African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — FY2012 Earnings Presentation
46 slides from African Rainbow Minerals's earnings presentation, October 2012
Slide 1: ARM significantly increased sales volumes across all commodities
“ARM significantly increased sales volumes across all its commodities except ferrochrome and Nkomati chrome ore. We also increased headline earnings and dividends despite challenging global markets.” Patrice Motsepe Executive Chairman
Slide 2: Overview and strategy
Khumani Iron Ore plant Overview and strategy Patrice Motsepe, Executive Chairman
Slide 3: Disclaimer
Disclaimer Certain statements in this report constitute forward looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, pla
Slide 4: Group structure
Group structure 4 1. Assets held through ARM Mining Consortium’s effective interest of 41.5%, the balance held by local communities. 2. ARM’s shareholding in Two Rivers will reduce to 51% once the transfer of Kalkfontein portions 4, 5 and 6 and Tweefontein prospecting rights has been effected. 3. Pl
Slide 5: Salient features
Salient features Headline earnings increased 2% to R3.45 billion (F2011 restated: R3.37 billion) in difficult market conditions. Headline earnings per share were 1 615 cents compared to 1 585 cents in F2011 (restated). ARM declared an increased dividend of 475 cents per share, compared to the F2011
Slide 6: Salient features
Salient features Satisfactory cost containment at Two Rivers Mine, the PCB coal operations, the manganese ore mines, the manganese alloy operations and the chrome ore mine. Khumani Mine is ramping up production ahead of schedule and under budget. The Lubambe Copper project progressed ahead of schedu
Slide 7: Headline earnings
Headline earnings Headline earnings (R million) 4 500 4 013 4 000 3 451 3 500 3 374* 3 000 2 500 2 317 2 000 1 714 1 500 1 000 500 0 F2008 F2009 F2010 F2011 F2012 *Restated due to early adoption of IFRIC 20 Headline earnings increased despite challenging commodity market conditions. 7
Slide 8: Dividend and earnings history
Dividend and earnings history Headline earnings per share and dividends per share (cents per share) 2 500 Headline earnings per share Dividends per share 2 000 1 906 1 585 1 615 1 500 1 094 1 000 807 450 475 500 400 175 200 0 F2008 F2009 F2010 F2011 F2012 *Restated due to IFRIC 20 Dividend cover 4.8
Slide 9: Robust financial position
Robust financial position Net cash excluding partner loans (R million) 3000 2 594 2500 2 303 2000 1 811 1 575 1500 1000 500 174 0 F2008 F2009 F2010 F2011 F2012 ARM is well positioned financially. 9
Slide 10: Revenue composition
Revenue composition F2011 revenue split F2012 revenue split Nickel Nickel 10% 9% Iron Ore 35% Platinum 19% Platinum Iron Ore 22% 44% Coal 4% Coal Chrome 3% 6% Chrome 8% Manganese Manganese 22% 18% The iron ore contribution to revenue increased as the Khumani Mine ramped up one year ahead of schedule
Slide 11: EBITDA margins
EBITDA margins EBITDA margin (%) Nickel 29% 2% Platinum 33% 25% Coal 43% 42% Chrome ‐7% ‐5% Manganese 40% 25% Iron Ore 68% 60% ‐30% ‐10% 10% 30% 50% 70% F2011 F2012 11
Slide 12: ARM strategy
ARM strategy Quality growth continues in Operational ARM’s portfolio efficiencies of commodities Acquisitions and partnerships Africa Entrepreneurial Owner operator Profit focused Partner of choice management World-class Responsible community Employer of choice management team development 12
Slide 13: Update on growth projects
Update on growth projects The Khumani Iron Ore Expansion Project was successfully handed over to the mine one year ahead of schedule and well below budget. Full production ramp-up to 6.4 mtpa was achieved at Goedgevonden Coal Mine. There was significant improvement in the operational performance of
Slide 14: Growth in iron ore
Growth in iron ore Total iron ore sales (million tonnes) 18.0 16.0 16.0 16.0 14.8 14.0 12.0 9.8 10.0 10.0 8.0 6.0 4.0 2.0 0.0 F2010a F2011a F2012a F2013e F2014e Iron ore sales increased by 48%. Ramp up of the Khumani Mine is one year ahead of schedule and below budget. 14
Slide 15: Nkomati Nickel Mine improving
Nkomati Nickel Mine improving Nickel produced (thousand tonnes) 25.0 20.5 20.0 17.5 15.0 14.0 9.7 10.1 10.0 5.0 0.0 F2010a F2011a F2012a F2013e F2014e Improvement in the operational performance of Nickel production increased by 39%. Nkomati Nickel Mine. 15
Slide 16: Lubambe Copper Project
Lubambe Copper Project Copper produced (thousand tonnes) 50.0 45.0 45.0 45.0 45.0 40.0 34.6 35.0 30.0 25.0 20.0 14.3 15.0 10.0 5.0 0.0 F2013e F2014e F2015e F2016e F2017e The Lubambe Copper Project is currently on schedule and within budget. 16
