Valterra Platinum Limited · JSE:VAL
Valterra Platinum — H1 2017 Earnings Presentation
45 slides from Valterra Platinum's earnings presentation, Jul 27, 2017
Slide 1: Interim Results Six Months Ended 30 June 2017
Platinum INTERIM RESULTS SIX MONTHS ENDED 30 JUNE 2017 Delivering change, building a resilient business and positioning for the future
Slide 2: Cautionary Statement
CAUTIONARY STATEMENT Disclaimer: This presentation has been prepared by Anglo American Platinum Limited (“Anglo American Platinum”) and comprises the written materials/slides for a presentation concerning Anglo American Platinum. By attending this presentation and/or reviewing the slides you agree t
Slide 3: Delivering on Our Commitments
Platinum 2017 INTERIM RESULTS DELIVERING ON OUR COMMITMENTS Chris Griffith Platinum bars atDe theBeers Precious Metals Diamond Refinery Jewellery
Slide 4: Resilient Performance in a Difficult Environment
RESILIENT PERFORMANCE IN A DIFFICULT ENVIRONMENT • Total PGM production up 4% Operational • Record production from high-margin Mogalakwena Improvements • Build-up of PGM and chrome inventory impacted free cash flow generation • Unit cost (1) increase of 3% Financials remain • Net debt further reduce
Slide 5: Operational Review
Platinum 2017 INTERIM RESULTS OPERATIONAL REVIEW Chris Griffith Komatsu Truck being loaded by the Rope Shovel De Beers at Mogalakwena Diamond Jewellery
Slide 6: Safety, Health & Environment
SAFETY, HEALTH & ENVIRONMENT Fatalities: own mine operations Safety 25 • Tragically, 2 fatalities occurred in H1 2017 • LTIFR(2) reduced by 14% to 0.63 • TRCFR(3) flat at 1.05 7 3 • Implemented revised safety strategy 2 2 2007 2014 2015 2016 H1 2017 Health & Environment Lost time injury frequency ra
Slide 7: Total PGM Production Up 4%
TOTAL PGM PRODUCTION UP 4% Total PGM production (‘000 ounces) (5) 2,289 2,344 2,428 • Total PGM production up 4% 443 450 464 • Total platinum production(7) up 3% 775 721 741 • Retained own mine platinum production up 2% 1,125 1,153 1,189 - Mogalakwena up 9% H1 2015 H1 2016 H1 2017 - Amandelbult down
Slide 8: Mogalakwena – Another Record Production
MOGALAKWENA – ANOTHER RECORD PRODUCTION Total PGM production (‘000 ounces) (5) 462 464 510 34 36 33 • 5 years fatality free 224 220 251 • Total PGM production up 10% 204 208 226 • Record platinum production up 9% H1 2015 H1 2016 H1 2017 • Unit cost flat at R20,632 / Pt ounce (9) Platinum Palladium O
Slide 9: Amandelbult – In Transition & Ramping Up Chrome
AMANDELBULT – IN TRANSITION & RAMPING UP CHROME Total PGM production (‘000 ounces) (5) 362 412 403 • Tragically 2 fatalities 98 86 100 • Total PGM production down 2% 97 95 87 • Platinum production down 4% 217 189 208 - Transitioning production from Tumela Upper to Dishaba H1 2015 H1 2016 H1 2017 Pla
Slide 10: Amandelbult – Improve Profitability and Resilience
AMANDELBULT – IMPROVE PROFITABILITY AND RESILIENCE All in sustaining costs (10) ($/Pt oz sold – real 2017) (11) Major investment to replace or -6% -24% grow only required in c.2025 1,140 1,072 1. Operational Turnaround – improving IMS (12) at Dishaba 820 and implement productivity improvements Actua
Slide 11: Unki – Delivering Above Nameplate Capacity
UNKI – DELIVERING ABOVE NAMEPLATE CAPACITY Total PGM production (‘000 ounces) (5) 65 74 80 9 • 5 years fatality free 8 8 25 30 33 • Total PGM production up 8% 36 38 • Record H1 platinum production up 5% 32 H1 2015 H1 2016 H1 2017 • Unit cost down 12% to R22,848 / Pt ounce largely due to the strength
Slide 12: Union – Sale Announced and Disposal Progressing
