Merafe Resources Limited · JSE:MRF
Merafe Resources — FY2021 Earnings Presentation
31 slides from Merafe Resources's earnings presentation, March 2022
Slide 1: Annual Results Presentation
ANNUAL RESULTS PRESENTATION for the year ended 31 December 2021
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 KEY FEATURES 1 MARKET REVIEW 2 OPERATIONAL REVIEW 3 FINANCIAL REVIEW 4 SHARE BUY-BACK AND DIVIDEND 5 OUTLOOK 6 MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 2
Slide 4: Key Features
KEY FEATURES MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 3
Slide 5: Global economic recovery led to improved performance
GLOBAL ECONOMIC RECOVERY LED TO IMPROVED PERFORMANCE HEALTH AND SAFETY OPERATIONAL • No fatalities • Increased ferrochrome and chrome ore production • TRIFR decreased by 29.9% (from December 2020) • Record smelting production achieved • COVID-19: • Electricity cost pressures - 80% of the workforce v
Slide 6: Market Review
MARKET REVIEW MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 5
Slide 7: 2021 – A Year of Recovery
2021 – A YEAR OF RECOVERY UG2 Merchant prices Ferrochrome Merchant prices 49%-70% European benchmark ferrochrome price (USD/t) (USc/lb)* (USc/lb) 200 140 210 120 180 150 100 150 80 120 100 60 90 40 60 50 20 30 0 0 0 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Oct Apr Jul Oct Jul Dec Mar Jul Jan Apr Jun S
Slide 8: It's All About China
IT’S ALL ABOUT CHINA Global stainless steel production (%) Global ferrochrome demand (%) 21,8 17,7 23,1 17,9 4,3 4,2 2,7 2,7 12,3 12,3 8,7 8,7 FY 2021 FY 2020 FY 2021 FY 2020 4,3 4,1 4,8 4,7 56,8 61,1 61,1 66,7 USA Western Europe Japan China Other Source: CRU MERAFE RESOURCES LIMITED ANNUAL RESULTS
Slide 9: Stainless steel production and ferrochrome demand revived
STAINLESS STEEL PRODUCTION AND FERROCHROME DEMAND REVIVED Global stainless steel production (mt) Global ferrochrome demand (mt) 15 14,5 58,9 13,6 60 13,1 53,2 3,4 51,5 2,5 12,8 2,3 10,3 9,1 10 40 33,5 8,8 8,8 8,9 30,6 31,5 5 20 3,0 2,4 2,9 0,7 0,5 0,6 6,8 6,3 7,2 1,3 1,2 1,1 0 2,5 2,2 2,5 0 0,4 0,4
Slide 10: Demand for ferrochrome leads production; increased ore imports into China
DEMAND FOR FERROCHROME LEADS PRODUCTION; INCREASED ORE IMPORTS INTO CHINA Global ferrochrome production (mt) Chrome ore imports into China (mt) 16 14,0 14,4 15,9 16 15,0 0,9 1,2 1,5 14,3 12,5 0,7 0,7 0,7 1,0 12 0,8 1,2 0,6 1,3 1,3 0,9 0,6 0,3 0,6 1,0 1,0 12 0,6 0,3 1,4 1,5 0,2 1,5 8 3,6 3,7 2,8 8 12
Slide 11: Operational Review
OPERATIONAL REVIEW MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 10
Slide 12: COVID-19 Update
COVID-19 UPDATE • COVID-19 remains a risk • No production stoppages due to COVID-19 • COVID-19 protocols continue to be observed • Antigen testing implemented across all operations to manage risk • Vaccination rollout campaign started and progressing well with 80% of the workforce vaccinated • Regre
Slide 13: Health & safety of employees central to operations
HEALTH & SAFETY OF EMPLOYEES CENTRAL TO OPERATIONS • No fatalities Total Recordable Injury Frequency Rate (TRIFR) 4 • TRIFR decreased to 2.75 from 3.91* in December 2020 3 • Safety of our employees remains a critical focus area with the goal of achieving zero 2 harm • Safety campaigns and programs w
Slide 14: Production ramped up
PRODUCTION RAMPED UP • Ferrochrome production increased to 379kt Ferrochrome production (kt) 500 - Installed capacity utilisation of 79% • Production efficiencies achieved at most 400 smelting operations • Production spurred by growth in stainless 300 steel production • Rustenburg smelter furnace 5
Slide 15: Cost management continues
COST MANAGEMENT CONTINUES • Total production costs per tonne decreased Breakdown of C3 production costs by 5.2% (from December 2020), influenced by: 21% - Higher production volumes 32% - Lower chrome ore cost FY 14% 2020 - Countered by › Increase in electricity tariff 12% 21% › Higher reductants cos
Slide 16: Platinum Group Metals (PGMs) Plant
PLATINUM GROUP METALS (PGMs) PLANT • Investment in PGMs processing plant made in 2021 • Plant contributed to the Venture • Plant has capacity to treat 21kt of the PGM-bearing material per month • R32m spent to date and balance of approximately R23m to be spent in 2022, funded from the Venture’s cash
