African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — H1 2008 Earnings Presentation
36 slides from African Rainbow Minerals's earnings presentation, Feb 20, 2008
Slide 1: Moving into overdrive
Moving into overdrive Interim results for the six months ended 31 December 2007 Wednesday, 20 February 2008
Slide 2: Disclaimer
Di l i Disclaimer This presentation contains "forward forward-looking looking statements statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and 21E of the Securities Exchange Act of 1934, as amended, that are intended to be covered by the safe harbour created by
Slide 3: Overview and strategy
Overview and strategy Patrice Motsepe Executive Chairman 3
Slide 4: Highlights
Hi hli ht Highlights • Headline earnings increased by 35% to R741 million • Headline earnings per share increased by 34% to 353 cents per share • EBITDA increased by 38% to R1.7 billion • Record volumes in Manganese Ore, Iron Ore, Thermal Coal and Chrome Ore • 9% increase in PGM sales • All projects
Slide 5: Operational highlights
O Operational ti l highlights hi hli ht Increased product sales (100% basis) . . . • 37% increase in manganese ore sales to 1.4 million tonnes • 18% increase i in i iron i ore sales l to 3.3 3 3 million illi tonnes • 12% increase in manganese alloy sales to 122 thousand tonnes • 55% increase in dome
Slide 6: Operational highlights: strong commodity price markets
O Operational ti l highlights hi hli ht Strong commodity price markets . . . • Rand PGM basket p prices increased by y 18% • Ferrous metals prices all experienced price increases, especially g manganese ore and alloys, y , and charge g chrome • Domestic thermal coal prices increased by 52% • Nickel
Slide 7: Consecutive periods of HEPS growth
5 consecutive periods of HEPS growth 400 353 350 316 300 264 cents per share 250 200 161 150 100 64 50 0 Financial year: 1H 2006 2H 2006 1H 2007 2H 2007 1H 2008 • 53% compound annual HEPS growth over the last 5 consecutive half year periods • ARM market capitalisation has increased 365% from R8,6 bi
Slide 8: High margin diversified mining company
High margin diversified mining company ARM EBITDA margin is 44% for the period under review Manganese Nkomati Platinum Coal Iron ore Chrome 0% 10% 20% 30% 40% 50% 60% Jul 2007 - Dec 2007 8
Slide 9: Delivering company transforming growth
Delivering company transforming growth Completed projects Projects in progress >R5 bn* 2004 - 2007: >R7 bn* 2007 - 2012: - Nchwaning III Manganese - Khumani Iron Ore (10 mtpa) - Modikwa Platinum - Nkomati Nickel (20.5 ktpa) - Two Rivers Platinum - GGV thermal coal (6.7 mtpa) - Nkomati Nickel interim
Slide 10: 2010 Growth Strategy
2 x 2010 Growth Strategy Att ib t bl tto ARM Attributable 450 PGMs Thermal Coal 400 M dik Modikwa T Two Rivers Ri Nk Nkomati ti 6 350 Xstrata Coal SA GGV Thousand ounces . 5 300 Million tonnes . 250 4 200 3 150 2 100 50 1 - 0 2005a 2006a 2007a 2008e 2009e 2010e 2005a 2006a 2007a 2008e 2009e 2010e 8
Slide 11: 2010 Growth Strategy
2 x 2010 Growth Strategy Att ib t bl tto ARM Attributable 2,000 Manganese Ore 6,000 Iron Ore 1 800 1,800 Beeshoek Khumani 1,600 5,000 nd tonnes . d tonnes . 1,400 1,200 4,000 1,000 3 000 3,000 Thousan Thousand 800 600 2,000 400 200 1,000 0 0 2005a 2006a 2007a 2008e 2009e 2010e 2005a 2006a 2007a 2008
Slide 12: ARM's strategy on track
ARM’s strategy on track • ARM ARM’s s partnership with world class mining companies continues to deliver value across our operations • ARM continues to be well positioned to participate in the local and global merger and consolidation opportunities • ARM continues to focus on growth in Africa, Afric
Slide 13: ARM supported by strong commodity fundamentals
ARM supported by strong commodity fundamentals ARM share price relative to the JSE/FTSE Africa Mining Index (Relative, rebased to 100 Aug 2006) ARM share price outperformed the JSE/FTSE Africa Mining index by 150% 13
