Slide 1: Annual Results presentation for the year ended 31 December 2018
Annual Results presentation for the year ended 31 December 2018 MERAFE RESOURCES 1 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 2: Legal notice/disclaimer
Legal notice/disclaimer This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Merafe Resource
Slide 3: Agenda
Agenda 1. KEY HIGHLIGHTS 2. MARKET REVIEW 3. OPERATIONAL REVIEW 4. FINANCIAL REVIEW 5. DIVIDEND 6. OUTLOOK MERAFE RESOURCES 3 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 4: 1. Key Highlights
1. KEY HIGHLIGHTS MERAFE RESOURCES 4 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 5: Credible performance in spite of a tough operating environment
Credible performance in spite of a tough operating environment Safety Operational • Regrettably, one fatality • Increase in ferrochrome production, • TRIFR 10% year on year with several record highs achieved • Costs well managed in a high mining inflation environment Market Financial • Macroeconomic
Slide 6: 2. Market Review
2. MARKET REVIEW MERAFE RESOURCES 6 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 7: 2018 Ferrochrome price volatility
2018 Ferrochrome price volatility UG2 42% (USD/t) Ferrochrome 50% (USc/lb) European Benchmark Ferrochrome Price (USc/lb) 500 140 180 160 120 400 140 100 120 300 80 100 60 80 200 60 40 40 100 20 20 0 0 0 2016Q3 2016Q1 2017Q1 2017Q3 2018Q1 2018Q3 2019Q1 Sep 17 Sep 16 Mar 17 Sep 17 Mar 18 Sep 18 Sep 16
Slide 8: China's dominant role in the stainless steel and ferrochrome market
China’s dominant role in the stainless steel and ferrochrome market Global Stainless Steel Production (%) Global Ferrochrome Demand (%) 5,8 4,4 21,7 20,3 10,1 6,2 14,5 4,8 18,8 17,2 11,5 15,3 5,5 5,6 6,4 6,5 53,3 61,0 51,7 59,6 Source for both charts: CRU USA Western Europe Japan China Other MERAFE
Slide 9: Solid sector fundamentals lead to continued growth in stainless steel production and ferrochrome demand
Solid sector fundamentals lead to continued growth in stainless steel production and ferrochrome demand Global Stainless Steel Production (mt) Global Ferrochrome Demand (mt) 60 14 13,1 51,4 12,2 48,5 12 11,5 50 45,6 2,6 2,1 11,1 1,8 9,2 10 40 8,2 8 30 7,8 25,8 26,6 6 7,1 7,5 24,2 20 4 3,1 3,2 3,3 10
Slide 10: Ferrochrome production responded to demand; Ore imports into China also increased
Ferrochrome production responded to demand; Ore imports into China also increased Global Ferrochrome Production (mt) Chrome Ore Imports into China (mt) 15 15 14,3 13,9 13,4 12,6 1,4 0,9 1,8 0,9 0,7 12 11,1 0,7 12 0,4 0,3 0,6 1,3 10,6 0,5 1,0 0,5 1,3 1,1 0,6 1,0 1,3 1,4 9 1,3 9 0,1 1,2 0,5 0,8 3,9 3,
Slide 11: 3. Operational Review
3. OPERATIONAL REVIEW MERAFE RESOURCES 11 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 12: Ensuring the safety of all employees
Ensuring the safety of all employees • Regrettably one fatality during 2018 and another in the current year • Overall, TRIFR improved to 3.39 from 3.74 in December 2017 • Safety of our employees remains a critical focus with the goal of achieving zero harm • Education and good decision making the ke
Slide 13: Sweating assets and driving efficiencies
Sweating assets and driving efficiencies • Growth in ferrochrome production to 407kt - Installed capacity utilisation of 85% - Annual production records achieved at Lion and Wonderkop smelters - Annual pellet production records at Tswelopele and Bokamoso • No significant disruptions in electricity s
Slide 14: Total costs well managed within a high mining inflation environment
Total costs well managed within a high mining inflation environment Total production costs per tonne increased by 9%, influenced by: • Increase in reductants prices • Increase in UG2 input prices • Increase in labour costs, effective 1 July 2018 • Increase in electricity prices, effective 1 April 20
