Merafe Resources Limited · JSE:MRF
Merafe Resources — SBG Securities Mining Conference 2015
37 slides from Merafe Resources's conference presentation, November 2015
Slide 1: SBG Securities - Mining Conference Presentation
SBG Securities - Mining Conference Presentation Presented by Zanele Matlala (CEO)
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: Agenda
Agenda 1. Corporate Overview 2. Operational Overview 3. Market Dynamics 4. Financial Overview 5. Outlook 6. Annexures Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015 3
Slide 4: Corporate Overview
01 Corporate Overview 4
Slide 5: Experienced Management Team
Experienced Management Team Zanele Matlala CA(SA) – Chief Executive Officer Power and ore consumption efficiencies* Zanele joined the Merafe Board in 2005 as an independent non-executive director. She was appointed Merafe’s Chief Financial Officer on 1 October 2010 and Chief Executive Officer on 1 J
Slide 6: Merafe pooled assets with Glencore to form the Glencore-Merafe Chrome Venture
On 1 July 2004 Merafe pooled assets with Glencore to form the Glencore-Merafe Chrome Venture 20.5% of EBITDA 79.5% of EBITDA Glencore-Merafe Chrome Venture (‘PSV’) Joint Board EXCO Treasury Audit SHEQ Transformation Operations Marketing Merafe Resources Ltd | SBG Securities - Mining Conference Prese
Slide 7: The Venture is the largest ferrochrome producer in the world
The Venture is the largest ferrochrome producer in the world 2014 Global Ferrochrome production 2014 South African production IFML Tata Steel, KZN Afarak, Mogale Europe 6% 4% Alloys Other ASA Metals 6% 1% 6% Kazakhstan 6% 10% Glencore - Merafe Hernic 43% Ferrochrome 9% South Africa 34% China 37% Ind
Slide 8: What sets us apart from the competition
What sets us apart from the competition Energy efficient Partnership with Lowest cost technology Glencore – Secure long- Strong balance producer in reducing impact leaders in the term supply of sheet and cash South Africa with of high marketing of ore reserves flows the gap widening electricity cost
Slide 9: Operational Overview
02 Operational Overview 9
Slide 10: Geographical distribution of the PSV provides competitive advantage
Geographical distribution of the PSV provides competitive advantage Chrome ore - 8 mines, +200 million tonnes of mineral resources, 8 UG2 plants and +13 000 long-term supply agreements with major SA platinum producers employees Lion II Lion I Ferrochrome Thorncliffe - 22 furnaces – 2.339 million ton
Slide 11: Recipe for producing ferrochrome
Recipe for producing ferrochrome Chrome ore 2.1 – 3.1 t Reductants 0.4 – 0.8 t Electricity 2.4 – 4.2 MWh Furnace Ferrochrome Water 1.0t 2.5m³/t FeCr Transport (Internal) 1.25t Slag Fixed Costs (Primarily Salaries) Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015 1
Slide 12: Historic projects delivered on time and on budget
Historic projects delivered on time and on budget 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Commissioning of Merger to form Glencore- Commissioning of Boshoek smelter Merafe Chrome Venture Lion I smelter Commissioning of Acquired interest in Bokamoso Pelletiser Wonderkop smelter and related
Slide 13: Lion II uses significantly less electricity than other smelting technologies
Lion II uses significantly less electricity compared to other available smelting technologies and has reduced the overall cost per tonne in the group by 6% Glencore-Merafe Venture anticipated the changes in the South African electricity tariffs and invested in efficiencies. Specific Energy Consumpti
Slide 14: Lion addresses the key challenges facing the SA ferrochrome industry
Lion addresses the key challenges facing the SA ferrochrome industry Lowest specific energy consumption ca. 37% Escalating energy costs better than nearest rival Increased fine ore 750,000 tonnes pelletising capacity Skills shortages In-house training centre established Lagging logistics Proximity t
Slide 15: Market Dynamics
03 Market Dynamics 15
Slide 16: Estimated increase in stainless steel production in all regions in 2016
Estimated increase in stainless steel production in all regions in 2016 2012 2013 2014 2015e Change 2016f Change 15/14 16/15 in ´000 t in % in ´000 t in % NAFTA 1,978 2,032 2,389 2,486 4.1 2,585 4.0 Brazil 391 421 425 430 1.3 437 1.5 European Union 7,461 7,142 7,242 7,160 -1.1 7,170 0.1 Other Europe
Slide 17: Ferrochrome demand estimated to be up 5.5% in 2016
Ferrochrome demand estimated to be up 5.5% in 2016 Change Change 2012 2013 2014 2015e 2016f 15/14 16/15 in ´000 t in % in ´000 t in % NAFTA 466 439 706 542 -23.2 557 2.8 EU 1,730 1,612 1,584 1,524 -3.8 1,549 1.6 Japan 654 667 757 648 -14.3 664 2.5 South Korea 483 505 468 494 5.7 495 0.1 Taiwan 266 2
Slide 18: Global FeCr production overview – estimated
