Valterra Platinum Limited · JSE:VAL
Valterra Platinum — Anglo American Platinum — FY2019 Earnings Presentation
66 slides from Valterra Platinum's earnings presentation, Feb 17, 2020
Slide 1: Anglo American Platinum 2019 Annual Results Presentation
ANGLO AMERICAN PLATINUM 2019 ANNUAL RESULTS PRESENTATION 17 February 2020
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American Platinum Limited (“Anglo American Platinum”) and comprises the written materials/slides for a presentation concerning Anglo American Platinum. By attending this presentation and/or reviewing the slides you agree t
Slide 3: 2019 Annual Results Agenda
2019 ANNUAL RESULTS AGENDA 1. ESG - safe & responsible mining Chris Griffith 1. Operations Chris Griffith 2. Financials Craig Miller 2. PGM market Chris Griffith 3. Next phase of value delivery Chris Griffith 3
Slide 4: Record Performance
RECORD PERFORMANCE Safety performance Leading ESG(1) performance Robust PGM fundamentals Fatalities Rank by Sustainalytics(2) USD basket price up zero 1st 27% at managed operations of 55 peers in precious metals sector rand basket price up 38% per platinum ounce sold Increasing returns Strong balanc
Slide 5: ESG - Safe & Responsible Mining
ESG - SAFE & RESPONSIBLE MINING Chris Griffith Social Project: Rejamonate Farm
Slide 6: Elimination of Fatalities Remains the Focus
ELIMINATION OF FATALITIES REMAINS THE FOCUS Fatalities & total recordable case injury frequency rate (TRCFR)(4) Fatalities 12 TRCFR 5.28 5.5 zero 5 at managed operations 10 4.52 4.5 Improving safety indicators 8 7 6 6 4 2.50 (4) down 53% since 2016 3.5 TRCFR 4 3.00 3 • Focus on the elimination of fa
Slide 7: Improving the Health of Employees
IMPROVING THE HEALTH OF EMPLOYEES Number of deaths from tuberculosis (TB) & TB incidence rates(5) UNAIDS Target(6) surpassed TB 20 Incidence rate 660 700 97:91:90 18 against target of 90:90:90 600 582 16 South African 14 average 567 TB incidence rate(5) reduction 14 500 12 400 50% 10 325 Since 2016
Slide 8: Waste & Water Reduction
WASTE & WATER REDUCTION Reduction in total waste to landfill (tonnes) Waste to landfill reduced 21.3 83% since 2016 5.8 Environmental incidents(7) 12.8 zero 3.6 at all operations since 2013 7.9 15.5 2.3 Potable water intensity(8) reduction 9.2 3.6 5.6 1.3 2.3 9% since 2016 2016 2017 2018 2019 8 Haza
Slide 9: Energy Use & Emission Reduction Continues
ENERGY USE & EMISSION REDUCTION CONTINUES Energy intensity reduction (Gigajoules / tonnes milled) Energy intensity down 10% 0.860 0.860 down 7% including new operations since 2016(9) GHG(10) emissions down 0.796 7% 0.793 down 4% including new operations since 0.860 0.860 2016(9) Trial of hydrogen po
Slide 10: Social Impact – Investing in Communities
SOCIAL IMPACT – INVESTING IN COMMUNITIES Infrastructure benefits Community benefits Community spend Mapela community project Procurement from zone of Social labour plan & CSI(11) enabled influence spend 70,000 R3.8bn R392m community members access to fresh including R2.4 billion of services in 2019
Slide 11: Global ESG Recognition
GLOBAL ESG RECOGNITION Ranked first out of 55 precious metals peers globally One of 325 global companies included in the index 11
Slide 12: Operations
OPERATIONS Chris Griffith Large wheel loader at Mogalakwena Mine
Slide 13: Steady Operational Performance
