Slide 1: 2017 Interim Results
2017 INTERIM RESULTS 25 JULY 2017
Slide 2: Disclaimer
DISCLAIMER Certain statements made in this presentation constitute forward-looking statements. Forward-looking statements are typically identified by the use of forward-looking terminology such as ‘believes’, ‘expects’, ‘may’, ‘will’, ‘could’, ‘should’, ‘intends’, ‘estimates’, ‘plans’, ‘assumes’ or
Slide 3: Delivering on Promises
DELIVERING ON PROMISES Safety: fatality free, material improvement on all key indicators Operations: another step change in productivity Financials: capturing benefit of price and performance Capital allocation: balance sheet strengthened, dividend reinstated Outlook: guidance revised upwards, cost
Slide 4: Critical Interventions Improve Safety Indicators
CRITICAL INTERVENTIONS IMPROVE SAFETY INDICATORS High potential Total Lost time incidents recordable cases injuries 14 % 21 % 24 % 1H17 1H16 0 Fatality free .73 TRCFR improvement from .83 .23 LTIFR improvement from .27 3
Slide 5: Robust Operating and Financial Performance
ROBUST OPERATING AND FINANCIAL PERFORMANCE Sales volumes EBITDA HEPS 21.2Mt R9.1bn R14.42 1H17 1H16 23 % 5.7% 53 % Production EBITDA margin HEPS 4
Slide 6: EBITDA Improvement Driven by Price and Productivity Gains
EBITDA IMPROVEMENT DRIVEN BY PRICE AND PRODUCTIVITY GAINS Rm +13% +21% 3 096 9 144 4 894 208 575 558 7 542 400 819 6 702 840 1 602 1H16 Price Currency Inflation Royalties Total Volume Opex Shipping 1H17 non-controllables Non-controllables Operational performance 5
Slide 7: Market Overview
KUMBA IRON ORE LIMITED MARKET OVERVIEW
Slide 8: Lump Premium Recovers from Historical Lows
LUMP PREMIUM RECOVERS FROM HISTORICAL LOWS Platts 62 IODEX (US$/dmt) Platts Weekly Lump Premium (US$/dmtu) 180 0.35 17% 2013 2014 2015 2016 1H17 2013 2014 2015 2016 1H17 $0.21 $0.17 $0.14 $0.15 $0.07 $135 $97 $56 $58 $74 160 16% 0.30 140 15% Lump % of total port stocks in China 0.25 120 14% US$/dmtu
Slide 9: Higher Absolute and Relative Prices – Outlook Cautious
HIGHER ABSOLUTE AND RELATIVE PRICES – OUTLOOK CAUTIOUS Kumba’s 1H17 Realised Price Reconciliation 1H17 Realised Price (US$/dmt, FOB), (US$/dmt, FOB) Peer Comparison 3 5 Peer 1 61 (Est) 2 22 Peer 2 68 71 55 Peer 3 67 Realised Increase in Decrease in Increase in Other pricing Realised FOB price Platts
Slide 10: Operational Overview
KUMBA IRON ORE LIMITED OPERATIONAL OVERVIEW
Slide 11: Sishen Demonstrating Stability
SISHEN DEMONSTRATING STABILITY Sishen Production and Waste (Mt) 25 76.6 80 72.2 − Production up 35% to 15.6Mt from higher plant 64.9 70 throughput and yields 20 +35% 60 − Waste up 18% to 76.6Mt 50 15 40 − Performance underpinned by improved productivity 10 30 16.9 15.6 20 − Strip ratio will exceed 4
Slide 12: Fleet Productivity Improves by 57%
FLEET PRODUCTIVITY IMPROVES BY 57% Operating Model delivering benefits Sishen Fleet Productivity (kt/day) +57% More hours worked − Motivated workforce 593 602 − New shift system 549 494 − Efficient shift change 456 453 − Good attendance 375 383 Heavy Rain Improved shovel productivity − Improved plan
Slide 13: Kolomela Achieves Another Solid Performance
KOLOMELA ACHIEVES ANOTHER SOLID PERFORMANCE Kolomela Production and Waste (Mt) 30.0 15 30 − Production up 7% to 6.3Mt 25.4 25 − Waste increased 26% to 25.4Mt 20.2 10 20 +7% − Rain impacted 1Q but tonnes recovered in 2Q 15 − Improved performance due to plant and 5 10 equipment efficiencies 6.8 6.3 5.
