African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — H1 F2014 Earnings Presentation
45 slides from African Rainbow Minerals's earnings presentation, February 2014
Slide 1: ARM's headline earnings increased by 66%
“ARM’s headline earnings increased by 66% as a result of increased contributions from the iron ore, manganese ore, Two Rivers, Nkomati and Goedgevonden mines.” Patrice Motsepe Executive Chairman 1
Slide 2: Overview and strategy
Two Rivers Mine Plant Overview and strategy Patrice Motsepe, Executive Chairman 2
Slide 3: Disclaimer
Disclaimer Certain statements in this report constitute forward looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, pla
Slide 4: Group structure
Group structure 100% 100% 10% 51% 100% 100% 14.6% Gold: Platinum Ferrous Coal Copper Exploration Harmony PGMs Iron Ore Coal Copper PGMs 41.5% Modikwa 1 50% Khumani 20% Participating Coal 40% Lubambe and 55% Two Rivers 2 50% Beeshoek Business Lubambe Extension Manganese Ore Nickel, PGMs & Chrome Mang
Slide 5: Salient features
Salient features Headline earnings increased by 66% to R2.34 billion (1H F2013: R1.41 billion). Headline earnings per share were 1 084 cents compared to 654 cents per share in the corresponding period. Basic earnings of R1.71 billion were negatively affected by exceptional items of R627 million. The
Slide 6: Salient features
Salient features ARM Ferrous’ contribution to headline earnings increased by 108% from R1.04 billion (restated) to R2.15 billion mainly as a result of: - higher US Dollar prices realised for iron ore and - a weaker Rand. ARM Platinum’s contribution to headline earnings increased from R299 million to
Slide 7: Salient features
Salient features Increased sales volumes were achieved in: - iron ore - PGMs - nickel - manganese alloys - export coal from Goedgevonden - chrome concentrate and - copper. Decrease in unit production costs achieved at Nkomati Nickel Mine. Cost increases at Dwarsrivier and Two Rivers were lower than
Slide 8: Update on growth projects
Update on growth projects Lubambe Copper Mine: - the concentrate specification issues have been resolved. - challenges with the late commissioning of the vertical shaft have also been resolved. Earthworks have commenced at the Sakura manganese alloy smelting project. 8
Slide 9: Safety
Safety ARM managed operations completed 23 months without a fatality. The Lost Time Injury Frequency Rate (LTIFR) remained constant at 0.41 per 200 000 man-hours compared to the corresponding period. 9
Slide 10: Headline earnings
Headline earnings Headline earnings (R million) 2 500 2 331 2 341 1 997 2 000 1 812 1 562 1 500 1 454 1 406 1 260 1 000 500 454 0 F2010 F2011 F2012 F2013 F2014 First half (1H) Second half (2H) Headline earnings increased by 66% compared to the corresponding period. 10
Slide 11: Headline earnings per share
Headline earnings per share Headline earnings per share (Rands) 12.00 10.81 10.84 10.00 9.37 8.51 8.00 7.34 6.78 6.54 5.93 6.00 4.00 2.14 2.00 0.00 F2010 F2011 F2012 F2013 F2014 First half (1H) Second half (2H) 11
Slide 12: Sales composition: segmental analysis
Sales composition: segmental analysis 1H F2013 sales split 1H F2014 sales split Copper Copper Nickel 4% 12% 0% Nickel 11% Iron Ore 35% Iron Ore 40% Platinum 23% Platinum 20% Coal Coal 5% 5% Chrome Chrome Manganese 3% Manganese 6% 19% 17% Iron ore and copper sales contribution increased. 12
Slide 13: EBITDA margins
EBITDA margins EBITDA margins by commodity 48% Iron Ore 58% 38% Coal 43% 27% Platinum 30% 31% Nickel 29% 23% Manganese 29% 4% Chrome 11% -30% -10% 10% 30% 50% 70% 1H F2013 1H F2014 EBITDA margins have improved. The copper mine is not reflected as it is in early stage ramp-up. 13
Slide 14: ARM strategy
ARM strategy Quality growth Operational continues in efficiencies ARM’s portfolio of commodities Acquisitions and Africa partnerships Entrepreneurial Owner operator Profit focused Partner of choice management World-class Responsible community Employer of choice management team development 14
Slide 15: Lubambe Mine ramp-up
Lubambe Mine ramp-up Copper produced (thousand tonnes) 50.0 45.0 45.0 45.0 40.0 38.0 35.0 30.0 26.0 25.0 20.0 14.9 15.0 10.0 10.6 5.0 0.0 F2013a F2014e F2015e F2016e F2017e Actual Estimate Steady state production is expected in F2016. 15
Slide 16: Quality growth opportunities
