Salungano Group Limited · JSE:SLG
Salungano — H1 2020 Earnings Presentation
48 slides from Salungano's earnings presentation, Nov 26, 2019
Slide 1: Results Presentation for the Six Months Ended 30 September 2019
RESULTS PRESENTATION FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2019 26 November 2019 LAYING THE FOUNDATION TO GROW SUSTAINABLY
Slide 2: Disclaimer
DISCLAIMER This presentation is published solely for informational purposes and does not constitute investment, legal, tax or other advice nor is it to be relied upon in making an investment decision. Information contained herein has been taken from sources considered by Wescoal Holdings Limited to
Slide 3: Contents
CONTENTS 1. Overview of Results and Strategy – Reginald Demana (Group CEO) 2. Mining Segment – Thivha Tshithavhane (Mining CEO) 3. Trading Segment – Thivha Tshithavhane obo Mike Berry (Trading CEO) 4. Financials – Izak van der Walt (CFO) 5. Outlook – Reginald Demana 6. Q&A 3
Slide 4: Operational and Financial Overview
OPERATIONAL AND FINANCIAL OVERVIEW NPAT EPS CASH GENERATED REFINANCE SAFETY -R51 million -11.8 cps R126 million R1.1 billion TRIFR* 1.06 (HY19: R108 million) (HY19: 25.2 cps) (HY19: R291 million) (FY19: 0.95) LTIs* 3 (HY19: 6) COAL MINED SALES REVENUE EBITDA 2.7Mt 3.1Mt R2 063 million R155 million (
Slide 5: Eskom Coal Demand to 2050
ESKOM COAL DEMAND TO 2050 Mt 120 100 Eskom’s expected coal shortfall 80 • 1.33 billion tonnes until 2050 60 › 474Mt by 2030 (36%) › 859Mt between 2030 and 2050 (64%) 40 • Kusile will account for a large portion of this 20 › 66Mt until 2030 0 › 266Mt until 2050 2020 2025 2030 2035 2040 2045 2050 • Es
Slide 6: Integrated Resource Plan 2019 on Coal
INTEGRATED RESOURCE PLAN 2019 ON COAL ‘’Coal will continue to play a significant role in The IRP’s Evolving Energy Mix electricity generation as the country has resources 2019 2030 in abundance. New investment will be directed towards more efficient coal technologies.’’ Gwede Mantashe • Energy secur
Slide 7: Power Station Demand
POWER STATION DEMAND RFP’s in the Power Decommission Coal Shortfall market Wescoal Operation Station Date (Life of Plant Mt) (Mt) (LoM - year) Commentary Majuba 2046 – 2050 322 - Elandspruit (FY26) Tutuka 2035 – 2040 116 100 Elandspruit (FY26) Bids to extend supply from VGF and Elandspruit Khanyisa
Slide 8: Strategy Update
STRATEGY UPDATE Sweat current operations, manage business well to Vanggatfontein Turnaround maintain steady state • Deploying senior Wescoal personnel directly onsite TARGET: 8Mt ROM FY20 • Appointing independent productivity consultant company • Fast tracking voluntary separation process STABILITY
Slide 9: Mining Segment
MINING SEGMENT
Slide 10: Safety
SAFETY LTIs TRIFR H2FY19 H1FY20 2 2 1 1 1.00 0 0 Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep 18 18 18 19 19 19 19 19 19 19 19 19 18 18 18 19 19 19 19 19 19 19 19 19 Actual Industry average Rolling average Mitigating risk of potential fatal incident
Slide 11: Mining Team for the Future
MINING TEAM FOR THE FUTURE CEO Mining Thivha 20 Tshithavhane Snr Human Project Mining Financial Resources Integration COO Projects - Manager Manager Manager Coordinator Erick Thulani Zanele Kutume Nthabiseng 10 30 20 17 13 Mnisi Ndlovu Sibisi Phalakatshela Mbekeni Group Business Mine Manager Mine Ma
Slide 12: Mining Operations – ROM Production
MINING OPERATIONS – ROM PRODUCTION Mt 4 000 3 000 2 000 1 000 0 2019 H1 Actual Intibane Vanggatfontein Elandspruit Khanyisa 2020 H1 Actual Challenging H1 Promising H2 Vanggatfontein Contractor change, production downtime (protest action), Turnaround initiatives regulatory shutdown (fatality), equipm
Slide 13: Operational Update – Vanggatfontein
OPERATIONAL UPDATE VANGGATFONTEIN
Slide 14: Vanggatfontein
VANGGATFONTEIN KEY INDICATORS 17 615 0.7Mt (HY19: 1.6Mt) 26.3Mt 9 years (FY19: 9 years) 1.1Mt (HY19: 1.1Mt) LTIFR 0.8 (FY19: 0.24) permanent contractors coal mined reserves LoM sales volume safety Current priorities • Implementation and monitoring of production improvement initiatives • Additional e
Slide 15: ROM and Sales Monthly Trend
