Slide 1: 2015 Financial Results Presentation – 29 April 2016
2015 Financial Results Presentation – 29 April 2016 LISTED PREMIUM 1
Slide 2: Disclaimer
Disclaimer This Presentation (the “Presentation”) has information or opinions on which it is significant in the context of the been prepared and issued by Kenmare based, or any other written or oral statements, estimates and projections Resources plc (the “Company” or information made available in c
Slide 3: Overview
Overview Proposed capital raising and debt restructuring Provides a robust balance sheet and reduces financial gearing Total debt reduced to a maximum US$100m, cash of US$75m1 post transaction Reduced debt service costs (-84%), increased term (to 2022) and repayment holiday until Feb 2018 Open offer
Slide 4: Capital Raising & Balance Sheet Restructuring
Capital Raising & Balance Sheet 1 Restructuring 4
Slide 5: Capital raise and debt restructuring
Capital raise and debt restructuring Proposed equity raise SGRF - US$100m King Ally Trading Limited – US$100m Placing with new and existing shareholders – US$75m Open offer to all existing shareholders – c.US$100m All proceeds to repay debt with a 25% reduction agreed by lenders Debt restructuring c
Slide 6: Transformed balance sheet post capital raise
Transformed balance sheet post capital raise Gross Debt (US$m) Cash (US$m) Net Debt (US$m) 450 80 400 400 70 350 350 60 300 300 50 250 250 40 200 200 150 30 150 100 20 100 50 10 50 0 0 0 Est. debt pre- Maximum debt Cash as at Est. cash post- Net debt pre- Maximum net debt completion post-completion
Slide 7: Debt repayment profile
Debt repayment profile Annual Interest (US$m) Repayment Profile (US$m) Interest Rates (%) 35 25.0 10.0% 30 20.0 8.0% 25 15.0 6.0% 20 15 10.0 4.0% 10 5.0 2.0% 5 0 0.0 0.0% 2015 avg. New debt New debt Aug-16 Feb-17 Aug-17 Feb-18 Aug-18 Feb-19 Aug-19 Feb-20 Aug-20 Feb-21 Aug-21 Feb-22 2015 interest Est
Slide 8: Deal timeline
Deal timeline April 2016 • Lenders progressing credit approvals for proposed restructuring deal June/July 2016 • Subscription agreement with King Ally • EGM/AGM Trading Limited signed July 2016 May 2016 • Transaction closes • Subscription agreement with SGRF expected • Lender documentation finalised
Slide 9: Summary Results
2 Summary Results 9
Slide 10: 2015 Financial Results Overview
2015 Financial Results Overview Power outage of 57 days in Q1 2015 significantly impacted production for the year Significant cost savings achieved in 2015 Production of Heavy Mineral Concentrate (“HMC”) down 15% to 1,100,600 tonnes (2014: 1,287,300 tonnes) Production of ilmenite down 11% to 763,500
Slide 11: Key Performance Indicators: Revenue & EBITDA
Key Performance Indicators Production 2013 - 2015 (Half-Yearly) 000t Revenue & EBITDA 2011 – 2015 US$m Sales Capitalised Sales EBITDA Zircon Ilmenite 500 250 450 400 200 Revenue & EBITDA US$m 350 150 Tonnes '000 300 250 100 200 150 50 100 50 - 0 2011 2012 2013 2014 2015 H1 2013 H2 2013 H1 2014 H2 20
Slide 12: 2015 Income Statement Review
2015 Income Statement Review 2015 2014 Comment on 2015 & movement US$m US$m Revenue 142.6 174.3 Sales down 18% - lower prices on flat sales volumes Cost of Sales & Opex (189.9) (205.8) Costs down 8% - focus on reducing production costs Operating loss (47.3) (31.5) Impairment loss - (64.8) No impairm
Slide 13: 2015 Revenue Review
2015 Revenue Review Volume/Mix Movement Pricing Movement (ex. CIF) 820,000 $200 $1,000 Rutile Volume (-24%) Secondary Zircon Volume (+56%) Primary Zircon Volume (-5%) Ilmenite Volume (+/- 0%) $190 800,000 - 2% Ilmenite price per tonne (US$) $180 $800 Zircon price per tonne (US$) $170 Shipments (tonn
Slide 14: 2015 Cash Operating Costs Review
2015 Cash Operating Costs Review 2015 2015 2014 2014 US$m US$m US$m US$m Cost of sales 168.1 173.4 Other operating costs 21.8 189.9 32.4 205.8 Freight (CIF charged to customers) (3.7) (8.3) Total costs less freight 186.2 197.5 Non-cash costs Depreciation 35.8 40.9 Share-based payments (0.7) (35.1) 1
Slide 15: Cash Operating Costs
Cash Operating Costs Final Product Production (kt) - Right Axis Final Product Production (kt) - Right Axis Ongoing Cash Operating Cost per Tonne (US$/t) - Left Axis Ongoing Cash Operating Cost per Tonne (US$/t) - Left Axis $250 $250 500 950 450 Final Product Production Final Product Production $225
Slide 16: Cost Efficiency Initiatives
Cost Efficiency Initiatives Adjusted cash operating costs down 21% in 2015 Cost efficiencies realised in the following areas: Labour costs down 23% Retrenchment programme reduced employee numbers, reduced numbers of short-term contracts, catering cost reductions, lower recruitment costs and favourab
Slide 17: 2015 Balance Sheet Review
