 2021 2018 2019 2020 2021 w Attributable free cashflow = B
Slide 26: Positioning for the future
[OFFICIAL]
Slide 27: Life extension with focus on quality and sustainability
[OFFICIAL] Life extension with focus on quality and sustainability 1, 50% increase expressed ona 2017 base, excluding depletion of 199Mt 2, Sishen UHDMS feasibility study: Production from processing Sishen low grade stockpile between 2036 - 2039 of ~10MIpa 3.Utlising high grade iron ore in the blast
Slide 28: 2022 full year guidance
[OFFICIAL] 2022 full year guidance Production! Unit cash costs 39-41Mt <US$41/t? Sishen: ~27Mt Sishen: R490 - 520/t Kolomela ~13Mt Kolomela: R350 - 370/t Sales Capital expenditure 359-41Mt R10.5-11.5bn 1, Production: 39-41Mtin 2023 and 41-43Mt in 2024 2. Based on R16.00/US$ 28
Slide 29: Kumba's value proposition
Kumbo's value proposition Well positioned to continue delivering stakeholder value Assets Capabilities [OFFICIAL] Sustainable returns High margin assets Life extension opportunities Integrated marketing & operations Sustainability leadership EBITDA margin enhancement Disciplined capital allocation I
Slide 30: Annexure
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Slide 31: 2022 full year guidance
[OFFICIAL] Annexure 1 2022 full year guidance Total production Total sales C1 cash costs Capital expenditure 39-41Mt 39-41Mt <US$41/t! R10.5-11.5bn 2023 Sishen Kolomela Production ~27Mt ~13Mt 59 a 41 Mt Waste 140-160Mt 55-65Mt 2024 Unit costs R490 - 520/dmt R350 - 370/dmt Strip ratio 4.5,LoM ~3.92|
Slide 32: Logistics performance impact on sales
Annexure 2 Logistics performance impact on sales [OFFICIAL] Mt 2021 2020 %change 2H21 1H21 %change Railed to port (incl. Saldanha Steel) 393 37.5 3.1 19.6 19.7 (0.5) Sishen mine (incl. Saldanha Steel) 27.3 2355 5.0 13.6 13.7 (0.7) Kolomela mine 12.0 12.0 -0.8 6 6 (1.7) Total sales 40.3 39.7 -0.1 20.
Slide 33: Operating margin driven by strong revenue growth
[OFFICIAL] Annexure 3 Operating margin driven by strong revenue growth Rm 2021 2020 % change 2H21 1H21__ % change Revenue 102 092 80 104 27 38476 63616 (40) Operating expenses! (42 584) (39 266) 8 (20 892) (21 692) (4) Operating profit 59 508 40 838 46 17 584 41924 (58) Operating margin (%) 58 51 14
Slide 34: Break-even price impacted by non-controllables
[OFFICIAL] Annexure 4 Break-even price impacted by non-controllables Platts 62% break-even price (US$/t) 4 9 2 2 “a= q 4/ (10) 6 2020 C1 Costs Price SIB Total after Lump Currency Inflation Freight Royalties 2021 premium controllables premium and escalation | Controllables $2 __ a Non-controllables $
Slide 35: Revenue analysis
[OFFICIAL] Annexure 5 Revenue analysis 2021 2020 % change 2H21 1H21_ % change Export (Rm) 94 886 74115 37 34078 60 808 (44) Tonnes sold (Mt) 40.2 40.0 2 21.1 19.1 10 US Dollar pertonne 161 113 40 109 220 >(100) Rand per tonne 2 363 1855 36 (822) 3185 >(100) Domestic (Rm) 237 409 (42) 2 235 (99) Ship
Slide 36: Average realised price 18% above benchmark price
Annexure 6 Average realised price 18% above benchmark price Average realised FOB price (US$/t) +$25/dmt | 164 160 161 = 3 2 v 16 | 189 2021 P62 Platts 2021 P62 Fe Lump Marketing RealisedFOB Conversion Realised FOB CFR Freight FOB premium premium premium Price($/dmt) $/DMTto Price ($/wmt) 2 (2% moist
Slide 37: Revenue benefit of higher prices offset by currency
[OFFICIAL] Annexure 7 Revenue benefit of higher prices offset by currency Revenue increase of 27% Revenue drivers Rm Controllables Total sales volumes: Flat at 40.3 Mt Gag (0766) 102092 (2020: 40.3Mt) 27015 Lump premium: Average US$16/dmtu (2020: US$6/dmtu) Market premium: $3/t (2020: US$1/t) 80104
