Kumba Iron Ore Limited · JSE:KIO
Kumba Iron Ore — H1 2021 Earnings Presentation
47 slides from Kumba Iron Ore's earnings presentation, Jul 27, 2021
Slide 1: Kumba Iron Ore 2021 Interim results
AngloAmerican Kumba lron Ore 2021 Interim results 27 July 2021
Slide 2: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute an offer to sell or the solicitation of an offer to buy shares in Kumba. Further, it does not constitute a recommendation by Kumba lron Ore Limited or any other party to sell or buy shares in Kumba Iron Ore Limited
Slide 3: et NV
et NV
Slide 4: Kumba's response to social unrest and Covid-19
Kumba's response to social unrest and Covid-19 Two phased approach Extended Covid-19 support (Rm) 1. Building on Kumba’s WeCare programme + Relief scheme for employees, contractors and communities * Provision of basic food parcels and medicine 2. Resetting and rebuilding post Covid-19 and social unr
Slide 5: First half highlights
First half highlights Safety and sustainability Unlocking asset potential Stakeholder value creation >5 years Fatality free production Environment 20.4Mt Production 1H20:18.2Mt EBITDA R31.5bn Attributable free cashflow 1H20:R7.1bn Dividends per share >6 years Zero significant incidents All volumes (
Slide 6: N fe) Cc S = Cc m4 = fe) xe) = 0) Cc kK
N fe) Cc S = Cc m4 = fe) xe) = 0) Cc kK
Slide 7: Excellent safety and sustainability performance
Excellent safety and sustainability performance Safety Health Environment meg LT! TRC Occupational diseases (new cases) Carbon emissions (Mt COe) 77 51 41 39 12 2017 2018 2019 2020 1H21 2017 2018 2019 2020 1H21 2017 2018 2019 2020 1H21 >5 years fatality free production 74% voluntary HIV testing >6 y
Slide 8: 19 mL water provided to communities
19 mL water provided to communities
Slide 9: Creating value for all our stakeholders
Creating value for all our stakeholders Rbn 1H21 1H20 Rbn 1H21 1H20 Contributing to South Africa Supporting local businesses Income tax 6.8 3.3 BEE business suppliers 49 5.2 Mineral royalty 2.4 1.0 Host community suppliers 1.7 1.4 Capital investment 3.0 2.8 Providing employment Salaries and benefits
Slide 10: Themba Mkhwanazi
Themba Mkhwanazi
Slide 11: Balancing our value chain
Balancing our value chain Waste mined Production Ore railed to port Sales Finished stock | ai mei e & 98.5Mti 4S 204Mt 4 19.7Mt 4S 19.5Mt 4S 6.1Mt — 1H20:94.6Mt 1H20: 18.2Mt 1H20: 18.5Mt 1H20: 18.9Mt 1H20: 6.3Mt 1. Includes KapstevelSouth waste of 7.4Mt in 1H21 All volumes and unit costs, excluding
Slide 12: P101 efficiency recovery reflects operational resilience
P101 efficiency recovery reflects operational resilience Total shovel fleet OEEs'(%) Total truck fleet OEEs? (%) 79.1 81.4 Targeting Targeting 80% 100% of benchmark of benchmark operating operating efficiency efficiency 87 82 67 7S 2018 2019 2020 1Q21 2Q21 2023e 2018 2019 2020 1Q21 2Q21 2023e 12 Nor
Slide 13: Focused on improving throughput
Focused on improving throughput Logistics performance (Mt) Interventions to improve performance Target quarterly average capacity Rail (44.8Mt capacity) + Track refurbishment, improve train speed + Operational management appointed + Locust spraying programme + Preventative maintenance regime Port (4
Slide 14: Differentiated by quality
Differentiated by quality 1H21 Fe qualities (%) 1H21 Realised price FOB (US$/wmt)' gas = 73m Vale Kumba Vale Rio Tinto BHP FMG 1H21 Lump: Fine ratio (%) BHP Rio Tinto — zl Kumba Vale Rio Tinto BHP FMG Source: Iron Ore Marketing. 1. Excluding pellets (Kumba product has approximately 1.6% moisture) 16
