Valterra Platinum Limited · JSE:VAL
Valterra Platinum — Anglo American Platinum — FY2018 Earnings Presentation
59 slides from Valterra Platinum's earnings presentation, Feb 18, 2019
Slide 1: Anglo American Platinum 2018 Annual Results Presentation
ANGLO AMERICAN PLATINUM 2018 ANNUAL RESULTS PRESENTATION 18 February 2019 Mogalakwena mine
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American Platinum Limited (“Anglo American Platinum”) and comprises the written materials/slides for a presentation concerning Anglo American Platinum. By attending this presentation and/or reviewing the slides you agree t
Slide 3: 2018 Annual Results Agenda
2018 ANNUAL RESULTS AGENDA 1. Safety and sustainability performance Chris Griffith 1. Operational performance Chris Griffith 2. Financial results Ian Botha 2. PGM market review Chris Griffith 3. Next phase of value delivery Chris Griffith 3
Slide 4: Our differentiated PGM proposition delivering value
OUR DIFFERENTIATED PGM PROPOSITION DELIVERING VALUE… Strong operational performance Increasing returns Generating cash PGM production increase ROCE increase to Free cash flow from operations(1) 4% 24% R5.6bn Strong balance sheet Increased dividend payout Industry leading returns Net cash position Di
Slide 5: We've been busy
…WE’VE BEEN BUSY ✓ Completed the sale of Union ✓ Completed the sell down of equity in Royal Bafokeng Platinum ✓ Completed the disposal of 33% stake in BRPM JV ✓ Completed the acquisition of remaining 50% stake in Mototolo JV ✓ Launch of AP Ventures Fund, with $200m commitment together with the PIC ✓
Slide 6: Safety & Sustainability Performance
2018 ANNUAL RESULTS SAFETY & SUSTAINABILITY PERFORMANCE Chris Griffith Unki irrigation project
Slide 7: Elimination of fatalities remains the focus
ELIMINATION OF FATALITIES REMAINS THE FOCUS Fatalities & total recordable case injury frequency rate (TRCFR)(2)(3) Fatalities 7.28 7.59 2 TRCFR 5.28 TRCFR improvement 4.52 3.00 34% Safety turnaround in place: 7 6 • Management commitment to safety and elimination of fatalities 3 • Benefits from imple
Slide 8: Investing in health
INVESTING IN HEALTH Tuberculosis (TB) deaths and TB incidence rates (per 100,000) TB related deaths 80 1,020 5 987 1,000 70 National average (781) 800 60 660 600TB incident rate reduction 582 50 51 325 400 40 TB incidence rates 44% 200to 325 per 100,000 people 30 - 27 United Nations - know your 20 -
Slide 9: Mining responsibly and sustainably
MINING RESPONSIBLY AND SUSTAINABLY… Environmental incidents (5) Carbon emissions Global ESG recognition (6)(7) Level 3 to 5 Reduction since 2013 zero 27% Total waste to landfill SO2 abatement investment Reduction since 2013 To global best practice 64% R2.5bn 2018 SLP and CSI spend (8) Dividends paid
Slide 10: To produce PGMs which improve peoples lives
…TO PRODUCE PGMS WHICH IMPROVE PEOPLES LIVES Producing ~5 million PGMs per annum to enable… Air quality & lower emissions Decarbonisation – fuel cells CO2 capture / storage Energy Storage Medical technology advances Food preservation…and more 10
Slide 11: Operational Performance
2018 ANNUAL RESULTS OPERATIONAL PERFORMANCE Chris Griffith 300 tonne haul truck at Mogalakwena
Slide 12: Strong operational performance – PGMs up 4%
STRONG OPERATIONAL PERFORMANCE – PGMS UP 4% Strong operational performance Improving productivity Refined within guidance PGM production increase PGM production per employee Impacted by WIP stock build 4% 15% 4.78Moz increase from 2017 Lower AISC (10) Strong EBITDA margin Low cost production Own min
Slide 13: Record production continues at Mogalakwena