Slide 17: Operational efficiencies
Operational efficiencies ARM achieved target of operations being below the 50th percentile on the global cost curve by 2012. 17
Slide 18: Continued growth in existing assets
Continued growth in existing assets ARM continues to focus on growing its existing assets Transnet recently announced that it will spend R300 billion over the next 7 years as part of its Market Demand Strategy (MDS), in terms of which the South African rail, pipeline and port infrastructure will exp
Slide 19: Acquisitions
Acquisitions Increased focus on acquisitive growth in Africa. ARM’s strong financial status positions it favourably to pursue value adding acquisitive growth. 19
Slide 20: Safety and sustainability
Safety and sustainability In F2012 the ARM’s Lost Time Injury Frequency Rate (LTIFR) improved from 0.43 to 0.42 per 200 000 man hours. Despite concerted efforts to maintain the highest safety standards at all our operations regrettably, ARM lost four employees in three fatal accidents. The ARM Board
Slide 21: Outlook
Outlook Commodity markets in F2012 have been negatively affected by the global economic slowdown. Weak demand fundamentals in the PGM, nickel and chrome markets are expected to persist in the short-term due to uncertainty in the developed markets. The long-term fundamentals of these commodities rema
Slide 22: Operational review
Loading in the Nkomati Mine open pit Operational review Mike Schmidt, Chief Executive Officer
Slide 23: Divisional headline earnings
Divisional headline earnings Contribution to headline earnings (R million) Commodity group year ended 30 June 2012 2011* % change Platinum Group Metals 190 350 (46) Nkomati Nickel and Chrome (130) 165 (178) Ferrous Metals 3 495 2 897 21 Coal 52 (103) Copper (31) (173) 82 Exploration (113) - Corporat
Slide 24: Significant improvement in safety record
Significant improvement in safety record Lost Time Injury Frequency Rate (LTIFR) per 200 000 man hours worked 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Jul-04 Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 LTIFR Linear (LTIFR ) 24
Slide 25: Significant sales volume increases
Significant sales volume increases F2012 vs. F2011 sales volumes (% change) 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% ‐10.0% ‐20.0% ‐30.0% ‐40.0% Iron ore Dwarsrivier Nickel GGV Ferromanganese GGV PGMs Manganese ore Ferrochrome Nkomati chrome chrome ore Eskom coal Export coal ore/ conc 25
Slide 26: Decrease in commodity prices
Decrease in commodity prices F2012 vs. F2011 realised prices (% change) 30% 20% 10% 0% -10% -20% -30% -40% -50% Chrome Rhodium Nickel Manganese FeMn Iron ore Platinum Copper Palladium R/$ Gold Export (Nkomati ($/oz) ($/lb) ore ($/t) ($/t) ($/oz) ($/lb) ($/oz) exchange ($/oz) thermal Only) ($/t) rate
Slide 27: Spot prices continue to decline
Spot prices continue to decline Spot prices on 24 August 2012 vs. F2012 realised prices (% change) 20% 15% 10% 5% 0% ‐5% ‐10% ‐15% ‐20% ‐25% ‐30% Rhodium Nickel Iron ore Export coal Copper Palladium Platinum Rand/Dollar Manganese FeMn ($/oz) ($/lb) ($/t) ($/t) ($/lb) ($/oz) ($/oz) exchange ore ($/t)
Slide 28: Unit cost changes by commodity
Unit cost changes by commodity F2012 vs. F2011 unit production costs (% change) Consumer price inflation at 5% GGV Coal Chrome alloys PGM: Modikwa Iron ore PGM: Two Rivers Manganese ore Manganese alloys PCB Coal Chrome ore -15% -10% -5% 0% 5% 10% 15% 20% 25% The Nkomati Nickel Mine US Dollar C1 cash
Slide 29: Analysis of costs: on-mine cash costs
Analysis of costs On-mine cash costs ARM Ferrous ARM Platinum ARM Coal Below inflation cost increases were Nkomati costs net of by-product Production costs at GGV were achieved at the manganese ore were negatively affected by a severe above inflation due to increased and alloy operations. Accelerate
Slide 30: Profit variance analysis
Profit variance analysis Unaudited profit variance analysis – Profit from operations before exceptional items (R million) Factors subject to market conditions Controllable factors 9 000 2 697 (2 155) 8 000 1 829 (1 983) 7 000 6 000 (465) 5 399 (32) (74) 5 216 5 000 4 000 3 000 2 000 1 000 0 F2011 Ex
Slide 31: ARM Platinum PGM and nickel production
ARM Platinum PGM and nickel production 720 708 16 000 700 689 14 000 680 680 14 004 6E PGM thousand ounces 12 000 660 10 000 Nickel tonnes 640 622 10 100 9 666 620 8 000 600 590 6 000 580 5 136 4 495 4 000 560 2 000 540 520 0 F2008 F2009 F2010 F2011 F2012 PGMs (000oz) Nickel (tonnes) 31
Slide 32: Significant improvement in Nkomati operational performance