Quality growth opportunities • Manganese ore expansion beyond 3 mtpa • Iron ore expansion • Expansion of Modikwa Platinum Mine • Lubambe Copper Extension • Exploration with Rovuma Resources • Thermal coal projects 16
Slide 17: Operational efficiencies
Operational efficiencies ARM’s objective is to have its operations below the 50 th percentile on the global cost curve. Two Rivers Platinum Goedgevonden Coal Khumani Iron Ore Manganese Ore Manganese Dwarsrivier Modikwa Platinum Smelters Chrome Ore Beeshoek Iron Ore Nkomati Nickel Lubambe Copper (201
Slide 18: ARM Exploration
ARM Exploration ARM Exploration continues with base metal exploration in Northern Mozambique. ARM Exploration is investigating and evaluating brownfields exploration opportunities in several African countries. 18
Slide 19: Mergers and Acquisitions
Mergers and Acquisitions ARM continues to evaluate value adding acquisitive growth opportunities. ARM’s strong financial status, positions it favourably to pursue value adding acquisitive growth. 19
Slide 20: Outlook
Outlook Global commodity prices and currencies remain volatile. The Chinese economy remains supportive of demand for the commodities that ARM produces. 20
Slide 21: Outlook
Outlook The South African mining industry is being challenged by rising costs for labour, fuel and electricity. ARM is focussing on containing costs to ensure that its operations continue to be positioned below the 50th percentile of the global cost curves. 21
Slide 22: Operational review
Aerial view of Lubambe Copper Mine Operational review Mike Schmidt, Chief Executive Officer 22
Slide 23: Divisional headline earnings
Divisional headline earnings Contribution to headline earnings (R million) Six months ended Commodity 31 December 2013 2012 % change Platinum Group Metals 206 152 36 Nkomati Nickel and Chrome 157 147 7 Ferrous Metals* 2 153 1 035 108 Coal (34) 105 (132) Copper (122) (21) >(250) Exploration (24) (36)
Slide 24: Improvement in safety record
Improvement in safety record Lost Time Injury Frequency Rate (LTIFR) per 200 000 man hours worked 2.50 2.00 1.50 1.00 0.50 0.00 3 month moving average 12 month moving average No fatalities on ARM managed mines in 1H F2014 24
Slide 25: Segmental profit variance analysis
Segmental profit variance analysis Unaudited profit variance analysis – Profit from operations before exceptional items (R million) Factors subject to market conditions Factors subject to management’s control 6 000 5 000 701 (982) 359 4 000 1 697 (209) (8) 3 619 3 000 2 061 2 000 1 000 0 1H F2013 Ex
Slide 26: Changes in sales volumes
Changes in sales volumes 1H F2014 vs. 1H F2013 sales volumes % change 55% 22% 9% 4% 4% 4% -1% -7% -21% Nkomati chrome GGV Export coal Ferromanganese PGMs Iron ore Nickel Dwarsrivier Manganese ore GGV Eskom coal concentrate chrome ore Copper sold for 1H F2014 was 14 325 tonnes. 26
Slide 27: Changes in US Dollar realised prices
Changes in US Dollar realised prices 1H F2014 vs. 1H F2013 realised prices % change 27% 19% 14% -7% -6% -8% -14% -14% -13% -15% -22% Export coal Nickel Manganese FeMn Rhodium Platinum Copper Chrome Palladium Exchange Iron ore ($/t) ($/lb) ore ($/t) ($/oz) ($/oz) ($/lb) concentrate ($/oz) rate ($/t)
Slide 28: Spot price comparison to 1H F2014
Spot price comparison to 1H F2014 Spot prices on 26 February 2014 vs. 1H F2014 realised prices % change 16% 13% 8% 4% 3% 3% 3% 2% 3% 1% - -4% Iron ore Copper Platinum Nickel Palladium Chrome Export coal Gold Manganese Exchange FeMn Rhodium ($/t) ($/lb) ($/oz) ($/lb) ($/oz) concentrate ($/t) ($/oz) o
Slide 29: Unit cost changes by commodity
Unit cost changes by commodity 1H F2014 vs. 1H F2013 on-mine production unit cost % change PCB Coal GGV Coal PGM: Modikwa Iron ore Manganese alloys Manganese ore Chrome ore PGM: Two Rivers Nickel -20% -10% 0% 10% 20% 30% 40% 50% Nkomati C1 cash cost net of by products decreased 15% to $4.35/lb produ
Slide 30: Costs analysis ARM Ferrous
COSTS ANALYSIS ARM Ferrous Iron ore operations Manganese ore operations Other Electricity Other Electricity 3% 4% 5% 5% Labour Consumables 30% 28% Consumables Labour 63% 62% Manganese alloy operations Other 4% Electricity 27% Consumables 48% Labour 21% 30
Slide 31: Costs analysis ARM Platinum