Slide 38: Operating expenditure analysis
Annexure 8 Operating expenditure analysis [OFFICIAL] Rm 2021 2020 % change 2H21 1H21 % change Raw materials and consumables 2178 2046 6 1052 1126 (7) Inventory movementin finished product (808) 909 <(100) (1267) 459 =(100) Inventory movementin WIP (893) (1745) (49) (1170) 277 <100 Inventory written
Slide 39: Operating expenditure driven by higher mining cost
[OFFICIAL] Annexure 9 Operating expenditure driven by higher mining cost Rm 38 270 ee 1194 77880 'B66 = 6 464 FY20 Mining Stock Deferred Escalation, Shipping Selling and FY21 operations movement stripping non-cash and forex distribution a Mining operations = Shipping ™ Selling and distribution 1, Ex
Slide 40: EBITDA analysis
[OFFICIAL] Annexure 10 EBITDA analysis Rm 2021 2020 % change Total sales volumes (Mt) a 39.6 39.7 (0.1) Benchmark price ($/t) 159 109 50 Product premiums ($/t) 25 17 8 Freight ($/t) (21) (11) (10) Realised FOB price($/t) 163 115 48 On-mine unit costs ($/t) (27) (21) (6) Logistics (rail and port) ($/
Slide 41: Sishen and Kolomela mines unit cash cost structure (R/t)
[OFFICIAL] Annexure 11 Sishen and Kolomela mines Unit cash cost structure (R/t) (60) (84) (72) Sishen mine Sishen mine H Kolomela mine Kolomela mine 2020 2021 H 2020 2021 Deferred stripping = Other Energy = Drilling and blasting = Maintenance m Outside services mFuel m Labour a
Slide 42: Sishen and Kolomela mines unit cash cost structure (%)
[OFFICIAL] Annexure 12 Sishen and Kolomela mines Unit cash cost structure (%) Kolomela mine Kolomela mine 2020 2021 Sishen mine Sishen mine 2020 2021 = Other Energy = Drilling and blasting = Maintenance ™ Outside services mFuel m Labour 42
Slide 43: Capital expenditure analysis
[OFFICIAL] Annexure 13 Capital expenditure analysis Rm 2021 2020 2022e Approved expansion 2566 632 5 100-5 600 Deferred stripping 1725 2502 2 000-2 200 Sishen 814 1523 1200-13200 Kolomela 911 979 800-900 SIB 3717 2952 3 400-3 700 Sishen 2 687 2.007 2 400-2 600 Kolomela 1030 945 1 000-1 100 Unapprove
Slide 44: Sensitivity analysis 2021
[OFFICIAL] Annexure 14 Sensitivity analysis 2021 Sensitivity analysis (1% change) - EBITDA impact (Rm) (1.500) (1.000) (500) 0 500 1.000 1.500 Change per unit of key operational drivers, each tested independently Sensitivity analysis Unit change EBITDA impact Currency (Rand/US$) RO.10/US$ R630m Expo
Slide 45: Markets: China steel production slowing down
[OFFICIAL] Annexure 15 Markets | China steel production slowing down China Crude Steel Production (Mt) Global Seaborne Iron Ore Supply (Wet Mt) 27.6% 11.5% 1 1213. 1237. 1262 1336 «461244 «1278 2016 2017 2018 2019 2020 2021 2015 2016 2017 2018 2019 2020 2021 mame Australia wee Brazil ——P 62 index So
Slide 46: Lump remained favored on tight supply
[OFFICIAL] Annexure 16 Lump remained favored on tight supply Lump premium and stocks at Chinese ports Platts 62 price ($/dmt) 1.0 25% 250 08 200 20% 06 150 04 100 15% 0.2 50 0.0 10% 0 2015 2016 2017 2018 2019 2020 2021 2015 2016 = 2017,—S «2018=— 2019-2020. 2021~S 2022 Platts LP ($/dmtu) Lump % of s
Slide 47: Image descriptions
Annexure 17 Image descriptions [OFFICIAL] Slide 23 Kolomela mine. Kapstevel South pit. Kolomela mine. Dense media separation plant. Slide 25 Kolomela mine. Process plant. Slide 26 Kolomela mine. Processing, mining. Slide 27 Saldanha Port. Bucket-wheel stacker and reclaimer. Slide 28 Spinning wind tu