Slide 1: Interim Results Presentation
Interim Results Presentation for the six months ended 30 June 2009
Slide 2: Legal Notice / Disclaimer
2 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 Reso
Slide 3: Contents
3 Contents 1. Snap shot of Merafe 2. Operational review 3. Market review 4. Financial performance 5. Shareholding 6. Prospects
Slide 4: Snap shot of Merafe
Snap shot of Merafe
Slide 5: Snap shot of Merafe
5 Snap shot of Merafe • Largest ferrochrome producer in the world together with it’s partner, Xstrata Alloys • Operational risk spread across 20 furnaces at 5 production sites with 3 major technologies • Resources to last in excess of 100 years assuming current smelting capacity • Proven track recor
Slide 6: Recent achievements
6 Recent achievements Some of Merafe’s achievements to date: • Listed among Top Performers on the JSE SRI Index in 2007 and 2008 • Received together with its partner, Xstrata, the Nedbank Capital Green Mining Award in 2008 for Sustainable Development Programme • Energy efficiency initiatives with Xs
Slide 7: Sustainable development
7 Sustainable development Merafe’s commitment to sustainable development is reflected in its approach: •First Sustainability report produced in 2003 •2008 Sustainability report was subjected to independent third party assurance • Its pillars of sustainable development are: 1 Safety 2 Occupational he
Slide 8: Safety
8 Safety Safety of our people is a vital element of our business • No fatalities during the reporting period • Major hazard management programmes in place • All operations have health and safety committees and safety of our people is our number one focus
Slide 9: Initiatives by the Venture to contain costs
9 Initiatives by the Venture to contain costs In response to the global economic downturn, the Venture has introduced the following initiatives to contain costs: • Freezing all new appointments and promotions • Reducing fixed term contract employees • Reducing the use of contractors • Limiting maint
Slide 10: Operational review
Operational review
Slide 11: Operational review
11 Operational review • Weak demand experienced in the second half of 2008 continued into the first quarter of 2009 • 2009 started off with high volumes of inventory brought forward from December 2008 • 6 additional furnace closures announced in January 2009 bringing the total number of furnaces tem
Slide 12: Operational review (cont.)
12 Operational review (cont.) •The European benchmark ferrochrome price came under severe pressure with the price in the first quarter of 2009 being settled at 79USc/lb from 185USc/lb in the fourth quarter in 2008 and further reducing in the second quarter of 2009 to 69USc/lb • Stockpiles have been
Slide 13: Market review
Market review
Slide 14: The first half of 2009
14 The first half of 2009 • Production of stainless steel significantly weakened in the first half of 2009 • Global stainless steel production for the first half of 2009 amounted to 10.4 million tonnes, 30% lower than the same period in 2008 • However, China’s stainless steel production for the firs
Slide 15: Crude stainless steel production
15 Crude stainless steel production 2007 2008 2008 / 2009 2009 / 2007 2008 ‘000 t ‘000 t ‘000 t % (estimate) % NAFTA 2,171 1,925 11.3 1,612 16.3 European Union 8,109 7,822 3.5 6,109 21.9 Japan 3,901 3,564 8.6 2,347 34.1 S. Korea / Taiwan / 5,305 4,458 16.0 4,465 0.2 India Others 1,508 1,298
Slide 16: Stainless steel capacity utilisation, Q2 2009
16 Stainless steel capacity utilisation, Q2 2009 China 97.8 India 78.7 South Afric a 77.0 Bra zil 67.4 Ta iwa n 63.5 South Kore a 60.0 USA 58.8 Ita ly 58.6 Fra nc e 56.4 Ja pa n 54.2 Cze c h Re p. 52.3 Be lgium 52.0 Ge rma ny 48.7 Finla nd 48.6 Spa in 45.9 Swe de n 45.5 Russia 44.6 Slove nia 38.9 Uk
Slide 17: Crude stainless steel production – European Union & China
Crude stainless steel production – European Union (EU) 17 & China 3000 2500 ´0 t 2000 1500 EU 1000 P in d o c ly Q u rte a 500 China 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Heinz P. Pariser
Slide 18: Regional ferrochrome demand
18 Regional ferrochrome demand 2007 2008 2008/2007 2009 2009/2008 ‘000 t ‘000 t % ‘000 t (estimate) % NAFTA 455 502 10.3 422 16.0 European Union 2,116 2,138 1.0 1,697 20.6 Japan 890 888 0.2 660 25.6 S. 1,342 1,040 22.5 1,062 2.2 Korea/Taiwan/India Others 743 719 3.2 603 16.2 China 2,277 1,987
Slide 19: Charge/High carbon ferrochrome production