STEADY OPERATIONAL PERFORMANCE Operational performance Record production 2019 production PGM production increased Mogalakwena & Unki up Impacted by: • Eskom power outages 1% 4% & 5% • Unprotected strike at Mototolo • Cracked mill at Mogalakwena • Rebuild of rope shovel Refined production(13) 2019 re
Slide 14: Mogalakwena – Another Record Performance
MOGALAKWENA – ANOTHER RECORD PERFORMANCE Total PGM Production (’000 ounces) PGM production increase +4% 1,215 4% 1,170 record production 1,099 139 134 126 EBITDA(15) margin 509 541 558 56% and ROCE(3) of 55% Economic free cash flow(16) 495 518 464 R9.9bn at AISC(14) of $(429) per platinum ounce 2017
Slide 15: Amandelbult – Stronger H2 Performance
AMANDELBULT – STRONGER H2 PERFORMANCE Total PGM Production (’000 ounces) PGM production increase +3% 893 3% 858 869 12% increase in H2 over H1 230 218 221 EBITDA(15) margin 203 205 209 30% and ROCE(3) of 49% Economic free cash flow(16) 438 443 454 R3.3bn at AISC(14) of $390 per platinum 2017 2018 20
Slide 16: Unki – Record Production
UNKI – RECORD PRODUCTION Total PGM Production (’000 ounces) Total PGM production increase +5% 202 5% 193 record production 34 166 31 EBITDA(15) margin 27 64 76 79 35% and ROCE(3) of 24% Economic free cash flow(16) 86 89 75 R1.1bn at AISC(14) of $88 per platinum ounce 2017 2018 2019 sold 16 Platinum
Slide 17: Mototolo – Short Term Production Impacts
MOTOTOLO – SHORT TERM PRODUCTION IMPACTS Total PGM Production (’000 ounces) Total PGM production decrease 288 9% Bokoni ex.benefit of Bokoni material in 2018. 242 26% increase in H2 over H1 67 62 EBITDA(15) margin 185 47 77 69 43% and ROCE(3) of 54% 53 Economic free cash flow(16) 123 112 85 R1.4bn a
Slide 18: Joint Ventures & POC Produce Stable Margins
JOINT VENTURES & POC PRODUCE STABLE MARGINS Total PGM ounces produced EBITDA margin JV production decrease 1,890 1,889 41% 4% 936 971 Total POC production increase Total Total 27% POC POC 1,413 1,430 1% 477 459 14% 10% Economic free cash flow(16) 477 459 R1.1bn from POC and toll. POC AISC of $806 20
Slide 19: Strong Refined Production Despite Headwinds
STRONG REFINED PRODUCTION DESPITE HEADWINDS Refined PGM production PGM sales volumes Refined production(13) increase Build in WIP due +11% to power outages 89 Build in WIP due to power 89 11% outages including tolling up 8% Sales volumes down 4,916 4,481 5,182 1% 4,463 4,429 due to lower sales of mi
Slide 20: Financials
FINANCIALS Craig Miller Platinum bar and grain
Slide 21: Record Financial Performance
RECORD FINANCIAL PERFORMANCE Headline earnings per share EBITDA Headline earnings (R/Share) +145% 70.87 R30.0bn R18.6bn double 2018 up 145% ROCE (%) Net cash 28.93 58% R17.3bn up from 24% up from R2.9bn 2018 2019 R14.2bn dividend declared for 2019 21
Slide 22: EBITDA Doubled – Best Ever Performance
EBITDA DOUBLED – BEST EVER PERFORMANCE EBITDA (R billion) 2019 vs. 2018 (1.4) Inflation 1.5 1.0 30.0 4.9 (1.4) Royalties 28.9 0.8 PGMs 0.2 Base metals (2.8) 12.4 7.8 Pd 108 4.6 Rh 14.5 (0.1) Pt 2018 Price Currency Inflation + Volume 2019 Load-shedding Royalties impact 22
Slide 23: Strong EBITDA Margins
STRONG EBITDA MARGINS 2018 2019 20% 32% 44% 41% 32% 32% 27% 20% 14% 10% POC JV mined share Own mines POC/Toll JV mined share Own mines 23
Slide 24: Unit Cost Impacted by Operational Headwinds
