Mmg Ltd. · HKEX:1208
Mmg — H1 2019 Earnings Presentation
38 slides from Mmg's earnings presentation, Aug 22, 2019
Slide 1: 2019 Interim Results
2019 Interim Results 22 August 2019
Slide 2: Disclaimer
Disclaimer The information contained in this presentation is intended solely for your personal reference and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organisation/firm) or published, in whole or in part, for any pu
Slide 3: Overview
Overview Geoffrey Gao, CEO 2019 first half performance Ross Carroll, CFO Financial results Geoffrey Gao, CEO Strategy and outlook Questions and Answers 3
Slide 4: 2019 first half in review
2019 first half in review Geoffrey Gao Chief Executive Officer
Slide 5: Safety, Environment and Social Performance
Safety, Environment and Social Performance Safety performance 5.1 ▪ Safety – our first value 4.7 4.5 4.5 4.3 ▪ Continued strong Total Recordable Injury Frequency 4.1 3.9 (TRIF1) rate compared with other ICMM2 member companies 3.4 3 ▪ Committed to ICMM’s 10 principles of Sustainable Development and P
Slide 6: Copper market update
Copper market update Cu price vs. Citi China copper end-use tracker Near term outlook has deteriorated 7500 11 7000 9 - Copper traded as a proxy for global growth. Investors 6500 7 use it to express a view (liquid and easy to trade). In the 6000 5 long term, fundamentals will prevail over ‘risk-off’
Slide 7: Peru Logistics
Peru Logistics Peru Southern Mining Corridor ROAD ▪ Peru Southern mining corridor currently experiencing RAIL heightened community protest. ▪ Matarani now world’s largest Cu port and 49% of Peru production - Las Bambas, Constancia, Antapaccay, Cerro Verde and Projects - Quellaveco and Tia Maria. Las
Slide 8: Financial results
Financial results Ross Carroll Chief Financial Officer
Slide 9: Financial performance
Financial performance 2019 Key Financial Metrics (US$ million) 1H2019 1H2018 v 2018 Income statement (continuing operations) Revenue 1,387.4 1,898.8 (27%) EBITDA 646.7 984.2 (34%) (Loss)/Profit After Tax (73.0) 188.8 (139%) Attributable to: Equity holders (81.0) 124.2 (165%) Non-controlling interest
Slide 10: EBITDA waterfall 1H2018 vs 1H2019
- 200.0 400.0 600.0 800.0 1,200.0 1,000.0 EBITDA: 1H 2018 Continuing 984.2 Operations Dugald River 23.7 Price (154.5) Royalties, 33.2 Selling FX 0.2 Volume EBITDA waterfall 1H2018 vs 1H2019 (451.5) Production expenses (6.0) Corporate/Ex 13.1 ploration Stock Movement 217.1 Other (12.8) EBITDA: 1H 201
Slide 11: Underlying profit to MMG equity holders
Underlying profit to MMG equity holders ▪ MMG is focused on improving NPAT attributable to equity holders 2019 1H2019 1H2018 v financial and operational (US$m) 2018 performance in 2H19: Profit after tax – Las Bambas 62.5% interest 13.3 107.4 (88%) ➢ Cash flow and earnings expected to Profit after ta
Slide 12: Earnings sensitivity
Earnings sensitivity High earnings and cash flow leverage to copper and zinc prices Estimated impact on FY19 underlying EBITDA from changes in commodity prices and currency Sensitivity EBIT Impact (US$m) Copper US$/lb $0.10/lb / ($0.10/lb) 94/(94) Zinc US$/lb $0.10/lb / ($0.10/lb) 46/(46) Lead US$/l
Slide 13: Free cash flow sensitivity to copper and zinc
Free cash flow sensitivity to copper and zinc Illustrative Free Cash Flow (US$ million) for FY19 at different copper and zinc prices* Copper Price – US$/lb 2.50 2.60 2.70 2.80 2.90 3.00 3.10 3.20 0.80 (0.80) 31.1 95.7 160.4 225.0 289.6 354.3 418.9 0.90 (1.8) 62.9 127.5 192.2 256.8 321.4 386.1 450.7
Slide 14: Net debt