RECORD PRODUCTION CONTINUES AT MOGALAKWENA Total PGM Production (’000 ounces) PGM production increase +7% 7% 1,170 1,099 134 980 126 EBITDA margin and ROCE 116 452 509 541 46% & 31% Economic free cash flow (11) 464 495 412 R4.0bn 2016 2017 2018 at AISC(10) of $286 per platinum ounce sold, despite bu
Slide 14: Unlocking further value at Mogalakwena
UNLOCKING FURTHER VALUE AT MOGALAKWENA 2016 Base plan Updated 2019 base plan Tonnes mined – reduce to enable cost reduction Tonnes mined – supporting 500-550,000 platinum ounces per annum 250 250 200 200 150 150 100 100 50 50 2014 2022 2030 2019 2027 2035 Old plan 2016 Base Plan 2016 base plan Updat
Slide 15: Amandelbult turn around progressing - tough Q4
AMANDELBULT TURN AROUND PROGRESSING - TOUGH Q4 Total PGM Production (’000 ounces) PGM production increase +1% 1% as ramp-up of Dishaba UG2 885 869 continues and fatality impacting Q4 858 219 221 EBITDA margin and ROCE 218 207 202 205 15% & 17% up from 10% and 6% 459 438 443 Economic free cash flow (
Slide 16: Amandelbult – unlocking full value & potential
AMANDELBULT – UNLOCKING FULL VALUE & POTENTIAL Progress to date and value 2017 Commitment – AISC reduction to <$820 (per platinum ounce sold) delivery to come… 1,072 1,066 1. Develop Dishaba UG2 – • Utilising existing Merensky infrastructure increasing reserves and replace the Tumela Upper 794 <820
Slide 17: Unki – record production from strategic asset
UNKI – RECORD PRODUCTION FROM STRATEGIC ASSET Total PGM Production (’000 ounces) Total PGM production increase +16% 193 16% 166 31 162 27 EBITDA margin and ROCE (13) 26 61 64 76 29% & 9% Economic free cash flow (11) 86 75 75 R525m at AISC(10) of $616/ platinum ounce 2016 2017 2018 sold, despite buil
Slide 18: Mototolo – 100% owned, able to unlock synergies
MOTOTOLO – 100% OWNED, ABLE TO UNLOCK SYNERGIES Total PGM Production (’000 ounces) Total PGM production increase (14) +56% 288 56% Bokoni 21 252 38 Own-mined 67 EBITDA margin and ROCE (15) 64 185 47 77 125 JV mined 25% & 34% 71 53 Economic free cash flow (16) 117 123 125 JV POC 85 R113m at AISC(10)
Slide 19: WIP build led to lower refined production
WIP BUILD LED TO LOWER REFINED PRODUCTION, SALES SUPPLEMENTED BY INVENTORY DRAWDOWN PGM refined production PGM sales volumes Refined PGM production down 5,382 5,225 6% 236 Lower refined production due to: Stock count 5,116 Sibanye toll c.600 gain & build 5,146 from Waterval 2017 run out 236 • Benefi
Slide 20: Financials
2018 ANNUAL RESULTS FINANCIALS Ian Botha Women in mining
Slide 21: Strong financials
STRONG FINANCIALS Headline earnings per share EBITDA Headline earnings (R/Share) 28.93 R14.5bn R7.6bn increase of 21% up 95% Up 95% 14.82 27.21 ROCE (%) Net cash 17.83 Underlying 1.72 24% R2.9bn (3.01) Once-off up from 18% from net debt of R1.8bn accounting 2017 entries 2018 and dividend of R1.9bn p
Slide 22: Diversified PGM dollar prices driving earnings
DIVERSIFIED PGM DOLLAR PRICES DRIVING EARNINGS EBITDA (R billion) 2018 vs. 2017 5.4 Rh 2.6 0.3 (1.5) 16.2 (1.4) Stock count Pd 2.1 14.5 (1.3) Ore 0.3 0.6 Ru 1.3 (2.7) 12.0 Ni 0.7 108 Pt (1.5) 2017 Price Currency CPI Stock count Cost & Associates 2018 & Ore Volume 22 capitalisation
Slide 23: Increasing EBITDA margins
INCREASING EBITDA MARGINS 2017 2018 18% 20% 32% 32% 27% Mototolo Toll 4% 20% 20% 18% 10% 23% 9% POC JV mined share Own mines POC JV mined share Own mines 23
Slide 24: Cost performance impacted by reduction in ore capitalisation
COST PERFORMANCE IMPACTED BY REDUCTION IN ORE CAPITALISATION R /Pt oz produced All-in sustaining unit cost (10) +8% +5% ESOP 1,803 127 (565) $756 per platinum ounce sold 1,026 20,684 (783) vs realised platinum price of $871/oz Above 677 CPI 20,223 CPI 999 2019 unit cost guidance 19,203 R21,000- R22,