19 Charge/High carbon ferrochrome production 2007 2008 2008/2007 2009 2009/2008 ‘000 t ‘000 t ‘000 t % (estimate % ) Brazil 176 193 9.7 145 25.0 European Union 367 354 3.6 98 72.3 Russia, Turkey, 274 335 22.1 222 33.7 Albania India 928 948 2.2 675 28.8 Kazakhstan 970 880 9.3 746 15.3 South Af
Slide 20: Venture's sales by region for the six months to June '09
20 Venture’s sales by region for the six months to June ’09 Sales by region Other 7% (2008: 8%) Europe 25% (2008: 40%) USA 3% Asia 65% (2008: 12%) (2008: 40%)
Slide 21: Charge chrome price development
21 Charge chrome price development 2.50 Realistic Price Forecast (in 2008 US$) 2.00 in US$ / lb 1.50 1.00 0.50 Nominal Prices 0.00 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 Source: Heinz P. Pariser
Slide 22: Financial performance
Financial performance
Slide 23: What Merafe said at December 2008 results presentations
What Merafe said at 31 December 2008 results 23 presentations • Costs would continue to remain a challenge • High inventory levels at end of December 2008 were expected to be normalised by end of third quarter 2009 • No cash burn was anticipated • A possible reduction in the second quarter ferrochro
Slide 24: Key features for the six months ended June 2009
24 Key features for the six months ended 30 June 2009 Revenue down by 49% to R824 million Net financing costs down by 96% Headline loss of R84 million equating to a loss of 3c per share Cash flows from operations of R144 million Strong cash balance of R466 million Ferrochrome inventory r
Slide 25: Group Condensed Statement of Comprehensive Income
Group Condensed Statement of Comprehensive 25 Income 6 months ended 6 months ended 30 June 2009 30 June 2008 Reviewed Reviewed R’000 R’000 Revenue 824,081 1,627,610 EBITDA (74,737) 893,601 Depreciation (50,507) (28,157) Net financing costs (1,145) (28,097) (Loss)/profit before taxation (126,389) Tax
Slide 26: Production costs
26 Production costs • Despite improved efficiencies, production costs have increased by 20% (1H’09 vs FY’08) • Cost increases mainly attributable to: an announced 27% increase in electricity prices from 1 July 2008 an average 64% increase in reductant prices (lag effect) double digit labour co
Slide 27: Group Condensed Statement of Financial Position
27 Group Condensed Statement of Financial Position As at As at 30 June 2009 31 December Reviewed 2008 R’000 Audited R’000 Assets Non-current assets 1,918,383 1,861,185 Property, plant and equipment 1,918,383 1,861,185 Current assets 1,614,782 1,893,165 Inventories Trade and other receivables 798,304
Slide 28: Group Condensed Statement of Financial Position (cont.)
Group Condensed Statement of Financial Position 28 (cont.) As at As at 30 June 2009 31 December Reviewed 2008 R’000 Audited Equity and liabilities R’000 Equity 2,398,272 2,479,338 Share capital 24,593 24,593 Share premium 1,244,072 1,244,072 Equity settled sharebased payment reserve 18,706 Liabilit
Slide 29: Summary of cash flows
29 Summary of cash flows R’m Opening cash balance 1 January 2009 540 Cash flows generated for the period 142* Taxation paid (accrual 31 Dec 2008) (88) Capital expenditure (84) Forex loss on US$ cash held (44) Closing cash balance 30 June 2009 466 * After accounting for R116 million of standing charg
Slide 30: Working capital requirements in second half of 2009
30 Working capital requirements in second half of 2009 Expect cash to be “lockedup” in working capital for the second half of 2009 This is due to the rampup in ferrochrome production Typical working capital cycle 56 months Mining of chrome ore Ferrochrome smelting Transport (road/rail, shippi
Slide 31: Shareholding
Shareholding
Slide 32: Shareholder analysis
32 Shareholder analysis Major shareholders at end of June 2009 SA 40% (Dec'08 : 42%) Royal Bafokeng 29% ( Dec'08 : 29%) Offshore 9% (Dec'08 : 7%) IDC 22% (Dec'08 : 22%)
Slide 33: Prospects
Prospects
Slide 34: Prospects
34 Prospects • The recovery of global stainless steel production is likely to continue into the third quarter of 2009 on the back of real demand and restocking • Global ferrochrome stockpiles have reduced significantly and inventory levels have normalised • Ferrochrome demand is expected to remain a
Slide 35: Prospects (cont.)
35 Prospects (cont.) • Merafe has continued to maintain its strong cash position • The short-medium term ferrochrome demand is dependant on the recovery of the global economy • The Company reiterates its view that the medium to long term outlook for ferrochrome remains robust supported by : urbani
Slide 36: www.meraferesources.co.za
www.meraferesources.co.za