Kumba Iron Ore Limited · JSE:KIO
Kumba Iron Ore — H1 2023 Earnings Presentation
43 slides from Kumba Iron Ore's earnings presentation, Jul 25, 2023
Slide 1: 2023 Interim Results, 25 July 2023
Kumbo 2023 Inv 25 July 2023
Slide 2: Disclaimer
Disclaimer This presentation is for information purposes only and does not constitute an offer to sell or No assurance can be given that such future results will be achieved; actual events or the solicitation of an offer to buy shares in Kumba. Further, it does not constitute a results may differ ma
Slide 3: H1 2023 results agenda
H1 2023 results agenda H1 2023 overview Mpumi Zikalala Operational performance Mpumi Zikalala Financial results Bothwell Mazarura Looking ahead Mpumi Zikalala 3
Slide 4: H1 2023 overview
H1 2023 overview Safety EBITDA Attributable free cashflow 1.20 TRIFR R19.8bn R7.9bn H1 2022: 1.12 H1 2022: R23.1bn H1 2022: R9.7bn Production Enduring stakeholder value Dividend declared 18.8Mt R28.5bn R7.3bn H1 2022: 17.8Mt H1 2022: R31.0bn H1 2022: R9.2bn 4
Slide 5: Focus on safe and stable operations
Focus on safe and stable operations Safety Health & wellness Environment LTI TRIFR Occupational diseases (new cases) Freshwater used (ML) 2.06 1.74 1.55 1.20 0.80 1 17 18 8 28 10 8 0 0 0 7 952 7 154 7 028 8 099 3 219 2019 2020 2021 2022¹ H1 2023 2019 2020 2021 2022² H1 2023 2019 2020 2021 2022 H1 20
Slide 6: Sustainability integrated in the way we operate
Sustainability integrated in the way we operate Healthy environment Thriving communities Trusted corporate leader Solar PV environmental authorisation Dept. of Health MoU improves collaboration Safety Health and Sustainable Development granted, earthworks commence H2 2023 on health and wellbeing pro
Slide 7: Enduring stakeholder value of R28.5bn
Enduring stakeholder value of R28.5bn BEE business suppliers Capital R7.9bn investment Host community R4.4bn Income tax suppliers R2.6bn R2.8bn Mineral royalty R0.7bn 3-year wage agreement concluded Owners of Kumba Salaries and R7.3bn benefits R3.1bn Direct social Empowerment partners Employed from
Slide 8: Operational performance
Operational performance 8
Slide 9: Production steady, logistics challenging
Production steady, logistics challenging Waste Production Finished stock Mine Port 111.2Mt 18.8Mt 70% 30% Total H1 2022: 95.5Mt H1 2022: 17.8Mt 7.8Mt FY 2022 Ore railed to port Sales Mine Port 92% 8% 18.4Mt 18.9Mt Total 7.9Mt H1 2023 H1 2022: 19.0Mt H1 2022: 19.7Mt 1. Includes Kapstevel South waste
Slide 10: Improving operational stability and capability
Improving operational stability and capability Kolomela waste (Mt) Kolomela production (Mt) Establishing stability at Kolomela +54% +22% Effective planning routines Reducing variability and improving equipment reliability 19.9 30.7 4.9 6.0 Healthy high grade ore buffer stocks H1 2022 H1 2023 H1 2022
Slide 11: Transnet rail performance impacting value chain
Transnet rail performance impacting value chain Ore railed to port (Mt) Challenges Contractual capacity Train derailments & rail breaks 42.0 Longer train turnaround times 20.2 38.1 39.3 19.7 35.9 19.7 Locomotive availability 16.9 Cable theft (new) Successes Tamping maintenance work Locust spraying p
Slide 12: Low supply chain stocks buoy iron ore prices