Slide 25: Continued working capital reduction
CONTINUED WORKING CAPITAL REDUCTION, DESPITE TEMPORARY WIP BUILD-UP Working capital reduction (R billion) Working capital days 4.1 Ore capitalisation 0.5 Finished goods 0.1 (1.9) 15 days 2017: 26 Days WIP (To be released in 2019) 3.5 (1.4) Union POC Ore capitalised 6.2 (3.3) (0.6) R2.3bn 2017: R1.8b
Slide 26: Disciplined spend on SIB and fast payback projects
DISCIPLINED SPEND ON SIB AND FAST PAYBACK AND HIGH RETURNING PROJECTS Rbn 2018 capital expenditure 5.7 – 6.3 0.8 R4.7bn 2019 guidance R5.7bn - R6.3bn 4.7 0.4 1.5 - 1.8 2019 project capital 4.0 0.6 1.0 R1.5bn-R1.8bn on low capex, fast payback projects, to drive to best in class performance and then s
Slide 27: Strong balance sheet, driven by improving cash generation
STRONG BALANCE SHEET, DRIVEN BY IMPROVING OPERATIONAL CASH GENERATION Net (debt) / cash (Rbn) Stronger free cash flow from operations (Rbn) R4.7bn improvement after a dividend payment of R1.9bn R5.6bn up from R3.5bn in 2017 2.9 5.5 4.7 0.1 1.3 1.5 2.6 60% (1.8) 5.6 3.5 (1.9) (1.9) (7.3) (0.6) 2016 2
Slide 28: Delivering returns to shareholders
DELIVERING RETURNS TO SHAREHOLDERS Improving dividend payout H2 2018 dividend Payout per share 40% R2.0bn R7.51 of headline earnings (from 30%) R3.0bn returned for 2018 2% dividend yield 28
Slide 29: PGM Market Review
2018 ANNUAL RESULTS PGM MARKET REVIEW Chris Griffith Fuel cell vehicle – SAIC Roewe950
Slide 30: Stronger basket price, supported by palladium and rhodium
STRONGER BASKET PRICE, SUPPORTED BY PALLADIUM AND RHODIUM Indexed price (3 Jan 2017 = 100)(17) USD basket price increase 250 400 13% 200 300 Rand basket price increase 150 200 13% 100 100 USD Platinum price decrease 50 0 Jan 17 Mar 17 Jun 17 Jan 18 Mar 18 Jun 18 Feb 17 Feb 18 Oct 17 Dec 17 Oct 18 Ap
Slide 31: Overall outlook for 3E demand positive
OVERALL OUTLOOK FOR 3E DEMAND POSITIVE Platinum (net demand)(18) Palladium (net demand)(18) Rhodium (net demand)(18) Jewellery Industrial Other 2% 19% 25% Industrial Jewellery 29% 43% Investment 1% Autocatalyst 27% Autocatalyst Autocatalyst 79% 75% • Industrial demand strong • Automotive consumption
Slide 32: Next Phase of Value Delivery
2018 ANNUAL RESULTS NEXT PHASE OF VALUE DELIVERY Chris Griffith Mogalakwena North concentrator
Slide 33: Our differentiated value proposition
OUR DIFFERENTIATED VALUE PROPOSITION Quality assets and Capital discipline and Long term sustainability operational excellence shareholder returns 70% production in H1 Strong balance sheet Project studies on value-add of the cost curve and cashflow growth optionality Only open-pit PGM mine Disciplin
Slide 34: Upgrade of the portfolio
UPGRADE OF THE PORTFOLIO Mototolo & Modikwa JV Mogalakwena Amandelbult Unki Processing Der Brochen Kroondal JV Own mine EBITDA margin ROCE Free cash flow from operations 32% 24% R5.6bn up from (12)% in 2012 up from R(5.4)bn in 2012 up from 16% in 2012 34
Slide 35: How we create value – next phase of the strategy
HOW WE CREATE VALUE – NEXT PHASE OF THE STRATEGY 1 Extracting the full potential from our operations Picture through our people and innovation Investing in our portfolio that delivers industry- Picture 2 leading cash flows and returns Picture 3 Investing in the development of the market for platinum
Slide 36: First ensure stability and optimisation
1 FIRST ENSURE STABILITY AND OPTIMISATION… Mogalakwena North Concentrator – stability shown through Operating Model Stabilisation of Further improvements processes at a higher implemented highlighting performance increased stability 30 000 2 3 1 UCL = 29141 UCL = 28921 28 500 UCL = 27816 27 000 Mean
