Kumba Iron Ore Limited · JSE:KIO
Kumba Iron Ore — H1 2024 Earnings Presentation
43 slides from Kumba Iron Ore's earnings presentation, Jul 23, 2024
Slide 1: Kumba Iron Ore 2024 Interim results
Kumba Iron Ore 2024 Interim results 23 July 2024
Slide 2: Disclaimer
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 ma
Slide 3: Agenda
Agenda Safety, sustainability & operational performance Mpumi Zikalala Markets & financial performance Bothwell Mazarura Looking ahead Mpumi Zikalala 3
Slide 4: Strong fundamentals, focused on unlocking value
Strong fundamentals, focused on unlocking value Fe qualities (%) World-class High quality asset quality iron ore 64.1 62.0 61.3 60.2 57.6 Kumba Vale BHP Rio Tinto FMG C1 unit cost ($/t) -7% Opportunity to participate Safe, stable, capable R2.5 – 3.0bn lower costs in the green steel value chain & cos
Slide 5: H1 2024 business overview
H1 2024 business overview Safety EBITDA Attributable free cashflow 0.94 TRIFR R15.6bn R9.1bn H1 2023: 1.20 TRIFR H1 2023: R19.8bn H1 2023: R7.9bn Production Enduring stakeholder value Dividend declared 18.5Mt H1 2023: 18.8Mt R27.7bn H1 2023: R28.5bn R6bn H1 2023: R7.3bn 5
Slide 6: Safety and sustainability performance
Safety and sustainability performance 6
Slide 7: Relentless focus on improving safety, health & wellness
Relentless focus on improving safety, health & wellness Safety Health and wellness Our people LTI TRIFR 1 Fatality1 Occupational diseases (new cases)2 Women Women Kumba employed (%) Board 4 (%) 1.74 1.55 0.98 0.94 0.80 1 18 8 28 17 8 0 0 0 0 24 36 25 45 26 50 26 55 29 50 2020 2021 2022 2023¹ H1 2024
Slide 8: Reimagining mining to improve people’s lives
Reimagining mining to improve people’s lives Healthy environment Thriving communities Trusted corporate leader Freshwater withdrawals stable at 4.0BL & 1 748 jobs facilitated across multiple sectors, BBBEE improved from Level 7 to Level 5 over 9.9BL supplied to communities 11 088 learners & 394 teac
Slide 9: Enduring stakeholder value of R27.7bn created
Enduring stakeholder value of R27.7bn created BEE business Income tax suppliers R3.6bn R8.0bn Capital investment Mineral royalty Host community R3.7bn R0.7bn suppliers R1.9bn Owners of Salaries & Kumba benefits R6.0bn R3.5bn Direct social investment Empowerment Employed from R153m partners N. Cape R
Slide 10: Operational performance
Operational performance 10
Slide 11: Progressing our business reconfiguration plan
Progressing our business reconfiguration plan Finished stock Waste Production Mine Port 90% 10% 88.5Mt 18.5Mt Total 8.2Mt H1 2023 : 111.2Mt H1 2023 : 18.8Mt H1 2024 Mine Port Ore railed to port Sales 92% 8% Total 18.1Mt 18.1Mt 7.1Mt FY 2023 H1 2023: 18.4Mt H1 2023 : 18.9Mt Waste includes Kapstevel S
Slide 12: Committed to operational excellence