Slide 15: Premium driven by market share gain and quality
Premium driven by market share gain and quality Traditional market's' share of total sales (%) Price premium over Platts 62 FOB (US$/wmt) Traditional market's share 45-55% Long term 42 38 54 2015 2019 2020 1H21 11. Sales in EU/MENA/Americas, Japan and South Korea 53 = 22 18 17 2 1 6 i 16 16 28 2015
Slide 16: Bothwell Mazarura
Bothwell Mazarura
Slide 17: First half financial results
First half financial results Average realised FOB price’ Break-even price HEPS US$216/t 1H20: US$91/t Cost savings US$26/t 1H20: US$42/t EBITDA margin R72.78 1H20:R26.19 DPS R370m 1H20: R7 00m? J. Aoveragereased FOS price and comparativeon wetmetictonne bos 2.includes R355 millon of Covi 19 related
Slide 18: EBITDA driven by strong iron ore price and premium
EBITDA driven by strong iron ore price and premium Rm (S29) (1.654) 44 366) 12905) 967m 17401 67% 53% 1H20 Volume Premium Total after Currency Inflation Royalties Shipping 1H21 _ Controllables _ — Non-controllables oe Controllables Sales up 3% to 19.SMt (1H20: 18.9Mt) Product premium US$2.8/t (1H20:
Slide 19: Higher production offsetting cost inflation
Higher production offsetting cost inflation Sishen, (R/t) Zp "21" KE ey 7 17 > 448 362 7% —> Bex 16% —" — — Kolomela, (R/t) +H 8 (26) mA 14 =O 304 324 315 7% (3%) — FY20' Inflation Cost _Totalafter Deferred Maintenance Production Cost 1H21" escalation non- stripping volume savings controllables L No
Slide 20: Value over volume strategy continues to pay
Value over volume strategy continues to pay 216 TSWELEL@PELE Enhanced product premium US$2.8/t above lump & Fe premium Improve operational efficiency 71% truck fleet efficiency Cost savings initiatives Savings since 2018 of R3.6bn C1 unit cash cost <US$40/t 32 35 34 29 40 1H17 1H18 1H19 1H20 1H21 C1
Slide 21: Deferrals driving lower capex in 2021
Deferrals driving lower capex in 2021 Rbn 10.8-11.3 P09 7.7-8.2 2.7-2.8 3.2-3.4 1.8-2.0 1H21 FY21e Previous = Deferred stripping aSIB FY21e Revised @ Expansion R3bn of lower capex Rephasing non-essential work and equipment Kapstevel mining optimisation Stronger USD/ZAR exchange rate Expansion capex
Slide 22: Robust and flexible balance sheet
Robust and flexible balance sheet Strong free cash flow generation Rbn 36.7 — 30.7 (CE) 40.7 (23.4) FY20 Cash flow after Base Discretionary 1H21 Interim Pro-forma Net cash sustaining capital dividends capital Net cash dividend net cash @ Kumba shareholders @ Minorities Interim dividend declared >5x
Slide 23: Maximising returns and delivering sustainable value
Maximising returns and delivering sustainable value Exceptional shareholder value creation (2018 — 1H21) Attributable free cashflow Rbn 23.4 R76.4bn 19.6 6.0 Total dividends paid R67.8bn Dividend payout ratio >85% 2018 2019 2020 1H21 2018 2019 2020 1H21 W Attributable free cashflow mw Base dividend
Slide 24: Themba Mkhwanazi
Themba Mkhwanazi
Slide 25: Decarbonisation will drive demand for quality
Decarbonisation will drive demand for quality Share of direct charge ore in Chinese blast furnaces! (%) DRI? share in global iron production will increase (%) 2016 2017. 2018 2019 2020 2021e EU, 2019 2030 2040 2050 Japan @OliverWyman — minternational Energy Agency (IEA) Average Steelmakers in tradit
Slide 26: Pathway to decarbonisation
Pathway to decarbonisation Scope 1 and 2: Targets and strategy set, pilot studies progressing * Solar renewable energy project studies underway * Hydrogen truck pilot studies in progress * Carbon neutrality by 2040 Scope 3: Developing targets, strategy and initiatives * UHDMS will upgrade high quali