Slide 17: Financial Review
FINANCIAL REVIEW MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 16
Slide 18: Revenue
REVENUE Increase in revenue year-on-year (YoY) • Ferrochrome revenue increased by 75% YoY to R7.020 billion • Market buoyancy led to higher ferrochrome • Chrome ore revenue increased by 33% YoY to R1.036 billion and chrome ore prices • Higher demand led to higher sales volumes • Stronger average ZAR
Slide 19: Earnings
EARNINGS • Headline earnings per share of 67.0c for the year • Key contributors to earnings were higher sales prices and volumes HEPS & Basic EPS (cents) 67,0 66,8 60 40 36,0 36,0 27,0 27,0 20 0 (3,4) (0,8) (20) (40) (40,0) (60) (54,2) (80) FY 2017 FY 2018 FY 2019 FY 2020 FY 2021 HEPS Basic EPS MERA
Slide 20: EBITDA Improvement
EBITDA IMPROVEMENT EBITDA from the Venture variance analysis: FY 2021 vs FY 2020 (%) 3 200 2 287 (970) 3 000 2 800 ( 145 ) 2 600 (603) 2 400 63 2 170 2 200 296 2 000 1 800 1 600 1 400 1 143 1 200 1 000 800 600 400 200 100 0 EBITDA Revenue Revenue Cost Inflation Foreign Standing Other EBITDA FY 2020
Slide 21: EBITDA Reconciliation to Profit
EBITDA RECONCILIATION TO PROFIT Venture’s EBITDA reconciliation to Merafe’s profit after tax (R’m) 2 700 2 498 (66) (111) 2 400 (6) 1 11 (454) 2 100 (199) 1 800 1 674 1 500 1 200 900 600 Merafe's share Corporate Depreciation Impairment Income from Net financing Current Deferred Profit of Venture's c
Slide 22: Financial Performance Overview
FINANCIAL PERFORMANCE OVERVIEW Ferrochrome revenue 31 Dec 2021 31 Dec 2020 • Driven by higher prices and sales volumes For the year ended R’m R’m Chrome ore revenue Ferrochrome revenue 7 020 4 002 • Driven by higher prices and sales volumes Chrome ore revenue 1 036 777 Foreign exchange gain Other re
Slide 23: Financial position influenced by working capital movements
FINANCIAL POSITION INFLUENCED BY WORKING CAPITAL MOVEMENTS 31 Dec 2021 31 Dec 2020 Non-current assets As at R’m R’m Include property, plant and equipment, intangible assets Total non-current assets 766 504 Inventories Current assets Increase due to investment in raw materials to secure supply Closin
Slide 24: Reconciliation of Cash
RECONCILIATION OF CASH Reconciliation of cash (R’m) 1 500 1 156 (42) (448) 1 200 (6) 213 972 (175) 900 (4) 600 300 278 0 Opening Net cash from Expansionary Sustaining Repurchase of Dividend Repayment Foreign Closing cash operating capex capex shares payment of loans exchange cash activities effects
Slide 25: Significant headroom on facilities
SIGNIFICANT HEADROOM ON FACILITIES Venture Merafe Merafe (Merafe’s share)2 head office total As at 31 December 2021 R’m R’m R’m Closing cash 489 483 972 Interest bearing Venture facilities debt1 Total As at 31 December 2021 R’m R’m (R’m) Total facilities in place Unspecified 300 300 Total facilities
Slide 26: Share Buy-back and Dividend
SHARE BUY-BACK AND DIVIDEND MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 25
Slide 27: Share Buy-back
SHARE BUY-BACK • A share repurchase programme was initiated on 4 January 2021, in accordance with the JSE Listings Requirements • Buy-back within the general authority approved by shareholders • 11 577 378 shares, representing 0.461% of the Company’s issued shares, were repurchased in the open marke
Slide 28: Dividend
DIVIDEND • The Board has declared a final ordinary cash dividend of R550 million • The final dividend amounts to 22 cents per share before dividend tax • This brings the full year dividend to R725 million amounting to 29 cents per share before dividend tax • The full year dividend works out to 43.2%
Slide 29: Outlook
OUTLOOK MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 28
Slide 30: Outlook
OUTLOOK • The rapid economic recovery experienced in 2021 is expected to slow down in 2022 • Risks to our growth include COVID-19 developments SA specific factors, such as Eskom, political developments and social unrests also contribute to risk and uncertainty • Focus continues to be on: - Efficient
Slide 31: Thank You
THANK YOU MERAFE RESOURCES LIMITED ANNUAL RESULTS PRESENTATION FOR THE YEAR ENDED 31 DECEMBER 2021 30