Slide 1: Annual Results presentation
Annual Results presentation For the year ended 31 December 2022
Slide 2: 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 Resources to be reliable, but no
Slide 3: Agenda
Agenda Key features 3 Market review 5 Operational review 10 Financial review 17 Dividend 26 Outlook 28 Merafe Resources Annual Results presentation for the year ended 31 December 2022 2
Slide 4: Key features
Key features Merafe Resources Annual Results presentation for the year ended 31 December 2022 3
Slide 5: Commodities market price buoyancy continues
Commodities market price buoyancy continues HEALTH AND SAFETY OPERATIONAL MARKET FINANCIAL No fatalities Marginally higher Global market Revenue down by ferrochrome and uncertainty 2% year-on-year TRIFR decreased by chrome ore 14% (from Decrease in stainless Headline earnings productio
Slide 6: Market review
Market review Merafe Resources Annual Results presentation for the year ended 31 December 2022 5
Slide 7: Decline in stainless steel production & ferrochrome demand
Decline in stainless steel production & ferrochrome demand Global stainless steel production (mt) Global ferrochrome demand (mt) 80.0 16.0 14.4 14.1 70.0 14.0 13.0 58.7 3.4 3.3 60.0 56.5 12.0 2.3 51.5 12.8 50.0 12.5 10.0 9.1 40.0 8.0 8.8 8.9 8.8 30.0 33.5 32.7 6.0 31.5 20.0 4.0 10.0 2.4 2.9 2.8 2.0
Slide 8: Russia/Ukraine & China influence demand & supply dynamics
Russia/Ukraine & China influence demand & supply dynamics Global stainless steel production (%) Global ferrochrome demand (%) 3.6 4.0 2.7 2.3 8.7 8.2 11.4 12.3 22.1 21.8 23.1 4.3 23.4 4.4 4.9 4.9 FY FY FY FY 2022 2021 2022 2021 58.0 57.0 61.1 61.7 USA Western Europe Japan China Other Merafe Resource
Slide 9: 2022 Prices peak before trending lower
2022 Prices peak before trending lower UG2 Merchant prices Ferrochrome Merchant prices European benchmark (USD/t) 49%–70% (USc/lb)* ferrochrome price (USc/lb) 300 140 250 120 250 200 100 200 150 80 150 60 100 100 40 50 50 20 0 0 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1
Slide 10: China led ferrochrome production growth; flat ore imports into China
China led ferrochrome production growth; flat ore imports into China Global ferrochrome production (mt) Chrome ore imports into China (mt) 16.0 15.3 18.0 14.4 1.4 16.0 14.0 1.2 14.3 15.0 15.0 12.5 0.7 0.7 1.3 1.0 0.9 14.0 1.2 0.5 12.0 0.8 1.3 0.3 0.6 0.4 1.0 0.6 1.6 0.2 0.6 1.0 1.0 12.0 0.6 1.5 10.0
Slide 11: Operational review
Operational review Merafe Resources Annual Results presentation for the year ended 31 December 2022 10
Slide 12: COVID-19 update
COVID-19 risk has reduced significantly There were no significant impacts on operations arising from COVID-19 COVID-19 Mitigation measures have now been incorporated update into standard operating procedures Antigen testing implemented across all operations to manage risk Vaccinations at o
Slide 13: Health & safety of employees central to operations
Health & safety of employees central to operations Total Recordable Injury Frequency Rate (TRIFR) No fatalities 4.0 3.5 TRIFR decreased to 2.40 from 2.80* in 3.0 December 2021 2.5 Safety of our employees remains a critical 3.91 2.0 3.39 focus area with the goal of achieving zero 1.5 2.80 2.56
Slide 14: ESKOM update
Power supply challenges led to electricity outages Venture impacted by load curtailment from level 3 in the latter part of the year Venture had to reduce load for a period of over 250 hours ESKOM Double digit tariff increases directly impact cost update competitiveness Renewable energy bei
Slide 15: Production up marginally
Production up marginally Ferrochrome production (kt) Ferrochrome production increased to 384kt 450 400 • Installed capacity utilisation of 80% 350 • 100% utilisation of available capacity 300 Production efficiencies achieved at most 250 smelting operations 407 200 384 379 Lydenburg smelter & W
Slide 16: Cost pressures unrelenting
Cost pressures unrelenting Breakdown of C3 production costs Total production costs per tonne increased 8% by 30% (from December 2021), influenced 15% 38% by: FY • Increased chrome ore cost 2022 Chrome ore • Increased costs of reductants 24% Reductants and fluxes 15% • Increase in electricity tarif
Slide 17: Renewable energy
Renewable energy Co-Generation The agreement with Swedish Stirling considered for co-generation of electricity from off-gas has been terminated Alternative technologies for producing electricity from off-gas are being considered Renewable Energy Development of a range of Renewable Energy from