UNIT COST IMPACTED BY OPERATIONAL HEADWINDS R/Pt oz produced R/PGM ounce 22,294 268 +5% 439 R10,189 / PGM oz 204 (158) 21,587 240 2018: R9,412/PGM oz 717 All-in sustaining unit cost 20,584 $293 / Per sold Pt oz against a platinum achieved price of $861/oz 2018 CPI Wages Electricity Net Ore Load- 201
Slide 25: Working Capital Reduced to Record Low
WORKING CAPITAL REDUCED TO RECORD LOW Working capital reduction (R billion) Working capital days 0.3 0.3 3 Days 2018: 15 Days 0.8 4.9 Ore capitalised (3.2) R2.1bn 2018: R2.2bn 3.1 Customer prepayment R9.4bn 2018: R6.1bn 2018 Metal Trade Trade Customer 2019 inventory Debtors creditors prepayment 25
Slide 26: Continued Capital Investment in Value Accretive Projects
CONTINUED CAPITAL INVESTMENT IN VALUE ACCRETIVE PROJECTS SIB capital expenditure Rbn 6.8 – 7.5 R4.8bn 6.0 Investment in SO2 abatement & Mogalakwena HME 1.2 2.6 - 3.1 Project and breakthrough (P101) capital 4.7 1.1 R1.2bn on low capex, fast payback projects 4.8 4.2 - 4.4 3.6 Capitalised waste strippi
Slide 27: Strong Cash Generation
STRONG CASH GENERATION Net (debt) / cash (Rbn) Stronger free cash flow from operations(18) (Rbn) R14.4bn improvement after a dividend payment of R4.9bn R16.9bn up from R5.6bn in 2018 14.4 3.2 17.3 4.7 16.9 1.5 202% 5.6 2.9 (1.9) (4.9) (0.5) (1.8) (0.8) 2017 2018 2019 2018 2019 Customer prepayment Di
Slide 28: Dividend 100% of H2 2019 Earnings
DIVIDEND 100% OF H2 2019 EARNINGS 52.60 R/share H2 2019 dividend 25.00 R11.2bn 100% R14.2 billion returned for 2019 2.6 - 3.4 of H2 41.60 HE Dividend payout % • 40% of HE earnings 16.60 • Special dividend of R25.00 /share 4.2 - 4.4 • 76% of 2019 earnings 11.25 7.51 11.00 H2 dividend per share 3.74 2
Slide 29: Disciplined and Value Focussed Capital Allocation
DISCIPLINED AND VALUE FOCUSSED CAPITAL ALLOCATION Capital allocation framework 2019 (Rbn) 20.5 • Attributable free cash flow • Paid dividend of R4.9bn 4.9 • H2 dividend of R11.2bn declared 14.4 • Strengthening balance sheet Discretionary capital options Future project Additional • Low capex, fast pa
Slide 30: PGM Market
PGM MARKET Chris Griffith BAIC fuel cell car in China
Slide 31: Stronger Basket Price, Supported by Palladium and Rhodium
STRONGER BASKET PRICE, SUPPORTED BY PALLADIUM AND RHODIUM Indexed price (2 Jan 2019 = 100)(19) USD palladium & rhodium price increases 260 240 48% & 73% 220 achieved prices year-on-year 200 USD basket price increase 180 160 140 27% achieved prices year-on-year 120 100 Rand basket price increase 80 A
Slide 32: Benefit of Diversification of Metal Basket
BENEFIT OF DIVERSIFICATION OF METAL BASKET Revenue per metal % - 2018 Revenue per metal % - 2019 Other 6% Base Metals 7% Other 8% Platinum 29% Base Metals 10% Platinum 39% Rhodium 18% 2019 revenue Rhodium 13% 2018 revenue R100bn R75bn Palladium Palladium 30% 40% 32
Slide 33: Overall Outlook for 3E Demand Positive
OVERALL OUTLOOK FOR 3E DEMAND POSITIVE Platinum (net demand)(19) Palladium (net demand)(19) Rhodium (net demand)(19) Industrial & Industrial & Jewellery Autocatalyst Other Other 22% 23% 17% 18% Investment 17% Industrial 38% Autocatalyst Autocatalyst 83% 82% • Exceptionally strong investment Automoti
Slide 34: Palladium and Rhodium in Fundamental Deficit
PALLADIUM AND RHODIUM IN FUNDAMENTAL DEFICIT Market balance 2015 to 2020F(20) (‘000 ounces) Palladium outlook Pd (77) growing (180) (304) (751) deficit Demand growth from the automotive (1,133) sector outstrips supply growth Rhodium outlook move to (1,900) 2015 2016 2017 2018 2019 2020(f) sustained