Low supply chain stocks buoy iron ore prices Strong exports offset reduction in demand Stocks at 5-year lows Iron ore prices holding up China Steel Demand & Exports, Mtpa Iron Ore (Port + Mills) Stocks Days of Use Platts 62 $/t +1.2% 65 1 132 1 068 1 080 991 1 008 852 901 78 55 118 806 60 72 92 159
Slide 13: Financial performance
Financial performance 13
Slide 14: H1 2023 financial results
H1 2023 financial results Average realised FOB price EBITDA margin HEPS US$106/t 52% R30.04 H1 2022: US$136/t H1 2022: 54% H1 2022: R36.13 C1 costs Break-even price DPS US$39/t US$65/t R22.60 H1 2022: US$43/t H1 2022: US$66/t H1 2022: R28.70 14
Slide 15: Premium prices for premium products
Premium prices for premium products Fe qualities (%) Price premium over Platts 62 FOB (US$/wmt) Lump premium+Fe Price premium¹ 25 18 3 17 3 13 6 0 4 15 11 22 13 8 63.3 61.6 61.3 60.6 57.8 (4) Kumba Vale BHP Rio Tinto FMG Market share 2019 2020 2021 2022 H1 2023 outside of China Lump : Fine ratio (%)
Slide 16: EBITDA reflects lower prices, offset by weaker currency
EBITDA reflects lower prices, offset by weaker currency Sales volumes C1 costs Average FOB price Price premium1 Average R/US Inflation Freight rates H1 2023 18.9 Mt US$39/t US$106/t US$4.0/t R18.21 6.9% US$14/t H1 2022 19.7 Mt US$43/t US$136/t US$13/t R15.40 5.9% US$20/t Rm 23 077 (1 476) 1 193 22 7
Slide 17: Operational efficiency mitigating cost pressures
Operational efficiency mitigating cost pressures FY Guidance Sishen unit cost1 (R/t) R540 – Cost optimisation programme (24) 570/dmt (11) 29 42 567 28 543 507 25 479 128 H1 2023 6% 7% R900m saved 437 vs. FY23 FY R1bn target Kolomela unit cost (R/t) Guidance 310 20 (52) 71 R510 – 35 (117) 540/dmt 52
Slide 18: Capital expenditure to sustain our business
Capital expenditure to sustain our business Capex¹ Rbn Expansion capex Kapstevel South: R1 billion (scope 74% completed) 9 - 10 UHDMS: R0.4 billion (progressed detailed design) 3.2 – 3.6 SIB capex HME and plant reliability, infrastructure upgrades 4.4 3.6 Technology and FutureSmart Mining 1.6 4.8
Slide 19: Disciplined capital allocation
Disciplined capital allocation Cashflow after sustaining capital Additional shareholder returns R13.0bn R0.6bn cash dividends Base dividends H1 2023 Net cash Attributable R6.3bn free cash flow R7.9bn R13.8bn end of period Discretionary capital Interim cash dividend declared¹ R1.6bn R9.7bn Future pro
Slide 20: Sustainable value delivery despite market volatility
Sustainable value delivery despite market volatility Shareholder value creation (2019 – H1 2023) Attributable free cashflow Rbn 33.2 R86.6bn 8.1 19.6 Total dividends1 2.6 15.1 R89.7bn 14.5 2.8 1.1 Average dividend payout ratio 17.1 20.7 30.5 10.4 7.9 12.3 17.0 25.1 13.4 7.3 2019 2020 2021 2022 Attri
Slide 21: Looking ahead
Looking ahead 21
Slide 22: Our refreshed strategy
Our refreshed strategy Unlock full potential of the core Position for a sustainable future Stakeholder value creation • Leadership and culture • Maximise product premium • Strong balance sheet • Operational excellence • Green steel value chain • Disciplined capital allocation • Cost competitiveness
Slide 23: The world needs green steel to grow
