Slide 1: Results Presentation for the Six Months Ended 30 June 2017
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 JUNE 2017 Presented by Zanele Matlala & Kajal Bissessor
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 01 Key Highlights 02 Market Review 03 Operational Review 04 Financial Review 05 Outlook 3 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017
Slide 4: Key Highlights
01 Key Highlights 4 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017
Slide 5: Solid performance in an uncertain environment
Solid performance in an uncertain environment Safety Operational • Regrettably, one fatality • 10% y-o-y increase in production, reaching a • 9% improvement in TRIFR since Dec’16 record high • Costs well managed within a high mining inflation environment Market Financial • Volatile pricing environme
Slide 6: Market Review
02 Market Review 6 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017
Slide 7: Pricing environment adjusts following unprecedented run in Q4 2016
7 100 150 200 250 300 350 400 450 - 50 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 (USD/t) Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 UG2 Metal Bulletin 42% Apr-17 May-17 Jun-17 Jul-17 20 40 60 80 100 120 140 160 - Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-
Slide 8: China the critical influencer accounting for 52% of global stainless steel production
China the critical influencer accounting for 52% of global stainless steel production in H1 2017 Global Stainless Steel Production Global Ferrochrome Demand (H1 2017) (H1 2017) 5.5% 6.3% 7.5% 5.0% 4.5% 4.8% 5.9% 6.8% 51.9% 12.7% 60.7% 17.0% 4.9% 6.5% China NAFTA Europe Japan China NAFTA Europe Japan
Slide 9: Industry fundamentals remain solid as ferrochrome demand tracks stainless steel production
Industry fundamentals remain solid as ferrochrome demand tracks stainless steel production Global Stainless Steel Production Global Ferrochrome Demand (mt) (mt) 6.0 5.8 25 6 23.3 23.3 5.6 0.3 22.3 0.4 1.2 1.3 0.3 0.3 1.1 0.3 1.7 1.7 0.3 5 0.3 0.3 20 1.7 0.3 0.3 1.2 1.1 0.3 1.1 0.3 1.6 1.6 0.7 1.5 0.
Slide 10: Ferrochrome production reacted to market conditions; ore imports into China also increased
Ferrochrome production reacted to market conditions; Ore imports into China also increased Global Ferrochrome Production Chrome Ore Imports into China (mt) (mt) 7 7 6.6 6.0 5.7 5.9 6 6 1.2 0.4 5.3 0.3 0.3 0.9 0.2 0.3 0.3 0.6 5 0.3 0.6 5 4.6 0.3 0.6 0.5 0.6 0.5 0.6 0.6 4 0.6 4 0.2 0.3 1.7 2.0 3 3 1.8
Slide 11: Operational Review
03 Operational Review 11 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017
Slide 12: Ensuring the safety of all our employees remains key
Ensuring the safety of all our employees remains key to building a stable production environment • Regrettably one fatality during the period • Overall, TRIFR improved to 3.78, from 4.15 in December 2016 • Safety remains the number 1 priority for the Venture with a goal of achieving zero harm • Educ
Slide 13: Reaping rewards of initiatives undertaken to drive efficiency
Reaping rewards of initiatives undertaken to drive efficiency • Ferrochrome production increased by 10% y-o-y to 216 kt as a result of: Total Ferrochrome Production 250 (kt) − greater number of furnaces in operation 216 − Improved furnace performances with 2 record 195 196 197 months during the quar
Slide 14: Total costs well managed within a high mining inflation environment
Total costs well managed within a high mining inflation environment • Total costs per tonne of ferrochrome sold increased by 9%* with key contributors being: − Increase in reductant prices; − Increase in UG2 input prices; − Increase in labour costs, effective 1 July 2016; − Increases in electricity
Slide 15: Financial Review
04 Financial Review 15 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017
Slide 16: Strong performance driven by favourable market conditions
Strong performance driven by favourable market conditions − 7% increase in revenue y-o-y to R 2 580m • Strength of the Rand partially offset the impact of the pricing environment • Ferrochrome revenue up by 6% y-o-y to R 2 282m setting a new record for H1 • Chrome ore revenue up by 15% y-o-y to R 29
Slide 17: EBITDA reconciliation to profit
EBITDA reconciliation to profit 1,000 887.1 900 800 (21.7) 700 (164.9) (23.8) 600 486.5 R'm 500 400 (281.7) 300 91.5 200 100 0 Merafe's 20.5% of Corporate costs Depreciation Net financing costs Current tax expense Deferred tax income Profit EBITDA from the Venture 17 Merafe Resources Ltd | Results p
Slide 18: Benefitted from upswing but continuing to drive efficiencies
Benefitted from upswing but continuing to drive efficiencies to counter negative macro influences Ferrochrome Revenue H1 2017 H1 2016 Variance • Driven by higher prices but partially offset by stronger Rand and lower sales volumes R'm R'm Chrome Ore Revenue Ferrochrome revenue 2 282 2 153 6% • Drive
Slide 19: Strengthening of the balance sheet enables greater flexibility
Strengthening of the balance sheet enables greater flexibility in the future As at As at Inventories • 59kt increase in finished goods on hand as a result 30 June 31 December of production being higher than sales 2017 2016 • Finished goods on hand is about 4 to 5 months of Reviewed Audited sales R'0
Slide 20: Strong operational cash generation enabled a significant reduction in net debt
Strong operational cash generation enabled a significant reduction in net debt levels Reconciliation of Net Debt (R’m) 800 21* (464) 100 700 141 600 1 500 409 400 300 208 200 100 - Opening Expansionary capex Sustaining capex Dividends paid Exchange rate Cash from operating Closing fluctuations activ
Slide 21: Significant headroom on debt facilities
Significant headroom on debt facilities Merafe and Venture - Cash and cash Working Merafe Head R’ m equivalents* Capital loan* Office debt Total Opening 263 (309) (363) (409) Cash from operating activities 485 (21) - 464 Arranging fees - (4) (4) Expansionary capex (1) - - (1) Sustaining capex (141)
Slide 22: Outlook
05 Outlook 22 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017
Slide 23: Outlook
Outlook • 2017 growth rate of stainless steel production projected to be 1.6% • 2018 to 2021 growth rate of 4.3% per annum for stainless steel production indicating strong demand for chrome • Our strong balance sheet, strong cash flow generation coupled with being a low cost producer enables us to w
Slide 24: Questions
Questions 24 Merafe Resources Ltd | Results presentation for the six months ended 30 June 2017