Net debt ▪ MMG has developed and Movements in Net Debt US$8.0b commissioned two of the largest (241) 7,700 7,601 (148) greenfield copper and zinc projects US$7.5b globally over the past 4 years 290 US$7.0b ▪ Growth has been largely debt funded US$6.5b US$6.0b ▪ Since commercial production at Las Bam
Slide 15: Debt maturity profile
Debt maturity profile Debt repayment schedule1 (US$m) 1,600 ▪Gross debt reduced by 1,400 ~US$0.3b in H1 FY2019 1,200 ▪Average outstanding maturity profile now ~5.3 years 1,000 800 600 400 200 0 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 MLB 7 Yr Acquisition Facility MLB 18
Slide 16: Las Bambas drilling results
Las Bambas drilling results ▪ Drilling has intersected mineralisation that is within 300 metres Drilling highlights include: to the south-west of the current Chalcobamba Ore Reserve pit. ▪ 126.8m @ 1.39% Cu and 7ppm Mo, including 48.8m @ 2.43% Cu, in drillhole CHS19-012, ▪ Further works expected to
Slide 17: DRC exploration results
DRC exploration results ▪ Extensive drilling campaigns have led to the identification of significant copper oxide mineralisation at the Nambulwa Project, 30km from Kinsevere ▪ Preliminary interpretations of grade, thickness, and metallurgical characteristics exhibited in drilling intercepts at both
Slide 18: MMG Outlook
MMG Outlook Geoffrey Gao Chief Executive Officer
Slide 19: The first 10 years – building a great company
The first 10 years – building a great company Cu-equivalent production International footprint Mine life Brownfield development Safety & social opportunities contribution 19
Slide 20: World-class assets and strong support from China
World-class assets and strong support from China ▪ Free Cash Generation of ~US$2.6b since Las Bambas commercial C1 zinc cost curve (2019)1 production has been used for debt reduction to create value for our 160 shareholders 140 C1 cash cost (c/lb) 120 2019 Dugald River C1 guidance ▪ Delivered 15% pa
Slide 21: 10 years on: Business Transformation
10 years on: Business Transformation “The right time to conduct a strategic and systemic review of the business to deliver a step change in operational performance and business costs.” Maximise benefits of a decentralised operating 1. Reduce Overheads and Improve Efficiency management structure thro
Slide 22: Appendix
Appendix
Slide 23: MMG asset base
MMG asset base Established presence in the key Andean and African copper belts and a world HIGH class Australian LAKE zinc business IZOK LAKE DUGALD RIVER (100%) LAS BAMBAS (62.5%) 2019 production guidance: 165,000 – 175,00 tonnes of 2019 production guidance: zinc in zinc concentrate LAOS HONG KONG
Slide 24: Guidance for 2019
Guidance for 2019 Las Bambas Rosebery Copper – production 385,000 – 405,000 tonnes Zinc – production 85,000 – 95,000 tonnes Copper – C1 costs US$1.15 – 1.25 / lb Zinc – C1 costs US$0.25 – 0.35 / lb Kinsevere Dugald River Copper – production 65,000 - 70,000 tonnes Zinc – production 165,000 – 175,000
Slide 25: 2019 illustrative spot EBITDA & FCF
2019 illustrative “spot” EBITDA & FCF Copper Las Bambas Kinsevere Total Copper 3 Total Copper Production (kt) 385,000 67,500 2 Payable % 96.70% 100% Total Copper Payable (kt) 372,295 67,500 Spot Price 1 ($/Ib) 2.72 2.73 3 Cost Guidance ($/Ib) (1.25) (2.20) Illustrative Free Cash Flow Margin ($/Ib) 1
Slide 26: Tax reconciliation
Tax reconciliation ▪ MMG’s prima facie income tax rate from its operations is approximately 32%. This broadly reflects the 1H19 Actual ETR % corporate income tax rates in Peru, Australia and the DRC. Profit Before Tax (71.0) ▪ In 1H19, MMG’s Effective Tax Rate (ETR) was (2.8%). This was largely Inco
Slide 27: Financial dashboard
