Kumba Iron Ore Limited · JSE:KIO
Kumba Iron Ore — FY2022 Earnings Presentation
46 slides from Kumba Iron Ore's earnings presentation, Feb 21, 2023
Slide 1: 2022 Annual Results
Kumb« 2022 An 21 February 2023
Slide 2: Disclaimer
This presentation is for information purposes only and does not constitute an offer to sell or No assurance can be given that such future results will be achieved; actual events or the solicitation of an offer to buy shares in Kumba. Further, it does not constitute a results may differ materially as
Slide 3: FY 2022 overview, Financial performance, Looking ahead
FY 2022 overview Mpumi Zikalala Financial performance Bothwell Mazarura Looking ahead Mpumi Zikalala 3
Slide 4: Geopolitics, energy crisis and volatile iron ore market
Geopolitics and China’s Covid policy Energy crisis Volatile iron ore market Supply-chain disruptions Logistics constraints Climate change 4
Slide 5: FY 2022 highlights
Safety Adjusted EBITDA¹ Attributable free cashflow Zero fatalities R37.3bn R10.4bn FY2021: Zero FY 2021: R64.6bn FY 2021: R30.5bn Production Enduring value contribution Dividend declared 37.7Mt R63bn R14.5bn FY 2021: 40.9Mt FY 2021: R89bn FY 2021: R33.2bn 1. Adjusted EBITDA represents net operating
Slide 6: Safety, health and wellness
Safety Health and wellness LTI TRCFR Occupational diseases (new cases) 2.06 1.80 1.74 1.55 0.80 21 17 18 8 28 5 8 0 0 0 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022¹ Safety reset focusing on risk reduction, culture Reduction in exposure to occupational hazards and behaviour change through hiera
Slide 7: Freshwater used and carbon emissions
Freshwater used (ML) Carbon emissions (MtCO2) 1.000 0.950 0.900 0.850 0.800 0.750 0.700 0.650 0.600 7 497 7 952 7 154 7 028 8 099 0.550 0.963 0.999 0.913 0.989 0.994 0.500 2018 2019 2020 2021 2022 2018 2019 2020 2021 2022 Freshwater used driven by high rainfall and Carbon emissions driven primarily
Slide 8: Contributing to South Africa
Contributing to South Africa (Rbn) Supporting local businesses (Rbn) Income tax 7.1 BEE business suppliers 18.0 Mineral royalty 1.8 Host community suppliers 5.4 Delivering shareholder returns (Rbn) Investing in our people (Rbn, %) Owners of Kumba 14.5 Salaries and benefits 6.5 Empowerment partners 4
Slide 9: Education, health and wellness, livelihoods
Education Health and wellness Livelihoods Kolomela, Tsantsabane municipality, Dept of Education career day Kumba One Stop Medical Trauma facility Anglo American Zimele Hospitality and Tourism Programme Targeting 80% of local schools to perform UNSDG3 goal to ensure healthy lives and Targeting five j
Slide 10: Operational performance
Operational performance 10
Slide 11: Waste mined, production, railed to port, sales
Waste mined¹ Production Railed to port Sales Finished stock Million tonnes +14% +12% (12%) (14%) +73% 7.8 4.5 95.5 108.8 17.8 19.9 19.0 16.9 19.7 16.9 H1 H2 H1 H2 H1 H2 H1 H2 H1 H2 FY 2022: 204.3Mt 37.7Mt 35.9Mt 36.6Mt 7.8Mt FY 2021: 209.4Mt 40.9Mt 39.3Mt 40.3Mt 6.1Mt 1. Includes Kapstevel South was
Slide 12: Kolomela improving, Sishen stable
Kolomela waste and production (Mt) Kolomela improving, Sishen stable +39% +21% Kolomela improvements in H2, partly hampered by Transnet rail strike 5.8 Sishen improved operational stability, 4.8 19.9 27.6 0.0 further strengthening of the base H1 2022 H2 2022 H1 2022 H2 2022 Production split Sishen w
Slide 13: Logistics and sales performance