Slide 37: Then achieve best practice performance
…1 …THEN ACHIEVE BEST PRACTICE PERFORMANCE… Mining Concentrating Processing Develop/Drill Mine/Blast Hoist/Tram Mill Float & Filter Smelt & Refine Crush Load & Haul 60% of cost base ~20% of cost base ~20% of cost base ~45Mtpa ~ 10% Shovel performance from 26Mtpa in 2018 Throughput increase ~ 81% Ope
Slide 38: And set best practice with game-changing technologies
…AND SET BEST PRACTICE WITH GAME-CHANGING 1 TECHNOLOGIES ~10% increase in feed grade and 2% in recoveries PGM and chrome ultra fine Bulk sorting recovery ~30% reduction energy intensity Coarse Particle Recovery Dry Disposal ~30% reduction in grinding costs Advanced Fragmentation Shock-break 38
Slide 39: To drive the next phase of value
1 TO DRIVE THE NEXT PHASE OF VALUE Driving an uplift in EBITDA margin (excluding expansion projects) Margin uplift +5-8pp 5-8 pp 25%-28% Time to implement 20% 3-5 years 11% Driven by • Operational efficiency to beat best in class (P101) • Innovation and Technology • Fast payback, value enhancing pro
Slide 40: Invest in key value enhancing projects
2 INVEST IN KEY VALUE ENHANCING PROJECTS Fast payback projects Mogalakwena expansion Mototolo/ Der Brochen expansion • Modernisation • Conceptual project studies • AAP completed purchase of - Amandelbult 15E replacement showed third concentrator most remaining 50% stake in Mototolo value accretive e
Slide 41: Invest in PGM market demand…support growth
3 INVEST IN PGM MARKET DEMAND…SUPPORT GROWTH Jewellery Investment Industrial 2018 spend on jewellery 2018 spend on investment Total committed capital (6 years) development development $30m $4.2m ~$100m • AP Ventures – provide investment opportunities (so far $27m drawn • Contribute to jewellery deve
Slide 42: Guidance & Conclusion
GUIDANCE & CONCLUSION Chris Griffith Unki smelter
Slide 43: 2019 Guidance
2019 GUIDANCE Production M&C (m ounces) Refined production (m ounces) Sales volumes (m ounces) PGMs 4.2 – 4.5 PGMs 4.6 – 4.9 PGMs 4.6 – 4.9 Pt: 2.0 – 2.1 Pt: 2.2 – 2.3 Pt: 2.2 – 2.3 Pd: 1.3 – 1.4 Pd: 1.4 – 1.5 Pd: 1.4 – 1.5 Other: 0.9 – 1.0 Other: 1.0 – 1.1 Other: 1.0 – 1.1 Excluding Sibanye toll pr
Slide 44: To conclude…
TO CONCLUDE… ✓ ESG performance improving and receiving global recognition ✓ Improved operational performance ✓ Upgrading the portfolio ✓ Strong financial position ✓ Increased returns to shareholders ✓ Next phase of value delivery underway 44
Slide 45: Q&A
Q&A Run-of-mine stockpile area at Mogalakwena North concentrator
Slide 46: Appendix
APPENDIX Plat Africa Awards 2
Slide 47: Balanced capital allocation
BALANCED CAPITAL ALLOCATION Capital allocation framework 2018 12.8 • Free cash flow • Reduced net debt by R4.7bn (9.9) • Sustaining capex and capitalised waste stripping of R5.2bn Discretionary capital options • Dividend paid R1.9 billion (2.9) • Fast payback, low capex projects Low cost, fast payba
Slide 48: Net debt and cash flow by mine
NET DEBT AND CASH FLOW BY MINE (5.2) (1.0) 14.3 (2.4) 3.8 0.1 (0.6) 1.5 (1.9) 2.9 (1.8) R5.6n Investment in Net debt 100% Economic Economic Cash tax and Cash from SIB and Project Free cash associates, Customer Net proceeds Net cash Dec Operation December Operating interest free net interest Dividend
Slide 49: Cost breakdown
COST BREAKDOWN Costs reflective of AAP Own mined and Joint Venture share of production and costs at operations. Excludes all purchase of concentrate costs and volume, overhead and marketing expenses. 2017 Cost base (Rbn) Volum e % PGM volum e (koz) Labour Contractors Materials Utilities Sundries Ope