Committed to operational excellence Waste mining Value-focused Cost-out optimisation (Mt) production (Mt) programme on track Proactive 60.3 9.9 logistics 59.6 mini shut 50.9 9.4 9.3 9.7 9.4 Optimised 13.8 46.0 9.2 mine plan 19% 14.8 43.8 44.7 9.4 9.3 8.6 5.4 9.0 8.7 15.8 8.3 69% 8.0 Operational R1.8
Slide 13: Partnerships key to improving logistics performance
Partnerships key to improving logistics performance Rail and sales Improved Continued work with Transnet, performance (Mt) sales (Mt) OUF & NLCC to improve logistics performance Proactive 5-day 39.3 40.3 mini-shut 37.2 35.9 36.6 36.3 Challenges on Stacker reclaimer Conclude independent technical rai
Slide 14: Financial performance
Financial performance 14
Slide 15: H1 2024 financial results
H1 2024 financial results Average realised FOB price EBITDA margin HEPS US$97/t 44% R22.27 H1 2023: US$106/t H1 2023: 52% H1 2023: R30.04 C1 costs Break-even price DPS US$38.5/t H1 2023: US$39.0/t US$76/t H1 2023: US$65/t R18.77 H1 2023: R22.60 15
Slide 16: Iron ore prices remain rangebound
Iron ore prices remain rangebound Strong exports offset weak domestic demand Steel output improving in line with margins Less iron ore supply disruptions China steel production, Mtpa China mill utilisation and EBITDA margins Wet Mtpa 1,133 -5% 0% -1% 80% 0% -6% 7% 7% 49 78% 1,072 1,071 1,059 1,600 7
Slide 17: Product & customer strategy
Product & customer strategy Fe qualities (%) Geographic share of sales (%) Price premium over Platts 62 FOB ($/wmt) Lump premium+Fe Price premium 25 3 17 13 15 6 0 5 1 1% 55% 11 22 13 10 10 64.1 62.0 61.3 60.2 57.6 (9) Kumba Vale BHP Rio Tinto FMG Long-term 18% target 45 – 55% 2020 2021 2022 2023 H1
Slide 18: EBITDA reflects lower prices & sales with cost benefit
EBITDA reflects lower prices & sales with cost benefit Sales volumes C1 costs Average FOB price Price premium1 Average R/US Inflation Freight rates H1 2024 18.1Mt US$38.5/t US$97/wmt US$1/t R18.73 5.1% US$20/t H1 2023 18.9Mt US$39.0/t US$106/wmt US$4/t R18.21 6.9% US$14/t Rm 19,820 19,189 (1,605) 97
Slide 19: Business reconfiguration delivering cost benefits
Business reconfiguration delivering cost benefits Sishen unit cost (R/t) FY2024 Guidance 30 619 (52) R520 – 550/dmt 589 (102) 539 95 (21) +5% -13% 444 Kolomela unit cost (R/t) FY2024 Guidance 25 (31) 507 R410 – 440/dmt 482 (106) 64 425 (9) 361 +5% -16% FY 2023 Inflation & Total after non- Reduced Ef
Slide 20: Capital expenditure supports our strategy
Capital expenditure supports our strategy Capex¹ Rbn 8.0 - 9.0 0.9 – 1.0 Expansion: Kapstevel South, first ore June 2024 4.5 – 5.0 Sustaining: 4.4 Safety, asset integrity & sustainability 3.7 Medium-term ~R4 – 5bn p.a. 1.6 0.6 1.6 2.0 Deferred stripping: 2.6 – 3.0 1.5 Higher strip ratio at Sishen 0.
