African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — FY2014 Earnings Presentation
37 slides from African Rainbow Minerals's earnings presentation, 2014
Slide 1: ARM achieved record headline earnings in F2014
“ARM achieved record headline earnings in F2014 and declared an increased dividend of 600 cents per share. Excellent operational performances from Nkomati and Two Rivers mines as nickel and PGM’s contribution to headline earnings increased significantly.” Patrice Motsepe Executive Chairman 1
Slide 2: Overview and strategy
Two Rivers Platinum Mine chrome treatment 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% Modikwa1 50% Khumani 20% Participating Coal 40% Lubambe and 55% Two Rivers2 50% Beeshoek Business Lubambe Extension Manganese Ore Nickel, PGMs & Chrome Mangan
Slide 5: Salient features
Salient features Headline earnings increased by 10% to R4.11 billion. Headline earnings per share increased from 1 735 cents to 1 900 cents per share. Increased dividend declared of 600 cents per share (F2013: 510 cents per share). Basic earnings were negatively impacted by exceptional items of R819
Slide 6: Salient features
Salient features ARM Platinum’s contribution to headline earnings increased by 68% to R883 million. The ARM Ferrous contribution increased from R3.19 billion in F2013 to R3.74 billion in F2014. Costs were well controlled at the Nkomati, Two Rivers and Dwarsrivier mines. 6
Slide 7: Salient features
Salient features Lubambe Mine continued its production ramp-up and produced 23 791 tonnes of copper (F2013: 14 871 tonnes). The Sakura Ferroalloys Project commenced construction; R790 million has been spent to date. Full production of 170 000 tonnes of ferromanganese is expected in F2017. 7
Slide 8: Safety achievements
Safety achievements ARM’s number of lost time injuries decreased by 29% from 149 in F2013 to 106 in F2014. Khumani, Black Rock and Dwarsrivier mines each completed more than two million fatality-free shifts. On 21 May 2014, Nkomati Mine completed 365 consecutive days without a lost time injury. 8
Slide 9: Headline earnings
Headline earnings Headline earnings (R million) 4 500 4 108 4 013 4 000 3 737 3 500 3 374 3 451 3 000 2 500 2 317 2 000 1 714 1 500 1 000 500 0 F2008 F2009 F2010 F2011 F2012 F2013 F2014 Record headline earnings achieved. 9
Slide 10: Headline earnings per share
Headline earnings per share Headline earnings (cents per share) 2 000 1 900 1 800 1 735 1 615 1 585 1 600 1 400 1 200 1 000 807 800 600 400 F2010 F2011 F2012 F2013 F2014 Increased headline earnings per share. 10
Slide 11: Dividends per share
Dividends per share Dividends (cents per share) 650 600 600 550 510 500 475 450 450 400 350 300 250 200 200 150 F2010 F2011 F2012 F2013 F2014 Record dividend declared. 11
Slide 12: 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 Partnering with communities, workers Employer of choice management team and oth
Slide 13: Operational efficiencies
Operational efficiencies ARM’s objective is that all operations to be below the 50th percentile Two Rivers Platinum Lubambe Copper Goedgevonden Coal (2016) Khumani Iron Ore Manganese Manganese Ore Smelters Dwarsrivier Modikwa Platinum Chrome Ore Nkomati Nickel Beeshoek Iron Ore Commodity Unit cash c
Slide 14: Quality growth continues
Quality growth continues Ramping up volumes and initiating new growth projects Exploration/ Project development Steady state Declining feasibility and ramp-up (>15 years life-of-mine) operations Beeshoek Iron Ore Mine Thermal coal mines Manganese smelters Manganese ore mines Two Rivers Platinum Mine
Slide 15: ARM Exploration
ARM Exploration Africa Exploration is ongoing with Rovuma in Mozambique. ARM has agreed to continue with the option for a fourth year and will fund exploration at a cost of about US$7 million. ARM will have exclusive rights to exercise options to purchase prospecting and/or mining rights. 15
Slide 16: EBITDA margins
EBITDA margins EBITDA margins by commodity 55% Iron Ore 54% 45% Coal 39% 28% Platinum 32% 26% Nickel 27% 28% Manganese 23% -4% Chrome 16% -30% -10% 10% 30% 50% 70% F2013 F2014 EBITDA margins remain robust. 16
Slide 17: Outlook
Outlook Volatility in currencies and commodity prices continues with most commodity prices under pressure due to oversupply. The United States and some European economies continue to recover; this bodes well for the long-term demand for our commodities. Demand in China and other developing and devel
Slide 18: Operational review
Khumani Iron Ore Mine pit Operational review Mike Schmidt, Chief Executive Officer 18
Slide 19: Divisional contribution to headline earnings
Divisional contribution to headline earnings Year ended 30 June Reviewed and R million Reviewed restated 2014 2013 % change ARM Platinum 883 527 68 ARM Ferrous* 3 736 3 194 17 ARM Coal (120) 148 - ARM Copper (309) (135) - ARM Exploration (81) (88) 8 Gold - 64 - Corporate and other* (1) 27 - ARM Head
