Mmg Ltd. · HKEX:1208
Mmg — H1 2016 Earnings Presentation
40 slides from Mmg's earnings presentation, Aug 17, 2016
Slide 1: 2016 Interim Results Presentation
2016 Interim Results Presentation 17 August 2016 HKEx:1208 ASX:MMG
Slide 2: Disclaimer
Disclaimer The information contained in this presentation is intended solely for your personal reference and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person (whether within or outside your organisation/firm) or published, in whole or in part, for any pu
Slide 3: 1H16 in review
_ _ _ _ 1H16 Financial Operational Emerging in review Results Excellence Copper Major Andrew Ross Marcelo Andrew Michelmore Carroll Bastos Michelmore Chief Executive Chief Financial Chief Operating Chief Executive Officer Officer Officer Officer Las Bambas – World class copper Mid-tier miner wit
Slide 4: 1H16 in review
1H16 in review Andrew Michelmore Chief Executive Officer
Slide 5: Our first value: We think safety first
Our first value: We think safety first Safety Performance Fatality of contracted driver engaged by Las Bambas mine in Peru, following a road accident in July 2016. MMG is committed to continuous 5 improvement in health and safety. 4.5 “We place safety at the centre of 4 everything we do and we
Slide 6: Growing through the down cycle
Growing through the down cycle 1H16 was pivotal for MMG, Guidance for 2016 maintained emerging a different company Expect to produce 415-477kt of copper and Record safety performance: TRIF of 1.7 per 120-135kt of zinc. million hours worked in 1H16. Delivering on our commitment Operations remai
Slide 7: Production profile shifting towards copper
Production profile shifting towards copper Zinc production Copper production ‘000 tonnes 800 ‘000 tonnes 2016 FY 600 guidance 415-477 400 649 623 600 587 540 200 1H 188 191 208 120 152 202 -135 102 0 2011 2012 2013 2014 2015 2016F 2011 2012 2013 2014 2015 2016F MMG’s production profile expected to d
Slide 8: Financial results
Financial results Ross Carroll Chief Financial Officer
Slide 9: First half results in summary
First half results in summary Revenue decreased by US$527.7m Sales volume* and commodity price due to Century mine closure, lower performance copper sales and lower realised Indexed, 2015=100 prices. 1H15 1H16 Las Bambas sales volumes will hit the P&L from 1 July 2016 as the project 100 Zinc Sal
Slide 10: Condensed consolidated income statement
Condensed consolidated income statement Six months ended 30 June 2016 2015 Variance US$ million % Revenue 586.1 1,113.8 (47) EBITDA 134.3 375.9 (64) Depreciation and amortisation (201.3) (380.9) 47 Underlying EBIT (67.0) (5.0) (1,240) Net Interest (47.1) (41.8) (13) Income tax credit/(expense) 21.1
Slide 11: All continuing operations cash generative
All continuing operations cash generative Asset EBITDA as a proxy for Ongoing productivity focus and cost operating cash flow management. Century transitioned to care and maintenance. 600 46% 50 Group net operating cash flow 41% US$57.7 million, down 72%. Expect a 500 38% 45 material improvement
Slide 12: Underlying EBIT variance analysis
Underlying EBIT variance analysis US$ million 200 Century ($354m) Focus on operational Gold Grove ($17m) efficiency. Reduced Sepon ($47m) employee, contractor Rosebery ($9m) and energy costs 0 1H15 D&A EBIT Price 179.6 (5.0) (107.2) 1H16 EBIT (67.0) Selling & Royalty Admin -200 Cash Prodn Expense Ex
Slide 13: Access to long term capital, a competitive advantage
Access to long term capital, a competitive advantage Debt repayment schedule1 MMG total debt borrowings have US$ million attractive quasi-equity features: 6,000 – Sourced from Chinese government supported financial institutions. 5,000 – Majority vanilla structure. – Las Bambas debt long-term tenor
Slide 14: Focus on costs, capital efficiency, balance sheet
Focus on costs, capital efficiency, balance sheet
Slide 15: Pursuit of operational excellence