Slide 14: Operational Guidance
OPERATIONAL GUIDANCE Sishen Kolomela Production 28–29Mt in 2017 Production 13–14Mt in 2017 Waste 155–165Mt in 2017 Waste 50Mt–55Mt in 2017 Strip ratio to exceed 4 over the medium term, LoM ~4 Strip ratio at ~3.9 over the medium term, LoM ~3.8 Total sales 41–43Mt in 2017 13
Slide 15: Logistics Reflect Higher Production
LOGISTICS REFLECT HIGHER PRODUCTION Mt 1H17 1H16 % change 2H16 % change Railed to port (incl. Saldanha Steel) 20.8 18.3 14 21.5 (3) Sishen mine (incl. Saldanha Steel) 14.4 11.7 23 15.1 (5) Kolomela mine 6.4 6.6 (3) 6.4 - Total sales 21.2 20.2 5 22.3 (5) Export 19.5 18.1 8 21.0 (7) Domestic 1.7 2.1 (
Slide 16: Supporting Transformation, Challenging MCIII
SUPPORTING TRANSFORMATION, CHALLENGING MCIII Delivery beyond compliance − Kumba fully committed to meaningful and − Effective 29% BEE shareholding sustainable transformation of the mining industry − R28bn economic value to BEE shareholders − Charter needs to promote investment and (incl. 1H17 divide
Slide 17: Stakeholder Relationships
STAKEHOLDER RELATIONSHIPS Dingleton Thabazimbi Labour − Consolidated Sishen mining right − Closure application submitted − Continue to enjoy a stable (Section 102) granted to the DMR labour environment − Waste management licence granted − Engagements with DMR on − Wage negotiations in progress Secti
Slide 18: Financial Overview
KUMBA IRON ORE LIMITED FINANCIAL OVERVIEW
Slide 19: Financial Highlights
FINANCIAL HIGHLIGHTS Operating Profit (Rbn) − Revenue increased 18% to R21.5bn 10.1 7.6 − EBITDA margin increased 6% to 43% 5.2 − Headline earnings of R4.6bn up 53% 1H16 2H16 1H17 − Capex of R1.1bn down 17% HEPS (R/share) 17.9 − Net cash position of R13.5bn 14.4 − Dividend reinstated – R15.97 per sh
Slide 20: Breakeven - Controllable Costs Contained
BREAKEVEN - CONTROLLABLE COSTS CONTAINED Platts 62% Breakeven Price ($/t) +3% +45% 4 3 1 2 1 3 43 29 FY16 Controllable costs Lump premium Price impact Freight Royalties Currency 1H17 Controllables Non-controllables − Breakeven price up US$14/t from FY16 average − Non-controllable costs up US$8/t − C
Slide 21: Revenue Growth from Higher Volumes and Strong Prices
REVENUE GROWTH FROM HIGHER VOLUMES AND STRONG PRICES Rm 652 21 500 4 894 1 694 819 3 047 18 182 1 042 19 806 17 140 1H16 Volume Currency Price Shipping 1H17 Mining operations Shipping − Revenue increased by 18% − Total sales 21.2Mt: export sales up by 1.4Mt, domestic sales 0.4Mt lower − 14% stronger
Slide 22: Operating Expenditure Contained
OPERATING EXPENDITURE CONTAINED Rm 444 15 13 205 12 728 91 215 181 535 2 659 2 674 Mining Logistics 48 429 1 317 1 761 8 737 8 785 1H16 Mining operations Stock Deferred stripping Escalation, Shipping Selling and 1H17 movement non-cash and forex distribution 1 Mining operations Shipping Selling and d
Slide 23: Sishen: Unit Cost Aided by Increased Volumes and Efficiencies
SISHEN: UNIT COST AIDED BY INCREASED VOLUMES AND EFFICIENCIES R/t 68 30 36 9 4 296 311 +4% +1% FY16 Inflation Cost Mining Production Deferred stripping 1H17 escalation volume volume 1 Unit cash cost − Increased costs offset by improved production − Higher capitalisation of deferred stripping costs d
Slide 24: Kolomela: Unit Cost Driven by Higher Strip Ratio and Modular Plant
KOLOMELA: UNIT COST DRIVEN BY HIGHER STRIP RATIO AND MODULAR PLANT R/t 2 38 3 6 2 252 201 +4% +21% FY16 Inflation Cost Mining Production Deferred stripping 1H17 escalation volume volume 1 Unit cash cost − Increased costs as WIP stock is crushed as feedstock for modular plant − Above inflationary cos
Slide 25: Capital Expenditure Supports Production
CAPITAL EXPENDITURE SUPPORTS PRODUCTION Rbn 3.0–3.1 2017 − 2H17 SIB supports production and efficiency targets 2.4 0.9–1.0 − Expansion increase versus previous guidance due 0.3 to approval of Sishen 2nd modular 0.6 Medium term 0.9 − Sishen: maintenance of infrastructure in support of revised pit she
Slide 26: Balance Sheet Now Stronger and More Flexible