ROM AND SALES MONTHLY TREND VGF – ROM VGF – Own Sales kt kt 250 200 230 202 200 161 200 153 150 150 111 127 100 79 100 92 69 70 59 51 47 50 50 0 0 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 15
Slide 16: Pit Benching to Improve Flexibility
PIT BENCHING TO IMPROVE FLEXIBILITY VG3– NO PIT ROOM VG3 PROGRESS MAY 2019 SEPT 2019 VG4 PROGRESS VG5 PROGRESS OCT 2019 SEPT 2019 16
Slide 17: Vanggatfontein Timelines
VANGGATFONTEIN TIMELINES Schedule base Reserve Sept 19 (Mt) FY20 FY21 FY22 FY23 FY24 FY25 FY26 FY27 Feb 2020 Ave ROM Depleted VG3 2.2Mt steady state 120ktpm Dec 2023 Depleted VG4 11.1Mt Ave ROM steady state 200ktpm Nov 2026 Depleted VG5 10.8Mt Ave ROM steady state 160ktpm Moabsvelden 29.0Mt Ave ROM
Slide 18: Vanggatfontein Current and Geological Resources
VANGGATFONTEIN CURRENT AND GEOLOGICAL RESOURCES Moabsvelden Infrastructure i.e. CHPP, Coal Project Mine Offices, PCD, Discard Facility VG4 Mine out Area Vanggatfontein Colliery VG6 VG3 VG5 VANGGATFONTEIN EXTENSION 18
Slide 19: Operational Update – Elandspruit
OPERATIONAL UPDATE ELANDSPRUIT
Slide 20: Elandspruit
ELANDSPRUIT KEY INDICATORS 19 358 1.3Mt (HY19: 1.4Mt) 15.4Mt 6 years (FY19: 6 years) 0.9Mt (HY19: 1.1Mt) LTIFR 0.97 (FY19: 0.55) permanent contractors coal mined reserves LoM sales volume safety Current priorities • Relocation of Eskom power lines to enable FY21 mining plan • Product mix optimisatio
Slide 21: ROM and Sales Monthly Trend
ROM AND SALES MONTHLY TREND Elandspruit – ROM Elandspruit – Own Sales kt kt 300 200 260 250 230 225 222 207 200 191 177 157 150 148 150 150 144 145 133 135 100 50 0 100 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Oct 19 21
Slide 22: Operational Update – Khanyisa
OPERATIONAL UPDATE KHANYISA
Slide 23: Khanyisa
KHANYISA KEY INDICATORS 18 352 0.7Mt (HY19: 77kt) 2.9Mt 2.5 years (FY19: 3 years) 664kt (FY19: 104kt) LTIFR 0.43 (FY19: 1.66) permanent contractors coal mined reserves LoM sales volume safety Status quo • Complex divided into Catwalk and Triangle pits • Triangle 2 commenced new boxcut to virgin grou
Slide 24: ROM & Sales Monthly Trend
ROM & SALES MONTHLY TREND Khanyisa – ROM Khanyisa – Own Sales kt kt 200 200 150 150 134 126 128 122 120 121 116 117 100 103 100 100 92 83 50 50 0 0 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 Apr 19 May 19 Jun 19 Jul 19 Aug 19 Sep 19 24
Slide 25: Project Progress
PROJECT PROGRESS
Slide 26: Project Update
PROJECT UPDATE Moabsvelden/VG6 Arnot Mine • 29.0Mt reserves • 13.0Mt reserves; 190.0Mt resource (100% ownership basis) • 2.4 – 3.0Mtpa ROM mine development • c.2.0Mtpa ROM production • Awarded 10-year Eskom CSA in July 2019 • Eskom consent last outstanding condition precedent • Negotiating with
Slide 27: Trading Segment
TRADING SEGMENT
Slide 28: Overview
OVERVIEW No reportable HSEC incidents Satisfactory performance despite strong headwinds Maintained profit margin through strict cost management Continued focus on debtors’ book Sustained regional footprint Ongoing working relationship with Mining Segment to continue enhancing operational flexibility
Slide 29: 5YR Trend: Volume and Revenue
5YR TREND: VOLUME AND REVENUE Full-year Half-year 1600 1400 1200 1,153 1,120 • Decrease in sales volume and 1,045 1,042 1,072 revenue 1000 800 1,471 601 • Tonnes sold down by 14% to 600 1,117 1,094 1,218 516 516kt (Sept19: 601kt) 988 400 808 707 200 • HY20 revenue decreased by 13% to R707million (Se
Slide 30: Financials
FINANCIALS
Slide 31: Salient Features
SALIENT FEATURES REVENUE of R2 063 million (Sept18: R2 064 million) GROSS PROFIT of R195 million (Sept18: R276 million) NET CURRENT ASSETS of R194 million (FY19: -R27 million) CASH GENERATED FROM OPERATIONS of R126 million (Sept18: R291 million) SHARE BUY-BACK 22.4 million shares, R35.6 million LONG
Slide 32: Revenue and Operating Profit
REVENUE AND OPERATING PROFIT MAINTAINED SALES VOLUME AND REVENUE Full-year Half-year Rm 3,965 4,000 3,527 3,000 2,064 2,063 2,000 1,000 344 224 197 15 0 FY18 FY19 HY19 HY20 Revenue Operating profit 32
Slide 33: Segmental Contributions and Revenue Diversity
SEGMENTAL CONTRIBUTIONS AND REVENUE DIVERSITY Segmental contribution HY20 Revenue Operational EBITDA 16% 34% Mining 66% Trading 84% HY20 HY20 Rev enue div ersity yoy 53% 43% Eskom 47% 57% Other HY19 HY20 33