Pursuit of operational excellence Marcelo Bastos Chief Operating Officer
Slide 16: Continuous focus on cost management
Continuous focus on cost management Kinsevere sourced alternate electricity C1 Cost supply arrangements, resulting in US$/lb greater grid power availability and lower costs. Operational cost savings 4.00 also delivered from improved current efficiency. 3.50 Sepon facing higher costs to process 3
Slide 17: Las Bambas – world class copper asset
Las Bambas – world class copper asset 5km conveyor, 8,000t/hr. 140ktpd throughput design capacity with two SAG and ball mill trains working independently of each other, pebble crusher and regrind circuit. Dual train, conventional copper concentrator with 1.1m dry metric tpa Loading concentrate at Ma
Slide 18: Las Bambas – size, scale and life
Las Bambas – size, scale and life Largest copper greenfield 2017 Forecast annual production capability1 development in past 10 years. Escondida Targeting 2mt of copper in copper concentrate production over first 5 yrs. PT Freeport Indonesia Total project acquisition and Cerro Verde constructio
Slide 19: Las Bambas – world class ramp up
Las Bambas – world class ramp up McNulty Curve for plant ramp up Year 1 production of major Cu Las Bambas reached 97% of design capacity in 6 months Greenfields since 2013 Guidance/outlook vs. actual 110 Type 1 300kt 100 We reiterate 2016 Type 2 production guidance 90 250kt of 250-300kt Type 3 80 De
Slide 20: Las Bambas – low cost position
Las Bambas – low cost position Breakdown of 2H16 C1 guidance Demonstrated capability but a US$1.00-1.10/lb challenging logistics chain Bi-modal logistics chain identified as a key project risk. US$1.00-1.10/lb Transport capability delivered in line G&A with rapid mine ramp up (740 Transport tonn
Slide 21: Asset utilisation – driving continuous improvement
Asset utilisation – driving continuous improvement We squeeze the assets: Our operating approach Kinsevere Asset Utilisation targets consistent improvement in utilisation vs. MSPR* 238 tpd 238 tpd 218 tpd 222 tpd Continue to raise the bar: Improved Maximum Sustainable Production Rates (MSPR) eac
Slide 22: Emerging copper major earning the right to grow
Emerging copper major earning the right to grow Andrew Michelmore Chief Executive Officer
Slide 23: Earning the right to grow
Earning the right to grow Las Bambas – on time, on budget and ramp up ahead of industry norm. – Steady state production, cash generation focus. – Targeting 2mt of Cu production in first 5 years. Dugald River – US$130-150m lower capital budget. – Finance confirmed. First production 1H18. Long l
Slide 24: Base metals focus – longer term price support for copper
Base metals focus – longer term price support for copper Tonnes 000' US$/lb 25,000 4.50 4.00 20,000 3.50 3.00 15,000 2.50 2.00 10,000 1.50 1.00 5,000 0.50 0 0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Base Case + Probable Projects Copper Supply Base Case Copper Supply Coppe
Slide 25: Base metals focus – zinc facing declining supply
Base metals focus – zinc facing declining supply Tonnes 000' US$/lb 18,000 1.80 16,000 1.60 14,000 1.40 12,000 1.20 10,000 1.00 8,000 0.80 6,000 0.60 4,000 0.40 2,000 0.20 0 0.00 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Base Case + Probable Projects Zinc Supply Base Case Zinc
Slide 26: Emerging copper major positioned for growth
Emerging copper major positioned for growth Earn the right to grow. Tight cost focus. Leverage support from major shareholder China Minmetals Corporation. Optimise capital structure. Positioned for growth. Objective to be valued as one of the world’s top, mid-tier miners by 2020 26
Slide 27: We mine for progress
WE MINE FOR PROGRESS
Slide 28: Appendices
AA “Brouress EMEIVIG Appendices
Slide 29: Our Company