Slide 27: Tangible value delivered
Tangible value delivered 585 attributed to P101 and business improvement 2018 2019 2020 M21 Reserves added Sishen LoM extension 2018-2021 excl. depletion (incl. UHDMS) and incl. UHDMS' 1. Based on approved feasibility study. Reserves to be updated aspart of 2021 life of mine cycle 2. Based on approv
Slide 28: Technology for safety, efficiency and sustainability
Technology for safety, efficiency and sustainability Operating Model FutureSmart™ mining Projects Stable and capable programme VOXEL™ data analytics programme Kapstevel South ahead of plan Defect elimination programme Integrated Operations Centres UHDMS implementation on track Debottlenecking logist
Slide 29: 2021 full year guidance
2021 full year guidance Total production Total sales C1 cash costs Capital expenditure 40.5-41.5Mt 39.5 -40.5Mt <US$40/t? R7.7-8.2bn (previously 40.5 - 41.5Mt) (previously sUS$34/t) (previously R10.8- R11.3bn) Sishen Kolomela Production ~28.5Mt ~13Mt Waste 150- 160Mt 55-65Mt5 Unit costs R410- 420/dm
Slide 30: Well positioned to continue delivering stakeholder value
Well positioned to continue delivering stakeholder value Assets Capabilities Sustainability High quality products Life extension opportunities Strong balance sheet Operational resilience P101 efficiency and technology Cost and capital discipline Safe and healthy operations Competitive margins Enduri
Slide 31: Annexures
AngloAmerican Annexures
Slide 32: Annexure: Logistics performance impact on sales
Annexure 1 Logistics performance impact on sales Mt 1H21 1H20 % change 2H20 % change Railed to port (incl. Saldanha Steel) 19.7 18.5 6 19.7 6 Sishen mine (incl. Saldanha Steel) 13.7 12.5 10 135 8 Kolomela mine 6 6 2 6.2 3 Total sales 19.5 18.9 3 21.4 13 Export 19.4 18.6 4 214 15 Domestic 0.1 0.3 (67
Slide 33: Annexure: Operating margin driven by strong revenue growth
Annexure 2 Operating margin driven by strong revenue growth Rm 1H21 1H20 % change 2H20 % change Revenue 63616 31579 >100 48525 31 Operating expenses (21692) (16 540) 31 (22726) <100 Operating profit 41924 15039 >100 25799 63 Operating margin (%)' 66 48 38 54 22 Profit for the period 30621 11024 >100
Slide 34: Annexure: Break-even price supported by price premiums
Annexure 3 Break-even price supported by price premiums Platts 62% break-even price (US$/t) 4 6 aL FY20 C1 Costs Price Total after Lump Currency Inflation Freight Royalties 1H21 premium controllables premium and escalation | Controllables $21 __ a Non-controllables $2 _—______| 34
Slide 35: Annexure: Revenue analysis
Annexure 4 Revenue analysis 1H21 1H20 % change 2H20 % change Export (Rm) 60 808 28399 >100 45716 33 Tonnes sold (Mt) 19.1 18.3 4 21.0 (9) US Dollar pertonne 220 93 >100 134 64 Rand per tonne 3185 1552 >100 2177 46 Domestic (Rm) 235 464 (49) (55) >100 Shipping operations (Rm) 2573 2716 (5) 2 864 (10)
Slide 36: Annexure: Price premia driven by traditional market recovery
Annexure 5 Price premia driven by traditional market recovery Kumba 1H21 realised FOB price (US$/t) Price drivers P62 index CFR China price +201% average: +$53.1/dmt nnn, US$183.5 (3.5) 21 Fe premium: =i Average: ~US$3.01 per 1% Fe Lump premium: 22.5 219.5 216.0 Average: US$0.52/dmtu vs US$0.23/dmtu
Slide 37: Annexure: Revenue reflects higher prices and volumes
Annexure 6 Revenue reflects higher prices and volumes Revenue increased by 101% Revenue drivers Rm Controllables (143) 63616 Total sales volumes: (8 873) Up 3% to 19.2Mt (1H20: 18.6Mt) 27 154 , Lump premium: Average US$22.5/dmtu (1H20: US$9.8/dmtu) Product premium US$2.8/t (1H20: US$0.1/t) 31579 129