Global FeCr production overview – estimated to increase by 7.1% in 2016 Change Change 2012 2013 2014 2015e 2016f 15/14 16/15 in ´000 t in % in ´000 t in % Brazil 172 172 195 154 -21.0 165 7.4 EU 27 278 483 507 535 5.6 592 10.7 Russia, Turkey, Albania 285 366 288 254 -11.8 299 17.8 India 947 988 875
Slide 19: Reduction in ferrochrome prices offset by weakening of the Rand
Reduction in ferrochrome prices offset by weakening of the Rand European benchmark ferrochrome prices 2014 Usc/lb 2015 Usc/lb Change Q1 118 108 (8%) Q2 122 108 (11%) Q3 119 108 (9%) Q4 115 104 (10%) Concerns about Average 118.5 107 (10%) Chinese growth – net prices down Average Rand/Dollar exchange
Slide 20: Financial Overview
04 Financial Overview 20
Slide 21: Historical EBITDA margin on revenue
Historical EBITDA margin on revenue 25 21 20 16 16 16 15 % 15 12 10 5 0 '10 '11 '12 '13 '14 '15 H1 Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015 21
Slide 22: Headline earnings per share
Headline earnings per share 25 20 15 Cents 11 11 10 8 6 5 5 5 0 '10 '11 '12 '13 '14 '15 H1 Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015 22
Slide 23: Cash generated from operating activities
Cash generated from operating activities 600 487 500 400 R’million 295 306 300 257 251 233 200 100 0 '10 '11 '12 '13 '14 '15 H1 Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015 23
Slide 24: Outlook
05 Outlook 24
Slide 25: Conclusion
Conclusion • Remain profitable despite challenging times • Continue to reap benefits of capital investments made • No significant expansionary capex going forward o Reduce debt and increase dividends in short to medium term Merafe Resources Ltd | SBG Securities - Mining Conference Presentation Novem
Slide 26: QUESTIONS
QUESTIONS
Slide 27: ANNEXURES
06 ANNEXURES 27
Slide 28: Stainless grade mix: share of production
Stainless grade mix 100% Austenitic CrMn Ferritic Total 90% 400 Series 23.7 23.8 in Mill t 2011 19.3 6.0 8.8 34.1 80% 2012 19.8 7.2 8.9 35.8 2013 20.8 8.5 9.3 38.7 70% 200 Series Share of Production, in % 21.2 21.8 2014 22.2 9.4 10.3 41.8 60% 2015e 23.2 8.9 9.9 42.1 2016f 23.6 9.5 10.4 43.5 50% Grow
Slide 29: Stainless weighted indices
Stainless weighted indices Typical End Use Structure Developing & Emerging Countries (Weighted Stainless Index) 160 Others Change 15/14: 16.3 (ABC, etc.) 13.3 3.0% 140 2011=100 Others 6.4 (Furniture, etc.) 120 10.1 2.9 4.2 8.1 100 Other Transport 6.4 5.2 80 10.1 Electro / 2011 2012 2013 2014 2015 El
Slide 30: Stainless steel supply and demand balance
Stainless steel supply and demand balance 13.0 in Mill t Crude Stainless Steel per Quarter 12.0 Supply 11.0 Demand 10.0 Nickel Price Bubble 9.0 8.0 Destocking 7.0 6.0 5.0 Financial Crisis © Heinz H. Pariser 4.0 2004 2006 2008 2010 2012 2014 2016 Merafe Resources Ltd | SBG Securities - Mining Confere
Slide 31: South Africa's Cr ore exports
South Africa’s Cr ore exports 1,000 SA Rising Export Levels: 946 900 Total Exports 2005-08: ramp-up of ore G.R. 14.9% exports as China-boom 800 kicks-in 700 Exports to "RoW" Export, in kt per Month i.e. Non-China 2008-12: ~ 425 kt per month 600 of which >75% to China 500 2013: rising towards new „he
Slide 32: Chrome ore imports into China
Chrome ore imports into China 2013 2014 Change 2015 +9.7% (1-8) 858 in ´000 t in % in ´000 t Others 782 Iran South Africa 6,736 5,748 -14.7 4,885 Pakistan Others Albania Turkey 1,988 1,280 -35.6 689 Iran Oman Pakistan Oman 687 489 -28.8 264 Albania Turkey I ran 428 494 15.6 295 Oman +27.5% Albania 6
Slide 33: Ferrochrome Producer's Return-on-Sales
Ferrochrome Producer's Return-on-Sales (Selected Companies, 5 Yr Average) 50.0 40.0 Return on Sales, in % 30.0 Weighted Average: 20.2% 20.0 10.0 Arithmetic Average: 3.5% 0.0 -10.0 -20.0 © Heinz H. Pariser -30.0 Merafe Company 1 Company 3 Company 5 Company 6 Company 7 Company 8 Company 9 Glencore Com
Slide 34: Global power prices
Global power prices 0.12 All data based on average power prices and exchange rates for the years stated / South African Projection based on Exchange Rate of ZAR 12.1 per US$ Average power price, in US$ per kWh 2012/14 0.10 2011 2010 2011/12 2013 2012/13 2015 2013/14 2010/11 2014/15 2009 0.08 2009/10
Slide 35: 2015 Costs Ex Works Estimate
2015 Costs ex Works Estimate (Status October 2015) 140.0 © Heinz H. Pariser 120.0 Charge Cr Benchmark (2015): Cost in US$ ct per lb Cr Content US$ ct 107 per lb 24 100.0 2014 China Tender (2015 Y-t-D, excl VAT): 19 20 21 22 23 US$ ct 78 per lb (50% Cr) 80.0 17 15 18 13 16 11 14 Average Cost Ex Works
Slide 36: Long-term Benchmark Price Development
Long-term Benchmark Price Development 2.50 Actual Estimate Forecast Prices / Costs, in US$ per lb Cr (2014 US$) 2.00 Long-term Actual Trend FeCr Deflated Trend 95-30 Realistic Production Forecast Cost Prices in US$ of 1.50 Deflated 2014 US$/lb 2010 1.33 1.11 0.77 2015 1.07 1.34 1.07 0.69 2016 1.38 1
Slide 37: THANK YOU
THANK YOU
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