UNION – SALE ANNOUNCED AND DISPOSAL PROGRESSING Total PGM production (‘000 ounces) (5) 135 147 155 • Year to date – fatality free 38 41 39 36 • Total PGM production up 5% 34 31 • Platinum production up 3% 65 75 78 • Masa chrome produced 77,000 tonnes of attributable chrome concentrate H1 2015 Platin
Slide 13: JVs & Associates – Mined & Purchase of Concentrate
JVS & ASSOCIATES – MINED & PURCHASE OF CONCENTRATE Total PGM production (‘000 ounces) (5) • Tragically 2 fatalities 739 803 794 • Platinum production broadly flat at 182 179 383,800 ounces: 168 233 231 211 - BRPM up 8% to 99,300 ounces 360 388 384 - Modikwa up 3% to 57,800 ounces - Kroondal down 5%
Slide 14: Refined Production & Sales – Higher in H2 2017
REFINED PRODUCTION & SALES – HIGHER IN H2 2017 Total refined platinum production (million ounces) 2.46 2.33 Refined platinum production • Refined platinum production increased 1.36 1.32 10% to 1.11 million ounces – Impacted by the Waterval smelter 1.10 1.01 1.11 rebuild in H1 – ACP water leak impact
Slide 15: Financials
2017 INTERIM RESULTS FINANCIALS IAN BOTHA Mafube Platinum Colliery, bars at the Load Hydrogen Male Precious Fuel Platinum andpumping haul ring operations Metals Refinery station
Slide 16: Results – Balance Sheet Further Strengthened
RESULTS – BALANCE SHEET FURTHER STRENGTHENED Headline Earnings per share (Rand/share) (16) Key financials (R billion) H1 2017 H1 2016 6.29 Basket price (Rand / Pt ounce) 24,400 25,100 Sales revenue 27.3 30.7 (16) EBITDA 4.0 5.4 2.85 (17) 7.21 EBIT 2.0 3.1 0.84 (16) Headline earnings 0.7 1.6 3.93 (18
Slide 17: Earnings Impacted by Weak Rand Basket Price
EARNINGS IMPACTED BY WEAK RAND BASKET PRICE EBITDA variance: H1 2017 vs. H1 2016 Restated (R billion) Uncontrollable (R1.5 billion) Controllable R0.1 billion 3.0 (3.7) 5.4 (0.5) (0.9) 0.8 3.9 (0.2) 4.0 (19) (20) (21) (22) H1 2016 Price Currency CPI Costs Sales Associates H1 2017 Restated Volume 17
Slide 18: Continued Focus on Costs, Outperforming Peers
CONTINUED FOCUS ON COSTS, OUTPERFORMING PEERS Cash unit cost of production (R / Pt oz) Rightsizing overheads (R billion) Reduction in Mogalakwena Capitalised Waste in 2017 -35% 20,850 5.4 +3% 20,350 19,970 400 359 19,385 3.5 (0.5) (0.3) 2014 2016 Rustenburg Union exit exit Lowest unit cost increase
Slide 19: Disciplined Capital Allocation Continues
DISCIPLINED CAPITAL ALLOCATION CONTINUES Capital expenditure (R billion) (23) SIB Projects • Aimed at maintaining asset integrity and adding 2015 3.7 – 4.2 value, not volume Full year 3.7 2016 • Focus on low capex and fast payback project Full year 0.8 – 1.0 3.4 spend • Continued strong SIB governan
Slide 20: Further Working Capital Release in H2
FURTHER WORKING CAPITAL RELEASE IN H2 Working capital (R billion) (24) Platinum inventory (‘000 ounces) Finished metals WIP 13.3 775 110 652 635 8.0 0.9 (1.0) 7.6 570 130 200 (2.3) 2.0 130 665 505 440 440 Days 75 43 51 2015 2016 Customer ACP & Stock Other H1 2017 2015 2016 H1 2017 New normal prepaym
Slide 21: Lower Net Debt, Strong Liquidity Maintained
LOWER NET DEBT, STRONG LIQUIDITY MAINTAINED Net debt (R billion) Net debt (R billion) 12.8 Net debt : EBITDA Opening net debt 1 January 2017 (7.3) Cash flow from operations 4.3 1.5 7.3 5.9 Capex and capitalised waste stripping (1.7) 0.8 0.7 Cash tax paid (0.4) Bokoni funding (0.5) 31 Dec 2015 31 Dec
Slide 22: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Capital allocation framework Targets and priorities Margin enhancement… • Operating cashflow remains constrained at current prices − 2017 H1 only R4.3bn • Cashflow supported in 2016/2017 by ‘once-offs’ − Working capital reduction of R5.3bn in 2016 Balance sheet strength…
Slide 23: Market Review