Logistics and sales performance (Mt) Q4 2022 challenging (Mt) Near-term priorities Contracted quarterly average capacity Transnet recovery in collaboration with 11.2Mt 6.8Mt vs 10.3Mt Transnet Board and Minerals Council 10.7Mt rail planned Improving logistics efficiencies: Slow Transnet Annual Reduc
Slide 14: Seaborne supply and China reopening driving iron ore price recovery
Seaborne Big 4 supply peaked in 2018 China reopening driving iron ore price recovery wmt Platts 62 IODEX Monthly Average 1 040 1 072 1 079 1 118 1 060 1 065 1 070 1 065 $/dmt 161 171 169 169 174 180 185 193 299 313 312 337 287 263 279 266 261 261 268 274 272 288 284 284 319 327 330 338 327 334 322 3
Slide 15: Financial performance
Financial performance 15
Slide 16: Price, margin, costs, HEPS and DPS
Average realised FOB price EBITDA margin HEPS US$113/wmt 50% R56.19 FY 2021: US$161/wmt FY 2021: 63% FY 2021: R103.65 C1 costs Break-even price DPS US$40/wmt US$68/t R45.00 FY 2021: US$39/wmt FY 2021: US$56/t FY 2021: R103.20 16
Slide 17: Fe qualities, price premium and lump ratio
Fe qualities (%) Price premium over Platts 62 FOB (US$/wmt) Lump premium+Fe Price premium (incl timing) 25 17 18 3 17 13 2 3 6 0 Sales outside 63.8 62.3 61.2 60.6 57.8 of China (%) 15 15 11 22 13 Kumba Vale¹ BHP Rio Tinto FMG 2018 2019 2020 2021 2022 44 50 Lump : Fine ratio1,2 (%) 36 Realised price
Slide 18: Adjusted EBITDA bridge
Sales volumes Premium Average FOB price Average R/US C1 costs Inflation Freight rates FY 2022 36.6 Mt US$0/t US$113/wmt R16.37 US$40/t 6.7% US$18.0/t FY 2021 40.3Mt US$3/t US$161/wmt R14.79 US$39/t 4.5% US$21.0/t Rm 64 558 (8 581) 396 56 373 (26 159) (2 128) 2 689 (331) 6 867 37 311 (13%) (34%) 2021
Slide 19: Unit cost drivers at Sishen and Kolomela
Sishen1,2 (R/t) Cost driven by: 123 (117) 17 (32) CPI and geological inflation, supply-chain 56 488 479 479 disruption 432 Higher maintenance costs at both mines 13% (2%) and lower waste mining at Kolomela WIP build at Sishen benefits feedstock Kolomela2 (R/t) availability for production stability (
Slide 20: Input price increases and cost optimisation
Contribution to costs (%) Key input price increases (%) Cost optimisation programme 59 Improve operational efficiencies 63% of 51 Sourcing model optimisation total costs Optimise mine plan 26 28 Efficient utilisation of consumables 21 16 13 FY 2023 unit cost guidance 10 4 3 5 Sishen: R540/dmt – R570
Slide 21: Expansion and SIB capex
Rbn Expansion capex 11.0 – 12.0 Kapstevel South total spend R7bn 10.2 4.4– 4.8 UHDMS project execution plan under review 8.0 3.2 Operational efficiency improvements 2.6 SIB capex 4.5 5.7 – 6.2 HME and maintenance spares 3.7 Infrastructure and plant upgrades 2.5 1.7 0.9 – 1.0 Safety and environmenta
Slide 22: Cashflow and shareholder returns
Cashflow after sustaining capital Additional shareholder returns R20.8bn R3.9bn cash dividends Base dividends FY 2022 Net cash Attributable R21.1bn free cash flow R10.4bn R9.3bn end of period Discretionary capital Final dividend declared¹ R4.0bn R6.9bn Future project Portfolio Additional options upg
Slide 23: Margin enhancement strategy and value delivered
Margin enhancement strategy Creating shareholder value Value delivered since 2018: 161 33.2 Product premium on average: +US$3/t 8.1 113 113 Cumulative cost savings: R5.2bn 108 96 19.6 Life of Sishen to 2039: +323Mt reserves 71 69 2.6 62 15.1 14.5 54 2.8 1.1 Total attributable cashflow: R85.8bn 35 9.