Slide 18: Platinum group metals (PGMs) plant
Platinum group metals (PGMs) plant Investment in PGMs processing plant made in 2021 Venture’s feed volume in 2022 increases to 160kt Consequently, Venture’s production ramped up to 15 000 oz Investment paid back in less than one year Merafe Resources Annual Results presentation for the year
Slide 19: ESG
ESG compliance remains an important pillar in how we run business JSE Sustainability Disclosure guidance used to enhance IAR disclosure ESG The 2022 IAR will provide substantial detail on ESG matters Venture’s target is 15% reduction of total emissions (scope 1, 2 & 3) by 2026 and a 50% redu
Slide 20: Financial review
Financial review Merafe Resources Annual Results presentation for the year ended 31 December 2022 19
Slide 21: Revenue
Revenue Decrease in revenue year-on-year (YoY) Total revenue decreased by 2% YoY to R7.939 billion PGMs revenue increased from R3 million to R100 million Ferrochrome revenue decreased by 3% YoY to R6.795 billion Market dynamics led to higher ferrochrome and chrome ore prices Chrome ore rev
Slide 22: Earnings
Earnings Headline earnings per share of 56.4c for the year Key contributors to earnings were higher sales prices and a weaker ZAR:US$ exchange rate HEPS and Basic EPS (cents) 67.0 66.8 56.4 56.4 60 40 27.0 27.0 20 0 ( 3.4) ( 0.8) (20) (40) (40.0) (60) (54.2) (80) FY 2018 FY 2019 FY 2020 FY 2021
Slide 23: EBITDA
EBITDA EBITDA from the Venture variance analysis: FY 2022 vs FY 2021 (%) 3 1 (32) 7 (6) 31 (13) 100 91 EBITDA Revenue Revenue Cost Inflation Foreign PGMs Other EBITDA FY 2021 volumes prices volumes exchange FY 2022 effect Merafe Resources Annual Results presentation for the year ended 31 December 20
Slide 24: EBITDA reconciliation to profit
EBITDA reconciliation to profit Venture’s EBITDA reconciliation to Merafe’s profit after tax (R’m) 2 400 2 200 (65) 2 000 (220) 4 24 1 800 (503) 1 600 1 400 2 205 (36) 1 200 1 000 1 410 800 600 Adjusted Corporate Depreciation, Income from Net financing Current tax Deferred tax Profit after tax Meraf
Slide 25: Financial performance overview
Financial performance overview 31 Dec 2022 31 Dec 2021 Ferrochrome revenue For the year ended R’m R’m Driven by higher prices and weaker ZAR:US$ exchange rate Ferrochrome revenue 6 795 7 020 Chrome ore revenue Chrome ore revenue 1 040 1 036 Driven by higher prices and weaker ZAR:US$ PGMs revenue
Slide 26: Financial position
Financial position 31 Dec 2022 31 Dec 2021 Non-current assets As at R’m R’m Include property, plant and equipment & intangible Total non-current assets 1 170 766 assets Current assets Inventories Inventories 2 373 1 652 Trade and other receivables 868 1 555 Increase due to market dynamics leading to
Slide 27: Reconciliation of cash
Reconciliation of cash Reconciliation of cash (R’m) 3 000 (18) 2 500 (466) 1 2 000 1 698 (850) 1 500 (18) (50) 1 000 1 269 500 972 0 Opening cash Net cash from Expansionary Sustaining PPE sale Dividend Advances & Foreign Closing cash operating capex capex proceeds payment repayment of exchange activ
Slide 28: Sufficient headroom under facilities
Sufficient headroom under facilities Venture & Unicorn Merafe Merafe (Merafe’s share)2 head office total As at 31 December 2022 R’m R’m R’m Closing cash 652 617 1 269 Venture Interest bearing Merafe facilities debt1 total As at 31 December 2022 R’m R’m R’m Total facilities in place Unspecified 300 3
Slide 29: Dividend
Dividend Merafe Resources Annual Results presentation for the year ended 31 December 2022 28
Slide 30: Dividend
Dividend The Board has declared a final ordinary cash dividend of R325 million The final dividend amounts to 13 cents per share before dividend tax This brings the full year dividend to R625 million amounting to 25 cents per share before dividend tax The full year dividend works out to 44% o
Slide 31: Outlook
Outlook Merafe Resources Annual Results presentation for the year ended 31 December 2022 30
Slide 32: Outlook
Outlook Disruption and volatility likely to persist Global risks include high inflation, recession fears, supply chain challenges and energy insecurity Local risks include electricity challenges, logistics constraints and inflationary pressures. Political developments and social unrests contri
Slide 33: Thank you
Thank you Merafe Resources Annual Results presentation for the year ended 31 December 2022 32