The world needs green steel to grow Stock of steel relative to GDP¹ Global DRI production growth The role we play in future of steel 70 178Mt over 2020-2050 period R² = 74% +31% +48% +17% Singapore Product quality and 60 +58Mt +79Mt +41Mt customer strategy by 2040 by 2050 by 2030 Tailor products to
Slide 24: 2023 full year guidance
2023 full year guidance Total production Total sales C1 cash costs Capital expenditure 35 – 37Mt 36 – 38Mt ≤US$43/t¹ R9 – 10bn (previously 37 – 39Mt) (previously ≤US$44/t2) (previously R11 – 12bn) Sishen Kolomela Production ~26Mt ~10Mt Waste 150 – 170Mt 45 – 55Mt Unit costs R540 – 570/dmt R510 – 540
Slide 25: Re-imagining mining to improve people's lives
Re-imagining mining to improve people’s lives Focused on continued value delivery through our Refreshed strategy 52% 77% R28.5bn EBITDA Shared Assets Capabilities ROCE Sustainability margin value Premium quality, Operational resilience Continued delivery high margin assets and marketing strength of
Slide 26: Annexures
Annexures 26
Slide 27: Average realised price reflects weaker steel demand
Annexure 1 Average realised price reflects weaker steel demand Average realised FOB export price (US$/t) Price drivers Average market prices¹: US$4/t P62 CFR China price average: US$118/t (H1 2022: US$140/t) Fe premium average: ~US$1.96 per 1% Fe 1 (H1 2022 ~US$2.3 per 1% Fe) (14) 3 (5) 118 Lump pre
Slide 28: Life extension projects
Annexure 2 Life extension projects Kolomela: Kapstevel South pit Sishen: Ultra high dense media separation plant 74% of scope completed. HME procured and implemented Progressed detailed engineering design work and project execution Infrastructure construction on track with handover in Sept. 2023 pla
Slide 29: Logistics constraints impact on sales
Annexure 3 Logistics constraints impact on sales Mt H1 2023 H1 2022 % change H2 2022 % change Railed to port (incl. Saldanha Steel) 18.4 19.0 (3) 16.9 9 Sishen mine (incl. Saldanha Steel) 13.2 13.4 (1) 12.2 8 Kolomela mine 5.2 5.6 (7) 4.7 11 Total sales 18.9 19.7 (4) 16.9 12 Total ore shipped 18.9 1
Slide 30: Operating margin reflects lower revenue
Annexure 4 Operating margin reflects lower revenue Rm H1 2023 H1 2022 % change H2 2022 % change Revenue 38 279 42 977 (11) 31 055 23 Operating expenses (20 748) (22 396) (7) (24 756) (16) Operating profit 17 531 20 581 (15) 6 299 >100 Operating margin (%)1 45.8 47.9 (2.1) 20.3 25.5 Profit for the pe
Slide 31: Break-even price driven by lower costs, weaker rand
Annexure 4 Break-even price driven by lower costs, weaker rand Platts 62% break-even price (US$/t) (3) 4 (2) (3) 5 (4) 68 67 (0) 65 FY 2022 Opex Price SIB Total after Lump Currency Freight Royalties H1 2023 premium controllables premium Controllables ($1) Non-controllables ($2) 31
Slide 32: Revenue analysis
Annexure 6 Revenue analysis H1 2023 H1 2022 % change H2 2022 % change Export (Rm) 35 335 39 334 (10) 27 489 29 Tonnes sold (wmt) 18.9 19.7 (4) 16.9 12 US Dollar per tonne (wmt)¹ 103 130 (21) 94 10 Rand per tonne (wmt) 1 870 1 997 (7) 1 627 15 Domestic (Rm) - - - 1 (100) Shipping operations (Rm) 2 94
Slide 33: Revenue impacted by price and sales
Annexure 7 Revenue impacted by price and sales Rm Revenue drivers 42 977 (1 476) Controllables 3 643 38 279 (7 973) 2 944 Total sales volumes: Decreased to 18.9Mt 5 450 (H1 2022: 19.7Mt) (699) Lump premium: Average US$0.13/dmtu (H1 2022: US$0.3/dmtu) Market premium: US$1/t1 39 334 35 335 (H1 2022: U