Slide 35: Next Phase of Value Delivery
NEXT PHASE OF VALUE DELIVERY Chris Griffith Bulk ore sorter at Mogalakwena Mine
Slide 36: Next Phase of Value Delivery
NEXT PHASE OF VALUE DELIVERY… 1. Operational Efficiency - Achieving benchmark & beyond (P101), modernisation & digitalisation 2. Breakthrough - Step change in production through FutureSmart Mining technology deployment TM 3. Projects - Fast payback, high-margin replacement ounces & growth option stu
Slide 37: Operational Efficiency – Benchmark & Beyond (P101)
OPERATIONAL EFFICIENCY – BENCHMARK & BEYOND (P101) Double benching at Mogalakwena Rope shovel efficiency improvement Modernisation at Amandelbult • From 2020 - pit slope design based • Digitalisation improves control systems • Tumela 15E mechanisation on double benching • Improved utilisation throug
Slide 38: Breakthrough – FutureSmart Mining Technology
BREAKTHROUGH – FUTURESMART MININGTM TECHNOLOGY Bulk-ore sorter – trial underway Coarse particle rejection – Q1 2021 XLP at Tumela 15E – in progress • Sensors determine ore content • Trial plant to be built at • Extra-low profile mechanised prior to processing allowing waste Mogalakwena North Concent
Slide 39: High Return, High Margin, Fast Payback Projects
HIGH RETURN, HIGH MARGIN, FAST PAYBACK PROJECTS Base Metal Refinery - copper debottlenecking Amandelbult modernisation Copper plates at the Rustenburg Base Metal Refinery (RBMR) Winder upgrades increase hoisting capacity from 160ktpm to 230ktpm Disciplined capital allocation framework drives project
Slide 40: Project Studies on Value Accretive Growth Options
PROJECT STUDIES ON VALUE ACCRETIVE GROWTH OPTIONS Mogalakwena expansion Der Brochen / Mototolo replacement and growth • Feasibility project study on track to complete in 2021, • Replacement of Mototolo in feasibility - maintain assessing: current production - Construction of third concentrator with
Slide 41: EBITDA Margin Expansion
EBITDA MARGIN EXPANSION Driving an uplift in EBITDA(15) margin Margin uplift before expansion Increase in 5 – 8pp EBITDA 5 – 8pp at 2018 prices and FX rates margin Margin uplift driven by 25-28% • Operational efficiency to beat best in class (P101) 22% • Breakthrough opportunities utilising 20% Futu
Slide 42: Market Development – Growing Demand for PGMs
MARKET DEVELOPMENT – GROWING DEMAND FOR PGMS Jewellery Investment Industrial 2019 spend on jewellery 2019 spend on investment 2019 spend on industrial development development development $25m $5m $6m AAP owned and funded, PGI, launched new “Men Of Platinum” brand in India Exclusive Platinum bridal l
Slide 43: Unprecedented Momentum for Hydrogen & Fuel Cells
UNPRECEDENTED MOMENTUM FOR HYDROGEN & FUEL CELLS AP Ventures investments FCEV targets set Cost of H2 fuel reducing Portfolio companies in 30 countries commit to deploy Cost since 2010 reduced by hydrogen economy value chain 6 10 million 60% vehicles in 10 years Industry alliances growing FCEV availa
Slide 44: Guidance & Conclusion
GUIDANCE & CONCLUSION Chris Griffith Autonomous nickel plate handling at RBMR
Slide 45: 2020 Guidance
2020 GUIDANCE Production M&C (million ounces) Refined production (million ounces) Sales volumes (million ounces) PGMs 4.2 – 4.6 PGMs 4.2 – 4.7 PGMs 4.2 – 4.7 Pt: 2.0 – 2.2 Pt: 2.0 – 2.2 Pt: 2.0 – 2.2 Pd: ~1.4 Pd: 1.4 – 1.5 Pd: 1.4 – 1.5 Other: 0.8 – 1.0 Other: 0.8 – 1.0 Other: 0.8 – 1.0 Excluding to