Slide 21: Disciplined capital allocation
Disciplined capital allocation Rbn Interim dividend declared R6bn 10.2 12.5 0.9 2.0 Dividend payout ratio 85% 6.0 13.2 14.6 6.6 2023 Cash flow after Base Discretionary H1 2024 Interim Pro-forma Dividend yield¹ Net cash sustaining capital dividends capital Net cash dividend net cash 4% Kumba sharehol
Slide 22: Flexible & efficient balance sheet
Flexible & efficient balance sheet Strong Disciplined free cashflow capital allocation Healthy Sustainable returns liquidity position to shareholders 22
Slide 23: Looking ahead
Looking ahead 23
Slide 24: Long-term, lump premia underpinned by limited supply & higher sintering costs
Long-term, lump premia underpinned by limited supply & higher sintering costs Lump supply Sintering, costs increase Lump premium growth limited with CO2 costs evolution Lump production Global indicative sintering (conversion) cost Lump premium to 62% (Mt) augmented by CO2 pricing ($/t-sinter) (Real
Slide 25: Our priorities for delivering sustainable value
Our priorities for delivering sustainable value Safe, stable, capable & Transnet logistics Progress cost efficient operations performance improvement sustainability projects Building high-performance, results- Supporting Transnet to prepare for Progressing renewable energy projects driven, resilient
Slide 26: 2024 full year guidance
2024 full year guidance Total production Total sales C1 cash costs Capital expenditure 35 – 37Mt 36 – 38Mt ≤US$38/t¹ R8.0 – 9.0bn Production Waste Unit costs Strip ratio LoA Sishen ~26Mt 135 – 145Mt R520 – 550/dmt ~4 | LoA ~3.3² ~15 years⁴ Kolomela ~10Mt 20 – 25Mt R410 – 440/dmt ~2 | LoA ~4.4³ 11 ye
Slide 27: Consistent execution of our strategy to unlock value
Consistent execution of our strategy to unlock value Business fundamentals Unlock value & position for the future Premium iron ore, Safe, stable Operational Maximise Long-term green steel value operations, value- excellence & premium & stakeholder chain opportunity based production cost optimisaton
Slide 28: Thank you
Thank you
Slide 29: Annexures
[OFFICIAL] Annexures 29
Slide 30: Average realised price of US$97/wmt
[OFFICIAL] Annexure 1 Average realised price of US$97/wmt Average realised FOB export price (US$/t) Price drivers Average market prices¹: US$1/dmt P62 CFR China price average: US$118/t (H1 2023: US$118/t) 3 Fe premium average: ~US$1.95 per 1% Fe (20) 5 (H1 2023 ~US$1.96 per 1% Fe) (12) Lump premium
Slide 31: EBITDA analysis
[OFFICIAL] Annexure 2 EBITDA analysis Rm H1 2024 H1 2023 % change Total sales volumes¹ (Mt) 17.8 18.7 (5) Benchmark price ($/t) 118 118 - Product premiums ($/t) 1 4 (75) Freight ($/t) (20) (14) 43 Realised FOB price ($/dmt) 99 108 (8) On-mine unit costs ($/t) (27) (28) (4) Logistics (rail & port) ($
Slide 32: Sensitivity analysis H1 2024
[OFFICIAL] Annexure 3 Sensitivity analysis H1 2024 Sensitivity analysis (1% change) – EBITDA impact (Rm) (219) Export volume 219 (306) Export price 306 (339) Currency 339 (400) (300) (200) (100) 0 100 200 300 400 Change per unit of key operational drivers, each tested independently Sensitivity analy
Slide 33: Logistics constraints impact on sales & inventory
[OFFICIAL] Annexure 4 Logistics constraints impact on sales & inventory Mt H1 2024 H1 2023 % change H2 2023 % change Railed to port (incl. Saldanha Steel) 18.1 18.4 (2) 17.9 (3) Sishen mine 12.8 13.2 (3) 12.9 (2) Kolomela mine 5.3 5.2 2 5.0 (4) Total sales 18.1 18.9 (5) 18.3 (3) Total ore shipped 18