2017 INTERIM RESULTS MARKET REVIEW Chris Griffith Hydrogen Fuel Pump Station Mafube Platinum Colliery, bars at the Load and Metals Precious haul operations Refinery
Slide 24: Market Prices – USD Platinum Price Unchanged
MARKET PRICES – USD PLATINUM PRICE UNCHANGED Platinum price (USD/ ounce) 1,200 US Dollar platinum price unchanged 1,100 H1 2016: $971/oz • USD platinum price declined 1% to 1,000 $957/oz compared to $971/oz in H1 900 2016 H1 2017: $957/oz 800 Jan-16 Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 Mar-17 M
Slide 25: Platinum Market – Modest Surplus in 2017
PLATINUM MARKET – MODEST SURPLUS IN 2017 Platinum supply and demand (25) ‘000 ounces 2016 2017F Y-o-Y Δ% Demand likely to decline by 5% Demand • Autocat: Gross 3,318 3,164 (154) (4.6)% • Lower consumption forecast in the global • Jewellery: Net 1,708 1,725 17 1.0 % automotive sector • Industrial: Gr
Slide 26: Palladium Market – Substantial Deficit Expected
PALLADIUM MARKET – SUBSTANTIAL DEFICIT EXPECTED Palladium supply and demand (25) ‘000 ounces 2016 2017F Y-o-Y Δ% Demand likely to expand by 7.6% • Automotive demand to expand in 2017, Demand • Autocat: Gross 7,935 8,217 282 3.6 % • Industrial 2,127 2,210 83 3.9 % with global vehicle numbers growing
Slide 27: Automotive Market – Growing Global Demand
AUTOMOTIVE MARKET – GROWING GLOBAL DEMAND Global monthly light duty vehicle sales ('000) (26) Global light duty vehicle demand 10,000 expected to rise 2.8% in 2017 9,000 • Palladium has benefited from increased sales of gasoline vehicles 8,000 Light duty diesel demand to soften but 7,000 heavy duty
Slide 28: Automotive Market – Strong FCEV Potential
AUTOMOTIVE MARKET – STRONG FCEV POTENTIAL Global fuel cell car sales (units) (26) 9,580 • Fuel cell vehicle sales are expected to 7,529 grow by over 200% in 2017 • Honda has begun leasing the Clarity fuel cell car in California where there are almost 30 refuelling stations operating 2,408 111 647 •
Slide 29: Jewellery Market – Slowing Decline in Jewellery
JEWELLERY MARKET – SLOWING DECLINE IN JEWELLERY Chinese platinum jewellery demand (‘000 ounces) (28) Global gross platinum demand set to 2,250 decline, net demand to be steady 2,000 • Chinese gross platinum jewellery demand likely to fall in 2017 from margin 1,750 pressure 1,500 • Recycling material
Slide 30: Investment Market – Platinum Flows Remain Positive
INVESTMENT MARKET – PLATINUM FLOWS REMAIN POSITIVE Platinum ETF holdings (million ounces) (29) Platinum flows positive, palladium flows 3.0 Platinum Palladium negative 2.5 • Platinum flows positive - USA and Japan 2.0 1.5 • Platinum ETF holdings up 122,000 ounces YTD 1.0 0.5 • Japanese buying of pla
Slide 31: Mining Charter III
2017 INTERIM RESULTS MINING CHARTER III Chris Griffith Mafube Measuring Platinum drill barsColliery, holes atLoad at the and Metals Precious haul operations Mogalakwena North Refinery Pit
Slide 32: Supporting COM in Legal Challenge on MCIII
SUPPORTING COM IN LEGAL CHALLENGE ON MCIII Delivery Beyond Compliance (2016) • AAP fully committed to meaningful and sustainable transformation in the mining • 27% of business acquired by HDSA’s and 8% of industry Amplats shares held indirectly by HDSA • 72% BEE/HDSA procurement • Contribution is me
Slide 33: Outlook
2017 INTERIM RESULTS OUTLOOK Chris Griffith Royal Mint 1 ounce platinum bullion coin: Mafube Platinum ‘Lion Colliery, ofbars at the Load England’, and Metals Precious Queen’s haul operations BeastsRefinery series
Slide 34: Resilient Performance in a Difficult Environment