COSTS ANALYSIS ARM Platinum Two Rivers Platinum Mine Modikwa Platinum Mine Other Electricity Electricity 8% 6% Other 6% 18% Labour 50% Consumables Labour Consumables 22% 54% 36% Nkomati Nickel Mine Electricity 10% Other 25% Labour 41% Consumables 24% 31
Slide 32: Costs analysis ARM Coal
COSTS ANALYSIS ARM Coal Goedgevonden Mine PCB operations Labour 15% Other 30% Labour 39% Other 47% Electricity Consumables 3% 36% Electricity Consumables 2% 28% The transition of PCB from underground to open-cast mining is expected to be completed by 2016. 32
Slide 33: ARM Ferrous
ARM Ferrous Iron ore and manganese ore sales volumes on a 100% basis (million tonnes) 9.0 8.0 7.7 7.4 7.0 6.8 6.0 5.0 4.5 4.0 4.0 3.0 2.0 1.5 1.5 1.6 1.5 1.4 1.0 0.0 1H F2010 1H F2011 1H F2012 1H F2013 1H F2014 Iron Ore Manganese ore* *Manganese ore sales exclude intra-group sales. 33
Slide 34: ARM Platinum
ARM Platinum PGM and nickel production on a 100% basis 450 13 000 427 409 400 11 859 11 000 384 11 258 361 6E PGM thousand ounces 353 350 9 000 Nickel tonnes 300 7 000 6 014 250 5 000 4 886 200 3 785 3 000 150 1 000 1H F2010 1H F2011 1H F2012 1H F2013 1H F2014 PGMs (000 oz) Nickel (tonnes) 34
Slide 35: Sustained improvement in Nkomati operational performance
Sustained improvement in Nkomati operational performance Nickel produced (thousand tonnes) Average concentrator recoveries (%) 14 80% 77% 11.9 12 11.2 75% 72% 10 70% 8 65% 6.0 65% 62% 6 5.3 62% 3.8 60% 4 2 55% 0 50% 1H F2010 1H F2011 1H F2012 1H F2013 1H F2014 1H F2010 1H F2011 1H F2012 1H F2013 1H
Slide 36: Lubambe Mine ramp-up
Lubambe Mine ramp-up Copper produced per six months (tonnes) Average concentrator recoveries (%) 25 000 80% 78% 22 500 75% 75% 20 000 75% 70% 15 000 11 641 65% 64% 10 567 10 000 60% 5 000 3 230 55% 0 50% 1H F2013 2H 2013 1H F2014 Steady state 1H F2013 2H 2013 1H F2014 Steady state Average Averagemil
Slide 37: Lubambe Extension Area
Lubambe Extension Area Total resource (indicated + inferred) AMEC AMEC Description statement statement Variance % change Feb 2014 Feb 2013 Resource tonnage Mt 134.00 105.00 29.00 28 Total Copper grade % 4.07 3.66 0.41 11 Acid soluble Copper grade % 0.46 0.59 (0.13) (22) Cobalt grade % 0.06 0.09 (0.0
Slide 38: Capital expenditure: segmental analysis
Capital expenditure: segmental analysis Capital expenditure (R million)* 5 000 4 500 4 321 Actual 1H F2014: R1.4 billion 4 000 3 494 3 489 3 500 3 200 3 000 3 000 2 850 2 500 2 000 1 500 1 000 500 0 F2011a F2012a F2013a F2014e F2015e F2016e ARM Platinum ARM Ferrous ARM Coal ARM Copper *The forecaste
Slide 39: Projects pipeline and operations
Projects pipeline and operations Exploration to Project development Steady state Declining feasibility and ramp-up (>15 years life-of-mine) operations Beeshoek Iron Ore Mine Thermal coal mines Manganese and chrome smelters Manganese ore mines Two Rivers Platinum Mine Modikwa Platinum Mine Nkomati Ni
Slide 40: Thank you
We do it better FaxM African Rainbow Minerals ES Se es Thank you 40
Slide 41: Appendix
We do it better FaxM African Rainbow Minerals ES Se es Appendix 41
Slide 42: Accounting policy change
Accounting policy change ARM has implemented changes to its accounting policies following changes to IFRS. The changes affect disclosures made in the financial statements but do not affect the earnings or the segmental analysis. 42
Slide 43: Accounting policy change
Accounting policy change Assmang is no longer proportionately consolidated. ARM’s share of Assmang is now disclosed as a single line item on the consolidated income statement as “Income from joint venture” ARM’s share of Assmang is disclosed on the statement of financial position as “Investment in j
Slide 44: Transnet's Market Demand Strategy
Transnet’s Market Demand Strategy Manganese Division Coal Division Nchwaning & Gloria Mines Goedgevonden Impunzi And Tweefontein Mines Gauteng Maputo Port North West Johannesburg Mpumalanga Kimberly Iron Ore Division Free State KwaZulu-Natal Beeshoek & Khumani Richards Bay Iron Ore Mines Lesotho Coa
Slide 45: Operational summary
Operational summary 1H F2014 1H F2013 % change PGMs in concentrate Ounces, 6E 154 911 176 701 (12) Modikwa Cash cost R/kg, 6E 213 441 187 418 14 Cash operating margin % 18 20 PGMs in concentrate Ounces, 6E 193 503 179 513 8 ARM Platinum Two Rivers Cash cost R/kg, 6E 165 667 164 629 1 (100% basis) Ca
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