BALANCE SHEET NOW STRONGER AND MORE FLEXIBLE Rm +119% 130 3 334 1 071 130 6 741 1 598 11 726 5 143 6 745 13 486 6 165 (4 604) 2015 2016 Cash generated Net financing Tax paid Capex Other Jun 17 Interim 2017 Proforma (Net debt) from operations costs dividend cash retained (incl. minorities) − Strong c
Slide 27: Outlook
KUMBA IRON ORE LIMITED OUTLOOK
Slide 28: Maximising the Return Potential of Our Current Assets
MAXIMISING THE RETURN POTENTIAL OF OUR CURRENT ASSETS Integrate technology through value chain Safe and energised workforce Optimise resource utilisation High performance culture Technology People Consistent and predictable delivery Offset inflationary pressure Costs Value Mining Mining equipment ef
Slide 29: Thorough Review of Value Chain Underway
THOROUGH REVIEW OF VALUE CHAIN UNDERWAY Resource Mining Processing Infrastructure Marketing Development Focus on resource utilisation, productivity and efficiency Safety underpins everything we do Benchmark performance Asset utilisation Cost management Optimise marketing Safety – elimination of fata
Slide 30: Delivering on Promises
DELIVERING ON PROMISES Safety: fatality free, material improvement on all key indicators Operations: another step change in productivity Financials: capturing benefit of price and performance Capital allocation: balance sheet strengthened, dividend reinstated Outlook: guidance revised upwards, cost
Slide 31: Questions
KUMBA IRON ORE LIMITED QUESTIONS
Slide 32: Annexures
KUMBA IRON ORE LIMITED ANNEXURES
Slide 33: Annexure 1: Robust Operating Margin and Healthy Cash Generation
ANNEXURE 1: ROBUST OPERATING MARGIN AND HEALTHY CASH GENERATION Rm 1H171 1H161 % change 2H161 % change Revenue 21 500 18 182 18 22 585 (5) Operating expenses (13 853) (12 976) 7 (12 475) 11 Operating profit 7 647 5 206 47 10 110 (24) Operating margin (%)2 36 29 45 Profit for the period 5 998 3 820 5
Slide 34: Annexure 2: Revenue Sector Analysis
ANNEXURE 2: REVENUE SECTOR ANALYSIS 1H17 1H16 % change 2H16 % change Export (Rm) 18 375 15 412 19 19 746 (7) Tonnes sold (Mt) 19.5 18.1 8 21 (7) US Dollar per tonne 71 55 29 67 6 Rand per tonne 942 851 11 940 - Domestic (Rm) 1 431 1 728 (17) 1 134 26 Shipping operations (Rm) 1 694 1 042 63 1 705 (1)
Slide 35: Annexure 3: Aggregate Operating Expenditure
ANNEXURE 3: AGGREGATE OPERATING EXPENDITURE Rm 1H17 1H16 % change 2H16 % change Cost of goods sold 8 785 8 733 1 7 232 21 Cost of goods produced 8 152 7 123 14 8 037 1 Production costs 7 655 7 353 4 8 117 (6) Sishen mine 5 336 5 527 (3) 5 845 (9) Kolomela mine 2 111 1 631 29 2 257 (6) Thabazimbi min
Slide 36: Annexure 4: Capital Expenditure Analysis
ANNEXURE 4: CAPITAL EXPENDITURE ANALYSIS Rm 1H17 FY16 FY17 Approved expansion 197 856 600 Deferred stripping 656 321 900–1 000 Sishen 550 88 600–700 Kolomela 106 233 ~300 SIB Sishen 140 875 900 SIB Kolomela 73 301 600 SIB Thabazimbi 5 - - Total approved capital expenditure 1 071 2 353 3 000–3 100 Al
Slide 37: Annexure 5: Sishen and Kolomela Unit Cash Cost Structure (R/t)
ANNEXURE 5: SISHEN AND KOLOMELA MINES’ UNIT CASH COST STRUCTURE (R/t) 311 296 79 252 80 52 201 60 43 47 32 67 26 64 96 62 68 44 13 12 11 28 34 10 14 16 63 4 4 46 32 27 (3) (18) (17) (35) Sishen mine Sishen mine Kolomela mine Kolomela mine FY16 1H17 FY16 1H17 Deferred stripping Other Energy Drilling
Slide 38: Annexure 6: Sishen and Kolomela Unit Cash Cost Structure (%)
ANNEXURE 6: SISHEN AND KOLOMELA MINES’ UNIT CASH COST STRUCTURE (%) 27 23 21 22 12 12 14 15 19 31 21 36 15 18 13 4 4 13 3 3 6 2 6 16 18 1 15 10 Sishen mine Sishen mine Kolomela mine Kolomela mine FY16 1H17 FY16 1H17 Other Energy Drilling and blasting Maintenance Outside services Fuel Labour 37
Slide 39: Annexure 7: Sensitivity Analysis 1H17
ANNEXURE 7: SENSITIVITY ANALYSIS 1H17 Change per unit of key operational drivers, each tested independently Sensitivity analysis Unit change EBIT impact Currency (Rand/US$) R0.10/US$ R150m Export Price (US$/t) US$1.00/t R250m Volume (kt) 100kt R65m Sensitivity analysis Unit change Breakeven price im