Slide 20: Contribution of commodities in our diversified portfolio
Contribution of commodities in our diversified portfolio EBITDA split by commodity 90% 70% 50% 30% 10% -10% F2007 F2008 F2009 F2010 F2011 F2012 F2013 F2014 Copper Coal Chrome Manganese Iron Ore Nickel PGM 20
Slide 21: Headline earnings variance analysis
Headline earnings variance analysis Headline earnings variance analysis by division (R million) 5 000 542 (268) 4 500 (174) 7 (64) 356 (28) 4 108 4 000 3 737 3 500 3 000 2 500 F2013 ARM ARM ARM ARM ARM Gold Corporate F2014 Platinum Ferrous Coal Copper Exploration and other Increase Decrease 21
Slide 22: 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 10 000 922 (2 488) 9 000 2 956 (103) 8 000 7 000 (168) (35) 6 618 6 000 5 534 5 000 4 000 F
Slide 23: Changes in sales volumes
Changes in sales volumes F2014 vs. F2013 sales volume changes (%) 52% 15% 16% 7% 7% 1% -3% -6% -5% -9% -30% GGV PCB Dwarsrivier Manganese Iron Nickel PGMs Ferromanganese PCB GGV Nkomati Eskom coal export coal chrome ore ore ore Eskom coal export coal chrome concentrate Copper sales volumes increased
Slide 24: Changes in US Dollar realised prices and exchange rate
Changes in US Dollar realised prices and exchange rate F2014 vs. F2013 US Dollar realised prices and exchange rate changes (%) 17% 11% 1% -1% -4% -5% -8% -8% -13% -16% Export coal FeMn Copper Platinum Nickel Chrome Iron ore Manganese ore Palladium Exchange ($/t) ($/t) ($/lb) ($/oz) ($/lb) concentrat
Slide 25: Unit cost changes by commodity
Unit cost changes by commodity F2014 vs. F2013 on-mine production unit cost changes (%) Chrome ore -2% PGM: Two Rivers 4% Nkomati Nickel 5% Iron ore 10% Manganese alloys 12% Manganese ore 14% PGM: Modikwa 15% Coal: GGV and PCB 21% -5% 0% 5% 10% 15% 20% 25% Unit production costs continue to be under
Slide 26: Iron ore
Iron ore Iron ore operational performance (100% basis) Khumani Mine sales volumes were lower F2014 F2013 % due to interrupted water supply. change 000 Production tonnes 16 054 16 103 - On-mine production unit % 10 20 - cost change EBITDA margin % 54 55 - Capital Rm 2 058 2 709 (24) expenditure Devel
Slide 27: Manganese ore
Manganese ore Manganese ore operational performance (100% basis) Manganese ore sales volumes were F2014 F2013 % lower due to reduced local sales. change 000 Production tonnes 3 358 3 199 5 On-mine production unit % 14 23 - cost change EBITDA margin % 34 37 - Capital Rm 1 267 777 63 expenditure High
Slide 28: Manganese alloys
Manganese alloys Manganese alloys operational performance (100% basis) The smelters continue to produce at below capacity due to oversupply in the F2014 F2013 % change market. 000 Production tonnes 279 260 7 Unit production % 12 12 - cost change EBITDA margin % 5 6 - Capital Rm 73 439 (83) Unit prod
Slide 29: PGMs
PGMs PGM operational performance (100% basis) Two Rivers Mine delivered an excellent operational performance, F2014 F2013 % change headline earnings up 88%. 000 Production ounces 841 786 7 Unit production R/t 1 010 876 15 cost Modikwa Unit production R/t 602 579 4 cost Two Rivers Modikwa Mine’s perf
Slide 30: Nickel
Nickel Nickel operational performance (100% basis) Nkomati Mine continued its excellent % performance achieving a 91% increase in F2014 F2013 change headline earnings. Nickel tonnes 22 874 23 220 (1) production Chrome 000 342 225 52 production tonnes On-mine cash cost R/t 308 292 5 per tonne milled
Slide 31: Coal
Coal Coal operational performance (attributable basis) Saleable production was lower at GGV mainly as a result of a mining shovel F2014 F2013 % change being out of operation for two months. Saleable production Mt 4.34 4.69 (8) GGV on-mine R/t 208 171 22 saleable cost PCB on-mine R/t 396 326 21 salea
Slide 32: Copper
Copper Copper operational performance (100% basis) Lubambe Mine is continuing with ramp-up. F2013 F2014 Steady state Milled tonnes Mt 1.05 1.59 2.50 % Mill head grade copper 1.92 1.95 2.30 Concentrator Grade challenges experienced due to recovery % 71.4 77.6 78.0 both reef width and dip variability
Slide 33: Capital allocation: segmental analysis
Capital allocation: segmental analysis Capital expenditure (R million)* 5 000 4 500 4 321 4 000 3 494 3 489 3 500 3 200 3 000 2 918 2 900 2 500 2 450 2 000 1 500 1 000 500 0 F2011a F2012a F2013a F2014a F2015e F2016e F2017e ARM Platinum ARM Ferrous ARM Coal ARM Copper *The forecasted capital expendit
Slide 34: Thank you
FaxtM African Rainbow Minerals ED es ee ee eee Thank you We do it better
Slide 35: Transnet's Market Demand Strategy
Transnet’s Market Demand Strategy Manganese Division Coal Division Nchwaning & Gloria Mines Goedgevonden Impunzi & 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 Coal
Slide 36: 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. 36
Slide 37: 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
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