RESILIENT PERFORMANCE IN A DIFFICULT ENVIRONMENT Operational • Production guidance - 2.35 to 2.40 million platinum ounces (metal in concentrate) Improvements • Refined production guidance – 2.45 to 2.50 million platinum ounces Financial • Unit cost guidance – R20,350 to R20,850 per platinum ounce (p
Slide 35: Appendix
APPENDIX Platinum bars Rustenburg at the Precious Base Metals Metal Refinery Refinery
Slide 36: Net Debt and Cash Flow by Mine
NET DEBT AND CASH FLOW BY MINE (1.5) (0.2) (0.4) (1.5) 4.3 (1.0) 2.3 (0.6) (5.9) (6.7) (7.3) R0.6bn Net Debt Funding of Rustenburg Net Debt December Cash from SIB & Waste Project Cash tax associates & Net interest Free cash Customer mine POC June Operation 2016 operations capital capital paid other
Slide 37: Cost Breakdown
COST BREAKDOWN Costs reflective of AAP Own mined and Joint Venture share of production and costs at operations. Excludes all purchase of concentrate costs and volume, overhead and marketing expenses. 2015 Cost base (Rbn) Volum e % PGM volum e (koz) Labour Contractors Materials Utilities Sundries Ope
Slide 38: AAP Cost per Platinum Ounce Sold
AAP COST PER PLATINUM OUNCE SOLD R/Pt oz total sold ounce +11% Cost of 24,400 mined volume / 312 mined production 1,360 (2,669) 21,959 volume 988 19,970 2,664 8,612 336 10,356 AAP Mining Mining / Capitalised POC Processing Overhead Marketing Inventory SIB AAP Cost / Basket Price unit cost / Pt oz so
Slide 39: Gross Profit Margins
GROSS PROFIT MARGINS Total Own Mined JV Share POC 12.9% 12.9% 12.0% 11.5% 10.3% 9.1% 8.8% 8.6% 7.5% 7.2% 7.0% 2.7% H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 H1 2017 H1 2016 H2 2016 H1 2017 39
Slide 40: Mogalakwena Waste Stripping
MOGALAKWENA WASTE STRIPPING • Waste Stripping is the process of removing mine waste material (overburden) in order to gain access to ore deposit • Waste stripping in the production phase, which provides improved access to ore, is recognised as a stripping asset i.e. capitalised • This stripping asse
Slide 41: Rhodium Market – Modest Surplus
RHODIUM MARKET – MODEST SURPLUS Rhodium supply and demand (25) ‘000 ounces 2016 2017F Y-o-Y Δ% Demand expected to climb by 0.1% Demand • Autocat: Gross 795 810 15 1.9 % • Automotive demand to grow in 2017, with • Other 195 181 (14) (7.2)% global vehicle numbers increasing 990 991 1 0.1% Supply • Oth
Slide 42: Industrial Demand – Healthy Annual Growth
INDUSTRIAL DEMAND – HEALTHY ANNUAL GROWTH Global industrial demand ('000 ounces) (25) 2,200 240 Platinum demand from industrial 2,000 220 applications continues to grow 200 1,800 180 • Industrial demand for platinum is 1,600 expected to grow again in 2017 160 1,400 1,200 140 • Strong buying by Chine
Slide 43: Automotive Recycling – Limited Growth in Platinum Recovery
AUTOMOTIVE RECYCLING - LIMITED GROWTH IN PLATINUM RECOVERY, MORE GROWTH IN PALLADIUM Gross automotive demand (‘000 ounces) (28) Platinum recycling set to grow modestly 10,000 • Platinum recoveries set to increase 8.2% in 8,000 2017, aided by processing of some scrap 6,000 stockpiles 4,000 • Further
Slide 44: Platinum Market – Automotive
PLATINUM MARKET – AUTOMOTIVE Forecast annual light duty vehicle production (millions) (26) 120 Automotive market expected to grow 8m 100 2m • Internal combustion engine market 80 expected to grow despite lower market 60 80m share in the future 67m Gasoline 40 • PGM demand forecast to be robust over
Slide 45: Footnotes
FOOTNOTES (1) Unit cost on a produced metal in concentrate basis (2) Lost time in jury frequency rate (LTIFR) calculated per 200,000 hours worked (3) TRCFR is total recordable case frequency rate (4) 2014 LTIFR normalised for the 5 month long strike (5) Total PGM (platinum group metals) production i