Slide 14: Business review
Business review André Wilkens Chief Executive Officer 14
Slide 15: Headline earnings per share over years
Headline earnings per share over 5 years 580 600 500 s per share e 400 3 3 353 300 264 225 200 166 cents 100 37 64 -1 9 0 -100 100 2004 2005 2006 2007 2008 Interim HEPS (6 months) Annual HEPS (12 months) • Consistent increase in headline earnings driven by increased commodity prices, prices higher s
Slide 16: Growing diversified commodity business
Growing diversified commodity business Attributable EBIT split between operations 12 months to 30 June 2007 6 months to 31 December 2007 Iron Ore Manganese 20.6% 41.2% Manganese Nkomati* 19.3% Iron Ore 20 3% 20.3% Chrome 12.6% Chrome 2.6% 5.3% Thermal Coal Nkomati* Thermall C Th Coall 0 3% 0.3% Plat
Slide 17: No significant impact due to expected electricity cut backs
No significant impact due to expected electricity cut backs ARM Ferrous ARM Platinum ARM Coal • Most operations at 90% of • All operations operating at below • All operations at 100% as steady-state demand 90% of steady-state demand Eskom requires uninterrupted • Some offset between • No significant
Slide 18: Strong US dollar revenue drivers – period on period price changes
Strong US dollar revenue drivers – Period on Period price changes 1H FY08 average price increase from 1H FY07 100 90 80 70 (%) 60 Percentage 50 40 30 P 20 10 0 -10 Chrome Manganese Manganese Rhodium Platinum Iron Ore Thermal Nickel Rand/Dollar Ore ($/t) Alloy ($/t) Ore ($/t) ($/oz) ($/oz) ($/t) Coal
Slide 19: Strong US dollar revenue drivers – spot price comparison
Strong US dollar revenue drivers – Spot price comparison 1H FY08 average price as a % off spot prices 100 90 80 70 60 %) ercentage (% 50 40 Pe 30 20 10 0 Chrome Ore Manganese Manganese Rhodium Platinum Iron Ore Thermal Nickel ($/lb) Rand/Dollar -10 ($/t) Alloy ($/t) Ore ($/t) ($/oz) ($/oz) ($/t) Coa
Slide 20: ARM Platinum: Modikwa and Two Rivers
ARM Platinum: Modikwa and Two Rivers MODIKWA ((4E)) – 100% basis TWO RIVERS ((4E)) – 100% basis ARM attributable ((4E)) Improving mining flexibility Continued increase in while building up to full PGM production, with Building up to full design design capacity 10% of PGM’s production capacity, p y,
Slide 21: ARM Platinum: Nkomati Nickel & Chrome
ARM Platinum: Nkomati Nickel & Chrome NKOMATI NICKEL – 100% basis NKOMATI CHROME – 100% basis • Interim plant (100 000 tpm) approaching full • Chrome contribution increased to 45% of production Nkomati divisional operating profit (FY • Volumes in accordance with our business plan 2007: 14%) • Still
Slide 22: ARM Ferrous: Iron Ore and Manganese Ore
ARM Ferrous: Iron Ore and Manganese Ore IRON ORE – 100% basis MANGANESE ORE – 100% basis • First production from Khumani mine • Manganese ore has delivered excellent • Iron Ore division continues to deliver excellent sales, through exports via Durban and y transporting sales volumes, currently g iro
Slide 23: ARM Ferrous: Manganese and Chrome Alloys
ARM Ferrous: Manganese and Chrome Alloys MANGANESE ALLOYS – 100% basis CHARGE CHROME – 100% basis • Exceptionally strong US dollar pricing • Strong pricing environment environment is expected to continue 175 150 s (000) 125 Tonnes . 100 75 50 25 - 6 months ended: Dec-06 Jun-07 Dec-07 Jun-08e 23
Slide 24: ARM Coal: Export and Domestic Thermal Coal
ARM Coal: Export and Domestic Thermal Coal EXPORT THERMAL COAL DOMESTIC THERMAL COAL • Strategy implemented to maximise • 52% increase in the domestic benefit from higher export spot sales thermal coal price prices • 81% increase in domestic thermal • RBCT expansion progressing well and coal sales,
Slide 25: ARM Coal