Slide 50: Areas of positive demand for PGMs
AREAS OF POSITIVE DEMAND FOR PGMS Short to medium term… Growth in Industrial Electrification heavy duty Hydrogen applications through fuel and stricter economy growing cell vehicles emissions Platinum Global growth Substitution Jewellery Jewellery driving into gasoline growth in growth in India indu
Slide 51: 2018 saw a shift in momentum for hydrogen and fuel cells
2018 SAW A SHIFT IN MOMENTUM FOR HYDROGEN AND FUEL CELLS WITH MULTIPLE, HIGH PROFILE DEVELOPMENTS Clear advantage of • Alstom launched operation of its hydrogen train in Germany. • Hyundai announced it will deliver 5000 hydrogen trucks to Switzerland in the coming 5 fuel cells years with operations
Slide 52: Pt demand balanced across key demand segments
Pt DEMAND BALANCED ACROSS 3 KEY DEMAND SEGMENTS Net demand 2018 (%) (18) Net platinum demand down Pt Pd 2.3% Investment year-on-year 1% Autocatalyst Industrial 27% 19% Net palladium demand down Jewellery 2% 1.0% year-on-year (excluding investment) Industrial Net rhodium demand down Jewellery Autocat
Slide 53: Automotive PGM demand to continue to grow
AUTOMOTIVE PGM DEMAND TO CONTINUE TO GROW Global light duty automotive sales outlook (million units) (22) Diesel car sales decline 94 million 111 million Fuel cell electric 25k 2.5% Pt 6k 6m CAGR over 2018-2025 1m Pd Hybrid 20m 4m Gasoline/hybrid sales increase Rh Pd 2.7% CAGR over 2018-2025 71m Gas
Slide 54: Pt demand from automotive sector resilient
Pt DEMAND FROM AUTOMOTIVE SECTOR RESILIENT Platinum auto demand split (22) Forecast platinum auto demand (23) Total automotive platinum demand decrease 0.2% CAGR over 2018-2025, excluding Europe Light Global Heavy Duty Diesel impact of substitution Duty Diesel 15% 50% Global Heavy duty diesel outloo
Slide 55: Industrial demand remains strong
INDUSTRIAL DEMAND REMAINS STRONG Net demand 2018 (%) (18) Platinum outlook Pt Pd positive Chemical Other 13% Chemical following 12% year-on-year growth Other 23% 35% 35% Palladium outlook Electrical 25% neutral Fuel cells Glass 2% 19% Rhodium outlook Petrol and Electrical Dental Gas-to-liquid 13% 8%
Slide 56: Jewellery: 2018 mixed, outlook more positive
JEWELLERY: 2018 MIXED, OUTLOOK MORE POSITIVE Net platinum demand 2018 (%) (25) China remains challenging North short term America 15% negative Japan 6% Europe, Japan, North America Europe 11% China 53% neutral ROW 4% Strong growth from India India 11% strong positive 56
Slide 57: Net investment continues
NET INVESTMENT CONTINUES Net platinum investment demand (000 ounces) (26) Total platinum investment 900 800 +66 koz in 2018 700 600 500 Total palladium disinvestment 400 300 -574 koz in 2018 200 100 0 Growth outlook -100 positive 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
Slide 58: 3E primary supply to remain stable
3E PRIMARY SUPPLY TO REMAIN STABLE 3E Primary supply (000 ounces) (27) Current production outlook Expansion Replacement negative 2018-2025 Replacement capex unlikely to Base compensate for declines in current production profile Processing capacity, water and mine economics to act as constraints on 2
Slide 59: Foot notes
FOOT NOTES (1) Free cash flow is defied as cash flow from operations, less capital, less project capital, less cash tax and net interest paid (2) TRCFR is a measure of the rate of all injuries requiring treatment above first aid per 1,000,000 hours worked (3) TRCFR is normalised for 2014 for the imp
Anglo American Platinum — FY2018 Earnings Presentation on 6ix