Slide 24: Looking ahead
Looking ahead 24
Slide 25: Tswelelopele sets base for next phase
Driven by our purpose: Reimagining mining to improve people’s lives Tswelelopele Unlock Position sets base for full potential for a sustainable next phase of core future Foundational elements Zero fatalities Leadership FutureSmart E: Healthy S: Thriving G: Trusted and harm and culture Mining environ
Slide 26: Driving long-term quality premia
Supply chain decarbonization Steelmaker decarbonization commitments Driving long-term quality premia commitments are growing quickly are rising alongside Market share of global companies with upstream scope 3 Steelmakers with emissions reduction targets Long-term price forecasts by Wood Mackenzie (D
Slide 27: Scope 1 and 2 carbon emissions reduction target
Scope 1 and 2 carbon emissions reduction target of 30% by 2030 Scope 3 opportunities Carbon emissions (Mt CO2) Total emissions by energy usage (%) (>30%) Product evolution Increase share of high-quality iron ore sales 0.99 0.93 Downstream logistics Convert ocean freight to low carbon fuels Scope 2 S
Slide 28: Production, sales, cost and capex guidance
Total production Total sales C1 cash costs Capital expenditure 35 – 37Mt 37 – 39Mt ≤US$44/t 1 R11 – 12bn 2024 Sishen Kolomela Production ~26Mt ~10Mt 37 – 39Mt Waste 150 - 170Mt 60 – 70Mt 2025 Unit costs R540 – 570/dmt R510 – 540/dmt Strip ratio 3.4, LoM ~3.12 | LoM ~3.93 To exceed ~5, LoM ~4.45 39 –
Slide 29: Strong foundation for sustainable value delivery
Strong foundation for sustainable value delivery Assets 50% Capabilities Sustainability R63bn 76% EBITDA Shared ROCE Premium quality, margin Operational resilience Continued delivery value high margin assets and marketing strength of stakeholder value Life extension opportunities Efficient capital a
Slide 30: Annexures
Annexures 30
Slide 31: Lump premium, port stocks and Platts 62 price
Annexure 1 Lump premium & stocks at Chinese ports Platts 62 price ($/dmt) Platts LP ($/dmtu) Lump % of stocks 1.0 25% 250 0.8 200 20% 0.6 150 0.4 100 15% 0.2 50 0.0 10% 0 2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023 Source: Platts, Mysteel 31
Slide 32: FY 2022 realised FOB price
Annexure 2 FY 2022 realised FOB price (US$/t) Price drivers +$13/dmt Average market prices¹: P62 CFR China price average: US$120/t (FY 2021: US$160/t) (2) (18) 4 Fe premium average: ~US$4 per 1% Fe 9 (FY 2021 ~US$2.62 per 1% Fe) Lump premium average: US$0.20/dmtu 120 115 (FY 2021: US$0.37/dmtu) 111
Slide 33: Kapstevel South pit and UHDMS plant
Annexure 3 Kolomela: Kapstevel South pit Sishen: Ultra high dense media separation plant 60% complete, first ore planned for H1 2024 Project execution plan under review. Further detailed engineering Focus on waste stripping, construction of major infrastructure and design work required as part of th
Slide 34: Sales and production volumes
Annexure 4 Mt 2022 2021 % change H2 2022 H1 2022 % change Railed to port (incl. Saldanha Steel) 35.9 39.3 (9) 16.9 19.0 (11) Sishen mine (incl. Saldanha Steel) 25.6 27.3 (6) 12.2 13.4 (9) Kolomela mine 10.3 12.0 (14) 4.7 5.6 (16) Total sales 36.6 40.3 (9) 16.9 19.7 (14) Export 36.6 40.2 (9) 16.9 19.