Significant improvement in Nkomati operational performance Monthly tonnes milled (thousand tonnes) Average recoveries (%) 700 675 80% 650 600 75% 72% 532 541 550 524 70% 66% 500 65% 438 65% 62% 450 60% 400 60% 350 55% 300 F2011 F2012 1H F2012 2H F2012 Steady state 50% in 2014 F2011 F2012 1H F2012 2H
Slide 33: ARM Ferrous
ARM Ferrous Iron ore and manganese ore* sales volumes (million tonnes) 16.0 14.8 14.0 12.0 9.8 10.0 10.0 8.0 7.4 6.0 4.0 3.1 2.9 2.9 2.2 2.0 0.0 F2009 F2010 F2011 F2012 Iron ore Manganese ore* * Manganese ore sales exclude intragroup sales 33
Slide 34: ARM Coal
ARM Coal The Goedgevonden Mine reached design capacity in 2H F2012. Capital expenditure of R8.2 billion was approved for the Tweefontein Optimisation Project (TOP). The project is expected to be completed in F2016 PCB concluded the sale of the Mpumalanga assets. 34
Slide 35: ARM Copper
ARM Copper The Lubambe Copper Project is progressing on schedule with commissioning of the concentrator plant expected in October 2012. 94% of the approved project capital expenditure budget of $410 million (in July 2010 terms) has been committed. Unit costs at steady state are expected to be $1.45/
Slide 36: ARM Copper: Growth in Area A
ARM Copper: Growth in Area A Approximately 24 164 metres were drilled in 12 month period with five machines. Initial drilling results indicate an average reef width of approximately 11 metres at 2.47% Total Copper at an average depth of 1 100 metres. We expect to have sufficient hole density by June
Slide 37: Capital expenditure
Capital expenditure Capital expenditure (R million)* 5 000 4 500 4 321 4 000 3 494 3 400 3 500 2 950 3 000 2 738 2 600 2 500 2 000 1 500 1 000 500 0 F2010a F2011a F2012a F2013e F2014e F2015e ARM Copper ARM Coal ARM Ferrous ARM Platinum *The forecasted capital expenditure in 2014 to 2015 is an estima
Slide 38: Transnet's Market Demand Strategy
Transnet’s Market Demand Strategy by 2019 38
Slide 39: Potential future projects
Potential future projects • Iron ore expansion beyond 16 mtpa • Manganese ore expansion to 5 mtpa • Expansion of Modikwa Platinum Mine • Lubambe Copper: Area A • Smelter conversions • Exploration with Rovuma Resources • Thermal coal projects 39
Slide 40: ARM Exploration
ARM Exploration ARM signed an agreement in July 2011 with a Mozambican exploration company Rovuma Resources to explore for PGM, nickel, copper and other base metals. Rovuma Resources had been exploring in Mozambique since 2007. ARM has agreed to continue with the second year of exploration (commenci
Slide 41: Financial position
Financial position EBITDA excluding exceptional items Cash on statement of financial position R million R million 8 000 7 229 4000 3 668 3 564 6 531 3 513 7 000 6 517 3500 3 039 6 000 3000 2 660 5 000 4 484 2500 3 907 4 000 2000 3 000 1500 2 000 1000 1 000 500 0 0 F2008 F2009 F2010 F2011 F2012 F2008
Slide 42: Cash flow statement
Cash flow statement Cash statement reconciliation – cash and cash equivalents (R million) 12 000 7 158 (1 189) 10 000 (959) (1 294) 8 000 (1 180) 6 000 (2 866) 4 000 3 227 151 3 227 179 2 000 0 F2011 Cash from Working Dividends Taxation Maintenance Expansionary Net Other F2012 operations capital pai
Slide 43: Net cash/ (net debt) position
Net cash/ (net debt) position year ended 30 June R million 2012 2011 change Cash and cash equivalents 3 564 3 668 (104) Long term interest borrowings (2 216) (2 337) 121 Short term interest borrowings (1 021) (732) (289) Total interest bearing borrowings (3 237) (3 069) (168) Net cash including part
Slide 44: Income statement
Income statement year ended 30 June R million 2012 2011* % change Sales 17 530 14 893 18 Profit from operations (before exceptional items) 5 216 5 399 (3) Income from investments 279 216 29 Finance costs (232) (216) (7) Income/ (loss) from associate 11 (135) Exceptional items (70) (11) Taxation (1 6
Slide 45: Cash flow statement
Cash flow statement year ended 30 June R million 2012 2011 change Cash generated from operations 5 969 5 988 (19) Net finance income 108 64 44 Dividends received 64 33 31 Dividends paid (959) (426) (533) Tax paid (1 294) (1 240) (54) 3 888 4 419 (531) Maintenance capital expenditure (1 180) (797) (3
Slide 46: Statement of financial position
Statement of financial position year ended 30 June R million 2012 2011 Non-current assets 25 662 23 375 Property, plant, equipment and other 18 910 15 798 Investments 6 313 7 129 Other 439 448 Current assets 9 654 9 011 Cash and equivalents 3 564 3 668 Other 6 090 5 343 Total assets 35 316 32 386 To
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