Slide 34: Operating expenditure analysis
Annexure 8 Operating expenditure analysis Rm H1 2023 H1 2022 % change H2 2022 % change Raw materials & consumables 1 495 1 197 25 1 275 17 Net movement in inventories (2 115) (1 568) 35 (3 065) (31) Inventory written down to NRV (19) 227 (>100) (42) (55) Contractors’ expenses 2 537 2 443 4 2 690 (6)
Slide 35: Opex benefit of stock, forex and lower shipping costs
Annexure 9 Opex benefit of stock, forex and lower shipping costs Rm 20 512 (898) 1 014 364 (628) 19 925 (676) 237 3 585 3 822 (148) (439) 3 437 2 762 13 490 13 341 H1 2022 Mining Stock Deferred Non-cash and forex Shipping Selling and H1 2023 operations movement stripping distribution Mining operatio
Slide 36: Sishen & Kolomela mines
Annexure 10 Sishen & Kolomela mines Unit cash cost structure (R/t) 543 490 479 447 119 119 108 109 61 96 99 49 83 148 80 136 104 87 77 18 78 25 27 7 15 16 14 8 124 134 148 118 (59) (36) (65) (88) Sishen mine Sishen mine Kolomela mine Kolomela mine FY 2022 H1 2023 FY 2022 H1 2023 Deferred stripping O
Slide 37: Sishen & Kolomela mines
Annexure 11 Sishen & Kolomela mines Unit cash cost structure (%) 20 20 21 21 17 17 10 10 15 14 25 27 15 18 14 15 5 5 3 3 3 1 3 1 25 23 26 23 Sishen mine Sishen mine Kolomela mine Kolomela mine FY 2022 H1 2023 FY 2022 H1 2023 Other Energy Drilling and blasting Maintenance Outside services Fuel Labour
Slide 38: EBITDA analysis
Annexure 12 EBITDA analysis Rm H1 2023 H1 2022 % change Total sales volumes¹ (Mt) a 18.7 19.4 (3.8) Benchmark price ($/t) 118 140 (15.3) Product premiums ($/t) 4 18 (76.9) Freight ($/t) (15) (20) (27.1) Realised FOB price ($/dmt) 108 138 (21.7) On-mine unit costs ($/t) (28) (31) (9.6) Logistics (rai
Slide 39: Sensitivity analysis H1 2023
Annexure 13 Sensitivity analysis H1 2023 Sensitivity analysis (1% change) – EBITDA impact (Rm) (245) Export volume 245 (345) Export price 345 (377) Currency 377 (500) (400) (300) (200) (100) 0 100 200 300 400 500 Change per unit of key operational drivers, each tested independently Sensitivity analy
Slide 40: Capital expenditure analysis
Annexure 14 Capital expenditure analysis Rm H1 2023 H1 2022 2023e Approved expansion 1 587 1 233 3 200–3 600 Deferred stripping 835 1 199 1 000–1 100 Sishen 456 738 960–1 000 Kolomela 379 461 40–100 SIB 1 936 1 212 4 800–5 300 Sishen 1 355 921 3 400–3 700 Kolomela 581 291 1 400–1 600 Unapproved expa
Slide 41: Robust, efficient balance sheet
Annexure 15 Robust, efficient balance sheet Rbn Interim dividend declared 6.3 R22.60 13.0 2.2 9.7 Dividend payout ratio 2.4 75% 7.3 13.8 9.3 Dividend yield¹ 4.1 5% FY 2022 Cash flow after Base Discretionary H1 2023 Interim Pro-forma Net cash sustaining capital dividends capital Net cash dividend net
Slide 42: Working capital driven by higher inventories
Annexure 16 Working capital driven by higher inventories Rm (830) (784) 15 740 6 313 11 041 43% H1 2022 Inventories Receivables Payables H1 2023 42
Slide 43: Margin analysis
Annexure 17 Margin analysis 216 159 136 106 106 90 93 66 56 58 34 29 40 43 39 H1 2019 H1 2020 H1 2021 H1 2022 H1 2023 C1 unit cash cost ($/t) EBITDA ($/t) Achieved FOB price Based on exchange rate of R18.21/US$1 43