Slide 46: To Conclude…
TO CONCLUDE… ✓ Zero fatalities and best ever safety performance ✓ Focus on ESG performance is receiving global recognition ✓ Record production from Mogalakwena and Unki ✓ Robust fundamentals for PGMs to continue ✓ Net cash position of R17.3 billion ✓ Increased returns – total 2019 dividend of R14.2
Slide 47: Q&A
Q&A Construction of Amandelbult chrome recovery plant
Slide 48: Appendix
APPENDIX Autonomous drills at Mogalakwena Mine
Slide 49: Industrial Demand Normalising Short-Term
INDUSTRIAL DEMAND NORMALISING SHORT-TERM Net demand 2019 (%)(20) Platinum outlook Pt Pd neutral following three years of significant capacity expansion in China Other Other Chemical Palladium outlook 14% 36% 26% Electrical Chemical 40% slight 20% negative Electrical 6% Rhodium outlook Fuel cells 2%
Slide 50: Jewellery: 2019 Mixed, Outlook More Positive
JEWELLERY: 2019 MIXED, OUTLOOK MORE POSITIVE Net platinum demand 2019 (%)(21) China remains challenging Japan Rest of World 4% short term 6% negative but there are signs of new initiatives and product development from Europe 14% manufacturers China 46% Europe, Japan, North America India 14% steady G
Slide 51: Platinum Demand from Automotive Sector Resilient
PLATINUM DEMAND FROM AUTOMOTIVE SECTOR RESILIENT Platinum auto demand split(22) Forecast platinum auto demand(23) Auto platinum demand increase 0.6% CAGR over 2019-2025, excluding Global impact of substitution heavy duty diesel Europe 18% light duty diesel Heavy duty diesel outlook Global 44% light
Slide 52: Automotive PGM Demand to Continue to Grow
AUTOMOTIVE PGM DEMAND TO CONTINUE TO GROW Forecast 3E light duty gasoline PGM loadings(20) Average global loadings increase 15% between 2018 and 2025 3E Automotive PGM demand forecast to increase despite falling vehicle sales Total light duty 3E outlook strong positive tighter emissions legislations
Slide 53: Automotive PGM Demand to Continue to Grow
AUTOMOTIVE PGM DEMAND TO CONTINUE TO GROW Global light duty automotive sales outlook (million units)(22) Diesel car sales decline 94 million 107 million Pt 5k Fuel cell electric 25k 2.9% CAGR over 2019-2026 Battery electric 10m 1m Pd 3m Hybrid 19m Gasoline/hybrid sales increase Rh 2.3% CAGR over 201
Slide 54: Attractive Platinum Price Drives Exceptionally Strong Investment Demand
ATTRACTIVE PLATINUM PRICE DRIVES EXCEPTIONALLY STRONG INVESTMENT DEMAND ETF holding and investment demand (million ounces)(24) Total platinum investment 4.00 Pt 3.00 +1.1 Moz 2.00 in 2019 1.00 0.00 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Total palladium disinvestment Platinum ETF hold
Slide 55: Hydrogen and Fuel Cell Adoption Gathered Additional Momentum in 2019
HYDROGEN AND FUEL CELL ADOPTION GATHERED ADDITIONAL MOMENTUM IN 2019 • The fuel cell sector shipped c.1.1 gigawatts during the year, a year-on year increase of 40%, Fuel cell shipments demonstrating increased capacity in the supply chain exceed 1 GW as • Umicore inaugurated its new production facili
Slide 56: Areas of Positive Demand for PGMs
AREAS OF POSITIVE DEMAND FOR PGMS Short to medium term… …longer term Fuel cell Growth in heavy Electrification Hydrogen installations duty & stricter through fuel cell economy growing emissions vehicles Platinum Global Substitution into Jewellery economic Jewellery gasoline growth in India growth dr
Slide 57: 3E Primary Supply to Remain Stable