2015 Balance Sheet Review 2015 2014 Comment on 2015 & movement US$m US$m Property, plant & equipment 835.0 865.2 Depreciation net of sustaining capital Deferred tax asset 1.3 - Inventories 46.2 62.5 Inventory write down of US$16.0m Trade & other receivables 20.9 28.1 Decrease in trade debtors and re
Slide 18: Yearly Capex 2012 - 2015
Yearly Capex 2012 - 2015 Expansion capex Sustaining capex 200 180 160 140 US#039; millions 120 100 80 60 40 20 0 2012 2013 2014 2015 Long period of investment completed in 2013 Sustaining capex tightly controlled in 2015 at US$5.6m (2014: US$5.2m) 18
Slide 19: Group Debt at December 2015
Group Debt at 31 December 2015 Group Debt at 31 Dec. 2015: US$341.9m (2014: US$337.7m) Lenders: Absa, KfW, FMO, EIB, EAIF & AfDB Guarantors: ECIC (of Absa), MIGA & Hermes (of KfW) Average project interest rate for 2015 was 9.6% Super Senior: US$10.4m, floating @ LIBOR +10%. Two year US$50m facility
Slide 20: Group Lenders at December 2015
Group Lenders at 31 December 2015 Loan Balance - US$m Super Senior Loans All 10.4 10.4 Senior Loans AFDB 21.2 Absa (ECIC) 23.9 EAIF 2.6 EIB 8.5 FMO 8.6 KfW IPEX-Bank (Hermes) 6.6 KfW IPEX-Bank (MIGA) 7.8 79.2 Subordinated Loans EIB 148.9 EAIF 60.8 FMO 47.5 Absa (Novated) 21.0 278.2 367.8 Project loa
Slide 21: Operations update & guidance
3 Operations update & guidance 21
Slide 22: Interim Management Statement – Q1 2016
Interim Management Statement – Q1 2016 • Vastly improved power quality and consistency since the December 2015 installation of additional power transmission infrastructure by Electricidade de Moçambique • Ore mined in Q1 2016 increased 120% to 7,061,000 tonnes (Q1 2015: 3,211,000 tonnes), mainly due
Slide 23: Guidance
Guidance Production 2016 Guidance 2015 Actual Variance Ilmenite kt 950 764 24% Zircon kt 70 52 35% of which primary kt 50 39 27% of which secondary kt 20 12 61% Rutile kt 8 6 33% Costs Total cash operating costs US$m 145 136 6% Cash operating costs per tonne of finished product US$/t 141 166 -15% Il
Slide 24: Market Update
4 Market Update 24
Slide 25: Market overview
Market overview • Demand for titanium dioxide closely Global pigment and GDP growth tracks growth in global GDP (1979-2015) 160 • Titanium feedstocks are used for the production of titanium pigment 140 Global pigment demand growth (log x100) (~90%), welding rods (~5%) and 120 titanium metal (~5%) •
Slide 26: Pigment market fundamentals improving
Pigment market fundamentals improving Major paints pigment producers reporting increased sales volume of 6-12% in Q1 2016 in comparison to the prior year period Pigment prices on the increase Pigment producers have been strong performers year to date 200 Share price performance rebased 150 to 100 10
Slide 27: Industry structure
Industry structure • 16mtpa of ilmenite equivalent required - 95% of TiO2 units are produced from TiO2 Feedstock Demand ilmenite - natural rutile accounts for just ('000 tonnes TiO2 Units) 5% 9,000 8,000 • Ilmenite can be upgraded into higher TiO2 content slag or synthetic rutile – 7,000 historicall
Slide 28: Iron ore production in China
Iron ore production in China • Domestic ilmenite production in China 3,500 175 comes as a by-product of a particular type of iron ore deposit (titanomagnetite) 3,000 150 • Production growth in China was fuelled by 2,500 125 the rapid increase in iron ore prices 2,000 100 • These mines produce a tonn
Slide 29: New ex-China supply
New ex-China supply • Price increases in 2010-12 led to the Average Monthly Port Stocks of Titanium Ore in China (000's tonnes) funding and development of new 400 projects • Combined with the growth in Chinese ilmenite supply and higher inventories, additional supply 300 exacerbated price declines a
Slide 30: Shifting feedstock requirements
Shifting feedstock requirements • Historically, miners have upgraded ilmenite into higher grade feedstocks for consumers (Rio Tinto – chloride slag/sulphate slag and Upgraded Slag, Tronox – Chloride Slag and Synthetic Rutile, Iluka – Synthetic Rutile) • Pigment producers are now moving upstream to u
Slide 31: Supply/demand outlook
Supply/demand outlook • Demand is expected to continue to TiO2 Feedstock Supply/Demand trend upwards with global GDP 10,000 • Supported by increasing per capita Total Supply Total Feedstock Demand incomes in emerging economies - expanding Chinese urban middle 8,000 class fuelling consumer-driven gro
Slide 32: Appendices
(a) Appendicies 32
Slide 33: 2015 Cash Operating Costs
2015 Cash Operating Costs Logistics & Logistics & Travel Travel Other Other 8% 9% 12% Distribution 15% Distribution Costs 5% Costs 6% Production Overheads Production 12% Overheads 10% Fuel 2014 7% 2015 Labour Power payroll 2% 33% Fuel Repairs & 7% Labour payroll Maintenance 31% 19% Power 5% Operatin