Slide 38: Annexure: Operating expenditure analysis
Annexure 7 Operating expenditure analysis Rm 1H21 1H20 % change 2H20 % change Raw materials and consumables 1126 508 >100 941 20 Inventory movementin finished product 459 848 (46) 1513 (70) Inventory movement in WIP 277 (645) >(100) (676) >(100) Inventory written down to NRV 83 31 >100 871 (90) Cont
Slide 39: Annexure: Operating expenditure driven by higher mining cost
Annexure 8 Operating expenditure driven by higher mining cost Rm 18579 ee ::5) ae 616 295 3409 15 082 1374 1H20 Mining Stock Deferred Escalation, Shipping Selling and 1H21 operations movement stripping non-cash and forex distribution = Mining operations | = Shipping = Selling and distribution 1. Exc
Slide 40: Annexure: EBITDA analysis
Annexure 9 EBITDA analysis Rm 1H21 1H20 % change Total sales volumes (Mt) a 19.2 18.6 3 Benchmark price ($/t) 183 91 >100 Product premiums ($/t) 54 12 >100 Freight ($/t) (17) (10) 70 Realised FOB price($/t) 220 93 >100 On-mine unit costs ($/t) (28) (19) 47 Logistics (rail and port) ($/t) (12) (10) 2
Slide 41: Annexure: Sishen and Kolomela mines unit cash cost (R/t)
Annexure 10 Sishen and Kolomela mines Unit cash cost structure (R/t) 448 (60) (32) Sishen mine Sishen mine | FY20 1H21 ! Deferred stripping m™ Other Energy = Drilling and blasting (84) Kolomela mine FY20 m Maintenance m Outside services (80) Kolomela mine m Fuel 1H21 mLabour a
Slide 42: Annexure: Sishen and Kolomela mines unit cash cost (%)
Annexure 11 Sishen and Kolomela mines Unit cash cost structure (%) Sishen mine Sishen mine FY20 1H21 ™ Other Energy = Drilling and blasting m= Maintenance Kolomela mine FY20 m Outside services m Fuel Kolomela mine 1H21 mLabour 42
Slide 43: Annexure: Capital expenditure analysis
Annexure 12 Capital expenditure | Analysis Rm 1H21 1H20 FY21e Approved expansion 622 348 2700-2 800 Deferred stripping 942 1237 1800-2 000 Sishen 437 854 1000-1100 Kolomela 505 383 800-900 SIB 1485 1242 3 200-3 400 Sishen 1035 892 2 400-2500 Kolomela 450 350 800-900 Unapproved expansion = _ _ Total
Slide 44: Annexure: Sensitivity analysis 1H21
Annexure 13 Sensitivity analysis 1H21 Sensitivity analysis (1% change) - EBITDA impact (Rm) Export volume Export price (800) (600) (400) (200) 0 200 400 Change per unit of key operational drivers, each tested independently Sensitivity analysis 600 800 Unit change EBITDA impact Currency (Rand/US$) RO
Slide 45: Annexure: China steel production at new record highs
Annexure 14 Markets | China steel production at new record highs China Crude Steel Production (Mt)1 Global Seaborne Iron Ore Supply (Wet Mt) 2015 2016 2017 2018 2019 2020 Source: World Steel Association (WSA) 1. Sum of WSA monthly sales; 2021 YTDannualised 1400 200 1200 1000 150 800 100 600 400 50 2
Slide 46: Annexure: Lump premium, sintering closures and tight supply
Annexure 15 Lump premium sintering closures and tight supply Lump premium and stocks at Chinese ports Platts 62 price ($/dmt) 1.0 25% 0.8 20% 0.6 0.4 15% 0.2 0.0 10% 2015 2016 2017 2018 2019 2020 1H21 Platts LP ($/dmtu) Lump % of stocks. Source: Platts Mystee! 250 200 2015 2016 2017 2018 2019 2020 2
Slide 47: Annexure: Image descriptions
Annexure 16 Image descriptions Slide 1 Saldanha port: loading vessel Slide 16 Saldanha port: loading vessel Slide3 Kolomela Mine: conveyor from process plant Slide 24 Wind turbines for sustainable power generation Slide 6 Assmang Primary School, Postmasburg Slide 26 Solar panels for sustainable powe