Slide 34: Operating margin reflects lower revenue
[OFFICIAL] Annexure 5 Operating margin reflects lower revenue Rm H1 2024 H1 2023 % change H2 2023 % change Revenue 35 802 38 279 (6) 47 955 (25) Operating expenses (22 868) (20 748) 10 (24 781) (8) Operating profit 12 934 17 531 (26) 23 174 (44) Operating margin (%)1 36.1 45.8 (9.7) 48.3 (12.2) Prof
Slide 35: Break-even price – cost benefit offset by freight
[OFFICIAL] Annexure 6 Break-even price – cost benefit offset by freight Platts 62% break-even price (US$/t) Controllables Opex: Lower on-mine unit cost at both mines 4 (1) (1) 1 (0) 76 Price premium: Timing effect of lower prices 15 72 62 (4) SIB capex: Increase at Sishen, offset by reduction at Kol
Slide 36: Revenue analysis
[OFFICIAL] Annexure 7 Revenue analysis H1 2024 H1 2023 % change H2 2023 % change Total sales (Rm) 31 458 35 335 (11) 44 987 (30) Tonnes sold (wmt) 18.1 18.9 (5) 18.3 (1) US Dollar per tonne (wmt) 97 106 (8) 128 21 Rand per tonne (wmt) 1 817 1 930 (6) 2 335 21 Shipping operations (Rm) 4 344 2 944 48
Slide 37: Operating expenditure analysis
[OFFICIAL] Annexure 8 Operating expenditure analysis Rm H1 2024 H1 2023 % change H2 2023 % change Raw materials & consumables 1 018 1 495 (32) 1 141 (11) Net movement in inventories 120 (2 115) (>100) (1 164) (>100) Reversal of inventory written down to NRV (68) (19) >100 (44) 55 Contractors’ expens
Slide 38: Operating expense reconciliation
Annexure 9 Operating expense reconciliation Rm H1 2024 H1 2023 % change H2 2023 % change Cost of goods sold 13 789 13 341 3 16 579 (17) Cost of goods produced 11 636 11 761 (1) 13 007 (11) Production costs 11 126 13 852 (20) 14 256 (22) Sishen mine 7 920 10 386 (24) 10 480 (24) Kolomela mine 3 206 3
Slide 39: Unit cost analysis by mine
[OFFICIAL] Annexure 10 Unit cost analysis by mine Sishen Kolomela H1 H1 % H2 % H1 H1 % H2 % (Rm) 2024 2023 change 2023 change 2024 2023 change 2023 change Production costs 7 920 10 386 (24) 10 480 (24) 3 206 3 466 (8) 3 776 (15) WIP 602 (1 966) (>100) (564) (>100) (92) (125) (26) (685) (87) Non-cash
Slide 40: Sishen & Kolomela mines
[OFFICIAL] Annexure 11 Sishen & Kolomela mines Unit cash cost structure (R/t) 589 539 137 172 482 106 425 114 116 99 47 123 86 38 114 129 115 99 27 71 19 28 58 26 12 9 8 9 145 107 111 100 (13) (10) (58) (109) Sishen mine Sishen mine Kolomela mine Kolomela mine FY 2023 H1 2024 FY 2023 H1 2024 Deferre
Slide 41: Sishen & Kolomela mines
[OFFICIAL] Annexure 12 Sishen & Kolomela mines Unit cash cost structure (%) 21 24 27 28 17 10 9 18 15 26 23 13 18 18 14 13 4 2 2 2 2 3 4 4 22 22 23 16 Sishen mine Sishen mine Kolomela mine Kolomela mine FY 2023 H1 2024 FY 2023 H1 2024 Other Energy Drilling and blasting Maintenance Outside services F
Slide 42: Capital expenditure analysis
[OFFICIAL] Annexure 13 Capital expenditure analysis Rm H1 2024 H1 2023 2024e Expansion 649 1 587 900 – 1 000 Deferred stripping 1 466 835 2 600 – 3 000 Sishen 1 412 456 2 500 – 2 700 Kolomela 54 379 100 – 300 SIB 1 598 1 936 4 500 – 5 000 Sishen 1 299 1 355 3 600 – 4 000 Kolomela 299 581 900 – 1 000
Slide 43: Working capital decreased due to lower receivables, partially off-set by lower payables
[OFFICIAL] Annexure 14 Working capital decreased due to lower receivables, partially off-set by lower payables (Rm) (328) 20 755 (5,005) 2,147 17,569 15% FY 2023 Inventories Receivables Payables H1 2024 43