Slide 15: 4. Financial Overview
4. FINANCIAL OVERVIEW MERAFE RESOURCES 15 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 16: Revenue
Revenue 5% decrease in revenue from prior year to R5.606bn • Ferrochrome revenue decreased by 6% to R4.848bn from prior year • Chrome ore revenue increased by 3% to R747m from prior year • Lower volumes of chrome ore and ferrochrome sold • Lower ferrochrome prices Ferrochrome Revenue (R’m) Chrome Or
Slide 17: Earnings
Earnings • HEPS decreased by 25% year on year to 27.2c • Significantly lower HEPS in H2 versus H1 HEPS Full Year (cents) HEPS H1 vs H2 (cents) 40 25 20 30 15 20 10 10 5 19 11 14 21 36 27 19 17 17 10 8 2 0 0 FY 13 FY 14 FY 15 FY 16 FY 17 FY 18 H1 16 H2 16 H1 17 H2 17 H1 18 H2 18 MERAFE RESOURCES 17 R
Slide 18: EBITDA reconciliation to profit
EBITDA reconciliation to profit EBITDA Reconciliation to profit (R’m) 1 600 1 200 (406) 4 800 (291) 30 400 1 346 683 0 Merafe's 20.5% Depreciation Net financing Current Deferred Profit EBITDA from income tax expense tax credit after tax the Venture MERAFE RESOURCES 18 RESULTS PRESENTATION FOR THE YE
Slide 19: Focus remains on driving efficiencies to counter negative macro influences
Focus remains on driving efficiencies to counter negative macro influences 2018 2017 Ferrochrome revenue R’m R’m Variance • Driven by lower prices and sales volumes Ferrochrome revenue 4 849 5 163 (6%) Chrome ore revenue Chrome ore revenue 747 726 3% • Driven by higher prices and lower volume Foreig
Slide 20: A tale of two halves…
A tale of two halves… H2 2018 H1 2018 R’m R’m REASONS FOR LOWER HEPS IN H2 Ferrochrome revenue 2 507 2 342 Ferrochrome revenue • Impact of lower prices in H2 Chrome ore revenue 369 378 Forex exchange gain Foreign exchange gain/(loss) 38 103 • More than 70% of forex gain realised Operating expense (2
Slide 21: Balance sheet weighed on by increased inventory levels
Balance sheet weighed on by increased inventory levels As at As at 31 Dec 2018 31 Dec 2017 INVENTORIES R’000 R’000 Increase due to: Current assets • Lower volumes sold and higher finished goods on hand Inventories 2 042 621 1 497 798 (4 - 5 months) Trade and other receivables 920 231 883 249 • Highe
Slide 22: Generation of cash from operations
Generation of cash from operations Reconciliation of net cash (R’000) 1 250 000 1 000 000 (412 262) 478 495 750 000 (30 042) (425 963) 500 000 (1 027) 250 000 280 855 671 655 0 Opening Cash from Sustaining capex Dividend Exchange rate Repayments Closing cash operating activities fluctuations of borr
Slide 23: Significant headroom on facilities
Significant headroom on facilities 1. Net cash/debt includes cash and Merafe cash equivalents, bank overdraft, As at 31 December 2018 Venture (Merafe’s share) head office Merafe total working capital loan and debt Total (R‘m) (R’m) (R’m) 2. Merafe's 20.5% of the Venture's $120 million overdraft faci
Slide 24: 5. Dividend
5. DIVIDEND MERAFE RESOURCES 24 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 25: Dividend declarations
Dividend declarations • The Board has declared a gross cash final ordinary dividend of R151m • Final dividend amounts to 6c per share • This brings the full year dividend to R351m (2017: R301m) and equates to a total gross dividend of 14 cents per share (2017: 12 cents per share) • Dividend represen
Slide 26: 6. Outlook
6. OUTLOOK MERAFE RESOURCES 26 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018
Slide 27: Outlook
Outlook • Positive strides aimed at removing uncertainty and restoring confidence evident from the South African government • While global uncertainty remains, there appears a desire by world leaders to find sustainable solutions • The fundamentals around stainless steel remain and positive growth i
Slide 28: Thank you
Thank you MERAFE RESOURCES 28 RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2018