3E PRIMARY SUPPLY TO REMAIN STABLE 3E Primary supply (’000 ounces)(25) Current production outlook stable between 2020 to 2030 13,977 Probable projects replace depleting supply 13971 14012 12387 Processing capacity, water, mine economics & Eskom likely to constrain further expansions 2019* 2020 2025
Slide 58: Earnings Sensitivities
EARNINGS SENSITIVITIES Impact of 10% change in Sensitivity analysis - 2019 price/FX Commodity / Currency 31 December spot Average realised EBITDA (Rm) Platinum ($/oz) 959 861 2,086 Palladium ($/oz) 1,909 1,518 3,211 Rhodium ($/oz) 6,060 3,808 1,192 Gold ($/oz) 1,523 1,396 211 Nickel ($/ton) 14,137 1
Slide 59: Net Cash Flow by Mine
NET CASH FLOW BY MINE (6.8) (1.1) (3.7) 19.8 0.3 (1.2) 3.2 (4.9) 17.3 28.6 2.9 R16.9n Investment Net cash 100% Economic Economic Cash tax and in Cash from SIB and Project Free cash Customer Net proceeds Net cash Dec Operation December Operating interest free net interest associates, Dividend operati
Slide 60: Cost Breakdown
COST BREAKDOWN Costs reflective of AAP Own mined and Joint Venture share of production and costs at operations. Excludes all purchase of concentrate costs and volume, overhead and marketing expenses. 2019 Cost base (Rbn) Volum e % PGMs (koz) Labour Contractors Materials Utilities Sundries Opencast M
Slide 61: All-in Sustaining Cost (AISC)
ALL-IN SUSTAINING COST (AISC) Company Mogalakwena Amandelbult Unki Mototolo JV mined Total mined Total POC (ex-trading) Costs (US$ million) Cash operating costs 686 801 162 163 332 2,144 1,696 4,146 Other costs and marketing 135 130 49 24 42 381 36 432 Capitalised waste costs 142 - - - - 142 - 142 S
Slide 62: Rand Basket Price
RAND BASKET PRICE Company Mogalakwena Amandelbult Unki Mototolo JV mined POC/Other (ex-trading)(29) Net sales revenue (US$ million) from platinum 447 395 79 100 187 697 1,905 from palladium 877 329 126 111 222 644 2,309 from rhodium 136 301 35 74 154 442 1,142 base metals & other 323 177 64 26 44 25
Slide 63: Simplified EBITDA
* SIMPLIFIED EBITDA (R million) Mogalakwena Amandelbult Unki Mototolo JV mined Mining POC/Toll Company c=axb Net revenue 25,845 17,424 4,403 4,506 8,812 60,989 30,708 91,697 a Rand basket per platinum ounce 49,782 38,052 48,083 39,023 40,518 43,515 37,746 40,862 b Platinum ounces sold (000 ounces) 5
Slide 64: Mototolo – Addition of Contiguous Ground
MOTOTOLO – ADDITION OF CONTIGUOUS GROUND Borwa shaft (Mototolo) Lebowa Two Rivers shaft Platinum (Mototolo) contiguous ground Der Brochen Der contiguous Brochen ground triangle area Legend Mototolo mined out ground Un-mined Der Brochen ground Two Rivers ground accessible from Mototolo mine UG2 reef
Slide 65: Mogalakwena – Addition of Kwanda North & Central Block
MOGALAKWENA – ADDITION OF KWANDA NORTH & CENTRAL BLOCK • Anglo American Platinum completed the acquisition of Kwanda North and Central Block prospecting rights on 27 August 2019 • These prospecting rights are adjacent to and have been incorporated into the Mogalakwena mining right • This effectively
Slide 66: Foot Notes
FOOT NOTES (1) ESG stands for environmental, social and governance (2) Sustainalytics is a global leader in ESG and Corporate Governance research and ratings. Over the last 25 years, they have brought together leading ESG research and client servicing professionals. Today, Sustainalytics supports hu
Anglo American Platinum — FY2019 Earnings Presentation on 6ix