Our Company Capital Millions Structure Primary Listing HKEx Secondary ASX Listing (CDI) Market Cap US$1,398bn1 Shares 5,290 74% Major (China shareholder Minmetals ownership Corporation) Melbourne, Head Office Australia (1) As at 15 August2016. 29
Slide 30: Executive team – global experience
Executive team – global experience Chief Executive Officer Chief Financial Officer Chief Operating Officer Mr Andrew MICHELMORE Mr Ross CARROLL Mr Marcelo BASTOS 30+ years of metals and mining 25+ years of experience in the Natural 30+ years mining experience in iron ore, experience. Resources
Slide 31: Board - sound corporate governance
Board - sound corporate governance Chairman Executive Director Executive Director Non-executive Director Mr JIAO Jian Mr Andrew MICHELMORE Mr XU Jiqing Mr GAO Xiaoyu Independent Independent Independent Independent Non-executive Director Non-executive Director Non-executive Director Non-executive Dir
Slide 32: Investor value proposition
Investor value proposition Current commodity prices have heavily impacted all base metal valuations. Track record of operational performance and capital discipline. 2016 guidance demonstrates shift in leverage to copper. Las Bambas completion and commercial production de-risks project invest
Slide 33: Financial dashboard
Financial dashboard Revenue by commodity Revenue by customer location 11% 2% Zinc 16% Australia 19% Copper Europe 61% Middle East Gold 7% Japan & Korea Silver 3% Other Asia Lead 43% South America 8% 18% China 9% 2% Operating expenses (sites) EBITDA by operating segment(1) 15% 14% People Sepon Extern
Slide 34: Sepon - transition to tail of proven Cu resources
Sepon - transition to tail of proven Cu resources Transition to lower grade and more complex Financials ores. US$ million 1H16 1H15 % Production impacted by planned total Revenue 176.3 269.3 (35) concentrator shutdown. EBITDA1 61.2 154.9 (60) Focus on operational efficiencies and cost controls
Slide 35: Kinsevere – sustained improvements
Kinsevere – sustained improvements Production up 2% to 39,974 tonnes of copper Financials cathode. US$ million 1H16 1H15 % Operational efficiencies, stable electricity, increases to mill throughput. Revenue 192.3 222.7 (14) Lower copper prices marginally offset by EBITDA1 67.9 80.9 (16) 2% inc
Slide 36: Australian operations – transition beyond Century
Australian operations – transition beyond Century Production of 7,231 tonnes of copper in copper Financials concentrate, down 50% on 1H15 US$ million 1H16 1H15 % Reduced throughput at Golden Grove from 1.6Mtpa to 1Mtpa to preserve value of the Revenue 193.7 231.7 (16) resource while exploration
Slide 37: 2016 Guidance
2016 Guidance Las Bambas Rosebery Copper – production1 250,000 – 300,000 tonnes Zinc – production 75,000 – 80,000 tonnes Copper – C1 costs 2H16 US$1.00 – US$1.10 / lb Zinc – C1 costs US$0.30 – US$0.40 / lb Copper – C1 costs2 US$0.80 – US$0.90 / lb Lead – production 18,000 – 22,000 tonnes Kinsevere C
Slide 38: Condensed consolidated balance sheet
Condensed consolidated balance sheet 30 Jun 2016 31 Dec 2015 US$ million Non-current assets 13,375.9 13,025.7 Current assets – cash and cash equivalents 215.9 598.3 Current assets – other 997.8 1,036.0 Total assets 14,589.6 14,660.0 Total equity 2,082.0 2,175.2 Non-current liabilities 11,187.0 11,64
Slide 39: Consolidated financial performance: Cash flow statement
Consolidated financial performance: Cash flow statement Half year ended 30 June 2016 2015 US$ million Receipts from customers 686.1 1,161.6 Payments to suppliers (865.2) (561.0) Payments for exploration expenditure (17.9) (18.8) Income tax paid (75.8) (48.6) Net cash generated from operating activit
Slide 40: Financial resources and liquidity
Financial resources and liquidity Gearing ratio1 MMG Group (excluding Las Maturity profile of borrowings Bambas) as at 30 June 2016 of 0.56. as at 30 June 2016 Gearing ratio1 MMG South America Management 40% within one year Group as at 30 June 2016 of 0.66 2% one - two years two - five years 8%