ARM C Coall • During the six months under review cash flow from Xstrata Coal South Africa (excluding Goedevonden) was re- invested into capital expenditure and as a result no dividend was received by ARM Coal • A R20 million dividend was received from ARM Coal during the period under review for the
Slide 26: Attributable volume growth from key projects underway
Attributable volume growth from key projects underway Khumani Iron Ore Goegevonden (GGV) Thermal Coal 6 6,000 Xstrata Coal SA GGV Beeshoek Khumani 5 Million tonnes . 5,000 es . 4 Thousand tonne 4 000 4,000 3 3,000 2 2,000 1 1 000 1,000 0 0 2005a 2006a 2007a 2008e 2009e 2010e 2005a 2006a 2007a 2008e
Slide 27: Nkomati Nickel Project
Nk Nkomati ti Ni Nickel k lPProject j t Nkomati Nickel is a 50:50 JV between ARM and Norilsk Nickel Total nickel in concentrate: 20 500 tpa Average grade: 0.35% Ni; Total plant capacity: 625 ktpm PCMZ Nickel in concentrate: 5 000 tpa MMZ Nickel in concentrate: 15 500 tpa Average grade: 0.25%Ni; PCMZ
Slide 28: Khumani Iron Ore
Kh Khumani i IIron O Ore Khumani Iron Ore mine is 50% owned by ARM and 50% by Assore 10 mtpa export iron ore (flexible design) 44% L Lumpy mp @ 65 65.25 25 Fe% 44% Medi Medium m Si Sized ed @ 64 64.41 41 Fe% 12% Fines @ 64 64.25 25 Fe% Indicative over life-of-mine • New modern and cost competitive m
Slide 29: Goedgevonden Coal Project
G d Goedgevonden d C Coall P Project j t Goedgevonden Coal Project (GGV) is 51% owned by ARM Coal and 49% owned by Xstrata 6.7 mtpa saleable Thermal Coal 3.2 mtpa p export p sales 3.5 mtpa domestic sales 27 mj/kg 22 mj/kg • ARM Coal has secured 3.2 mtpa additional • Eskom off-take negotiations ongoi
Slide 30: Attributable capital expenditure by division
Attributable capital expenditure by di i i division 3000 2 775 ARM Coal 2 581 ARM Ferrous 2500 Two Rivers 1 355 Nkomati 2000 nd millions Modikwa 1500 1 172 Ran 1000 500 0 FY 2007a FY 2008e FY 2009e FY 2010e • Strong EBITDA of R1.7 billion generated for the 6 months under review • All projects fully
Slide 31: Summarised income statement
S Summarised i d iincome statement t t t 6 months ended 31 December Unaudited Unaudited % Change R million 2007 2006 Sales 3 991 2 606 53 Profit from operations and associates (before exceptional items) 1 515 1 073 41 I Income from f investments i 52 24 117 Finance costs (209) (151) (38) Exceptional
Slide 32: Summarised balance sheet
S Summarised i db balance l sheet h t Unaudited Unaudited R million December 2007 December 2006 Non-current assets Property, plant, equipment and other 8 214 6 087 Investments 5 341 7 922 13 555 14 009 Current assets Other 3 215 2 577 Cash and equivalents 1 185 441 Total Assets 17 955 17 027 Shareho
Slide 33: Summarised cash flow
S Summarised i d cash h flflow Unaudited Unaudited R million December 2007 December 2006 C h generated Cash t dbby operations ti 1 565 551 Net finance costs (88) (114) Dividends paid (315) - Tax paid (164) (89) 998 348 Capital expenditure (1 361) (674) Investment into Coal - (800) Net borrowings rai
Slide 34: Sufficient capacity to fund growth platforms
Sufficient capacity to fund growth platforms R million Per balance sheet Net debt calculation Long term interest bearing borrowings 2 904 Short term interest bearing borrowings 1 607 T t l interest Total i t t bearing b i b borrowings i 4 511 4 511 Assmang (50%) 398 ARM Company 1 258 Modikwa 296 TEA
Slide 35: Partner of choice
P t Partner off choice h i ARM positioned as partner of choice in the Southern African mining industry • Quality, long-life resources • >70 y years operational p mining g and p project j skills • Strong balance sheet to contribute capital • Active business relationships p across Southern Africa Plat
Slide 36: Questions?
FaxtM African Rainbow Minerals QUESTIONS ?
African Rainbow Minerals — H1 2008 Earnings Presentation on 6ix