Financial dashboard Revenue by commodity Revenue by customer location 1% 4%3% 16% 14% China 5% Zinc Copper Japan & Korea 10% Gold Asia (exc. China, Japan & Korea) Silver 57% Australia Lead 13% Other Molybdenum 6% 71% EBITDA by operating segment Operating expenses (sites) 10% 8% -8% 14% 1% 5% People
Slide 28: Las Bambas 1H19 performance
Las Bambas 1H19 performance Key highlights: Financials ▪ Revenue of US$902.2 million 33% lower, due to lower sales volumes and US$ million 1H19 1H18 % lower realised commodity prices. The lower sales volumes were the result of community roadblocks that took place from early February until Revenue 90
Slide 29: Kinsevere 1H19 performance
Kinsevere 1H19 performance Key highlights Financials ▪ First half production of 29,002 tonnes of copper cathode was 28% US$ million 1H19 1H18 % lower than pcp, reflected the challenging mining conditions in the Mashi pit, declining ore feed grade and plant stability issues. Revenue 176.6 279.4 (37%)
Slide 30: Rosebery 1H19 performance
Rosebery 1H19 performance Key highlights Financials ▪ Revenue decreased by 30% to US$142.8 million compared to first US$ million 1H19 1H18 % half 2018 due to lower sales volumes across all commodities, lower Revenue 142.8 203.8 (30%) prices and higher zinc treatment charges. EBITDA 64.1 118.2 (46%)
Slide 31: Dugald River 1H19 performance
Dugald River 1H19 performance Key highlights Financials ▪ Revenue of US$163.8 million 137% above prior period, reflecting full six months US$ million 1H19 1H18 % of operation compared to two months following commercial production. Revenue1 163.8 69.2 137% ▪ 51% uplift in mined ore compared with firs
Slide 32: Profit or Loss Statement
Profit or Loss Statement 6 months ended 30 June 2019 2018 US$ million US$ million Revenue 1,387.4 1,898.8 Operating expenses (726.7) (901.2) Exploration expenses (13.4) (15.2) Administration expenses (11.5) (22.8) Other income / (expenses) 10.9 24.6 EBITDA 646.7 984.2 Depreciation and amortisation e
Slide 33: Balance Sheet
Balance Sheet US$ million 30 June 2019 31 Dec 2018 Non-current assets 11,785.2 11,982.6 Current assets – cash and cash equivalents 242.0 601.9 Current assets – other 876.0 670.9 Total assets 12,903.2 13,255.4 Total equity 2,799.9 2,896.3 Non-current liabilities – other 1,570.5 1,486.8 Non-current li
Slide 34: Statement of Cash Flow
Statement of Cash Flow US$ million - Six months ended 30 June 2019 30 June 2018 Receipts from customers 1,558.6 2,216.8 Payments to suppliers and employees (1,101.4) (1,262.6) Payments for exploration expenditure (13.4) (15.2) Income tax (paid)/ refunded (153.8) 2.5 Net cash generated from operating
Slide 35: MMG overview
MMG overview Overview Broker Coverage ▪ Founded in 2009, MMG is a diversified base metals company with four operating mines located across four continents Broker Name ▪ Headquartered in Melbourne (Australia), with a primary listing on the HKEx (1208 HK) and a Argonaut Helen Lau secondary listing on
Slide 36: Mineral Resources
Mineral Resources Copper and zinc Mineral Resources of 12.8Mt and 10.9Mt respectively Mineral Resources – Contained Metal (100% asset basis) As at 30 June 2018 Project Copper Zinc Lead Silver Gold Molybdenum kt kt kt moz moz kt Las Bambas 10,649 168 2.4 310 Kinsevere 1,313 Dugald River 99 7,052 1,03
Slide 37: Ore Reserves
Ore Reserves Copper and zinc Ore Reserves of 7.4Mt and 3.8Mt respectively Ore Reserves – Contained Metal (100% asset basis) As at 30 June 2018 Project Copper Zinc Lead Silver Gold Molybdenum kt kt kt moz moz kt Las Bambas 6,882 107 1.7 187 Kinsevere 488 Dugald River 3,336 580 35 Rosebery 11 428 161
Slide 38: Am ot
Am ot CMM | MINING WITH scoxcz: | PRINCIPLES