Slide 35: Income statement summary
Annexure 5 Rm 2022 2021 % change H2 2022 H1 2022 % change Revenue 74 032 102 092 (27) 31 055 42 977 (28) Operating expenses¹ (47 152) (42 584) 11 (24 756) (22 396) 11 Operating profit 26 880 59 508 (55) 6 299 20 581 (69) Operating margin (%)¹ 36.0 58.3 (22) 20.3 47.9 (28) Profit for the period 19 65
Slide 36: Platts 62% break-even price
Annexure 6 Platts 62% break-even price (US$/t) 7 (7) 3 (2) 3 (4) 7 72 72 68 68 6 56 FY 2022 C1-cost Price SIB Total after Lump Currency Inflation and Freight Royalties FY 2023 premium controllables premium escalation Controllables +$16/t Non-controllables ($4/t) 36
Slide 37: Revenue and export prices
Annexure 7 2022 2021 % change H2 2022 H1 2022 % change Export (Rm) 66 823 94 886 (30) 27 489 39 334 (30) Tonnes sold (wmt) 36.6 40.2 (9) 16.9 19.7 (14) US Dollar per tonne (wmt) 113 161 (30) 94 130 (28) Rand per tonne (wmt) 1 826 2 363 (23) 1 627 1 997 (19) Domestic (Rm) 1 237 (100) 1 - - Shipping o
Slide 38: Revenue drivers
Annexure 8 Rm Revenue drivers 102 090 6 969 (8 581) Controllables Total sales volumes: 9% lower at 36.6Mt (26 159) (FY 2021: 40.3Mt) 74 032 6 442 7 208 240 Lump premium: Average US$0.20/dmtu (FY 2021: US$0.16/dmtu) 95 121 Fe premium average: ~US$4 per 1% Fe (FY 2021 ~US$2.62 per 1% Fe) 66 824 Market
Slide 39: Operating expenses
Annexure 9 Rm 2022 2021 % change H2 2022 H1 2022 % change Raw materials & consumables 2 472 2 178 13 1 275 1 197 7 Net movement in inventories (4 633) (1 701) >100 (3 065) (1 568) 95 Inventory written down to NRV 185 170 9 (42) 227 >100 Contractors’ expenses 5 133 4 305 19 2 690 2 443 10 Deferred st
Slide 40: Cost bridge
Annexure 10 Rm (2 920) 40 259 38 413 5 718 (787) (336) 571 (400) 6 668 7 068 7 035 6 464 24 881 26 556 FY 2021 Mining Stock Deferred Non-cash and forex Shipping Selling and FY 2022 operations movement stripping distribution Mining operations 1 Shipping Selling and distribution 1. Excluding mineral r
Slide 41: Unit cash cost structure (R/t)
Annexure 11 Unit cash cost structure (R/t) 475 479 122 432 108 324 57 110 99 88 67 143 80 37 72 108 77 87 80 16 25 8 20 15 55 15 14 6 124 149 97 88 (29) (59) (72) (97) Sishen mine Sishen mine Kolomela mine Kolomela mine FY 2021 FY 2022 FY 2021 FY 2022 Deferred stripping Other Energy Drilling and bla
Slide 42: Unit cash cost structure (%)
Annexure 12 Unit cash cost structure (%) 24 20 22 21 10 10 14 17 15 25 16 28 15 14 17 5 14 4 3 2 3 4 3 1 22 25 21 26 Sishen mine Sishen mine Kolomela mine Kolomela mine FY 2021 FY 2022 FY 2021 FY 2022 Other Energy Drilling and blasting Maintenance Outside services Fuel Labour 42
Slide 43: EBITDA build per tonne
Annexure 13 Rm 2022 2021 % change Total sales volumes¹ (Mt) a 36 40 (9) Benchmark price ($/t) 123 159 (23.1) Product premiums ($/t) 11 25 (55.9) Freight ($/t) (19) (21) (9.9) Realised FOB price ($/dmt) 115 163 (29.7) On-mine unit costs ($/t) (29) (27) 9.5 Logistics (rail & port) ($/t) (12) (12) (6.6
Slide 44: Sensitivity analysis
Annexure 14 Sensitivity analysis (1% change) – EBITDA impact (Rm) (485) Export volume 485 (653) Export price 653 (682) Currency 682 (800) (600) (400) (200) 0 200 400 600 800 Change per unit of key operational drivers, each tested independently Sensitivity analysis Unit change EBITDA impact Currency
Slide 45: Capital expenditure
Annexure 16 Rm 2022 2021 2023e Expansion 3 181 2 566 4 400 – 4 800 Deferred stripping 2 512 1 725 900 – 1000 Sishen 1 585 814 600 – 650 Kolomela 927 911 300 – 350 SIB 4 457 3 717 5 700 - 6 200 Sishen 2 879 2 687 3 400 – 3 700 Kolomela 1 578 1 030 2 200 – 2 500 Total capital expenditure 10 150 8 008
Slide 46: Working capital movement
Annexure 17 Rm (2 177) 1 196 12 760 4 644 9 097 40% FY 2021 WIP stock Receivables Payables FY 2022 WIP: Work-in-progress stock for processing at the plant and finished stock at the mines and Saldanha Port 46