Slide 34: NPAT Variance
NPAT VARIANCE FY19 Mining Mining Unit cost of Trading Other (Opex, Disposed assets Once-off items FY20 Half year sales price volume sales and other income, Half year variance transport margin net finance cost, other) Sales Other • Higher revenue due to increased sales price per tonne • Mainly consis
Slide 35: Mining Unit Cash Cost
MINING UNIT CASH COST Unit cash cost (excluding buy-ins and delivery) R/ton 332 319 400 300 200 100 0 HY20 HY19 Mining Fuel Transport Processing Other Opex Overall mining unit cost increase contained to 5% • Vanggatfontein impacted by significant production interruptions and lower volumes • Increasi
Slide 36: Statement of Comprehensive Income
STATEMENT OF COMPREHENSIVE INCOME HY20 HY19 Change Rm Rm % Revenue 2 063 2 064 - Gross profit 195 276 (29) Operating profit 15 197 (92) Net finance cost (58) (38) 53 Taxation expense (7) (52) (87) Total comprehensive (loss)/ income (51) 108 (147) EPS (cents per share) (11.8) 25.2 (147) 36
Slide 37: Statement of Financial Position
STATEMENT OF FINANCIAL POSITION Reviewed Reviewed Audited 30 Sept 2019 30 Sept 2018 31 Mar 2019 Rm Rm Rm Non-current assets 2 563 1 968 2 168 • Invested in mine development and extension Property, plant and equipment 2 060 1 732 1 954 projects and reclassified assets previously held for sale Investm
Slide 38: Statement of Financial Position | Continued
STATEMENT OF FINANCIAL POSITION | CONTINUED Reviewed Reviewed Audited 30 Sept 2019 30 Sept 2018 31 Mar 2019 Rm Rm Rm Total shareholders’ funds 969 1 111 1 092 • Net current assets position improved to Non-current liabilities 1 788 1 051 1 050 R194 million (FY19: -R27 million) due to refinance for R1
Slide 39: Funding Profile
FUNDING PROFILE Full facility Utilised Available (Rm) (Rm) (Rm) Maturity HY20 FY19 Loans 500 (414) 86 48 months from June 2019, Nedbank term loan 250 (207) 43 interest payable quarterly, Debt service cover ratio 3.62 2.98 capital repaid in equal Standard Bank term loan 250 (207) 43 instalments start
Slide 40: Net Debt Movement
NET DEBT MOVEMENT Net debt Cash flows from Net finance Tax paid Capex Disposals Total Acquisitions Share Investments Net debt 31 Mar 2019 operations cost buy-back 30 Sept 2019 40
Slide 41: Statement of Cash Flows
STATEMENT OF CASH FLOWS Reviewed Reviewed Audited 30 Sept 2019 30 Sept 2018 31 Mar 2019 Rm Rm Rm Net cash flows from operating activities 58 236 323 • Positive cash generated from operating Cash generated from operating activities 126 291 462 activities despite challenges with mining Net interest (2
Slide 42: Main Components of Capital Expenditure
MAIN COMPONENTS OF CAPITAL EXPENDITURE HY20 FY19* (R’000) (R’000) Low grade study 889 6 481 Deferred stripping capitalisation 44 068 49 422 Vanggatfontein site establishment costs 2 108 11 552 Vanggatfontein surface rights 55 414 - Pollution control dam 18 558 11 872 Elandspruit South boxcut - 5 559
Slide 43: Outlook
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Slide 44: Capital Allocation Framework
CAPITAL ALLOCATION FRAMEWORK Managing existing debt Ongoing capital expenditure • Ensure timeous interest and capital repayments on • Ensure adequate sustaining and ongoing capital all facilities to support operations • Optimise balance sheet to create operational and • Explore bolt-on brownfiel
Slide 45: Looking Ahead
LOOKING AHEAD CONSISTENT STRATEGY EXECUTION • Strategy roll-out in progress • Stability of operations to reach steady state an immediate priority • Intent to achieve strategic targets on annualised basis by year-end Monthly Annualised LoM capacity capacity Operation (yrs) (ktpm) (Mtpa) Notes Vanggat
Slide 46: Q&A
Q&A LAYING THE FOUNDATION TO GROW SUSTAINABLY
Slide 47: Appendices
WESCOAL ‘APPENDICES .
Slide 48: Mineral Resource and Reserves
MINERAL RESOURCE AND RESERVES Measured resource Indicated resource Inferred resource Total resource Total reserve (Mt) (Mt) (Mt) (Mt) (Mt) Operating Elandspruit 16.71 - - 16.71 15.39 Khanyisa Complex 3.84 0.12 - 3.96 2.93 Vanggatfontein 29.13 1.64 0.34 31.11 26.26 Subtotal 49.68 1.76 0.34 51.78 44.5