Slide 1: Results Presentation for the year ended 31 December 2012
INVESTED IN LONG-TERM SUSTAINABLE PARTNERSHIPS `+ MERAFE RESOURCES LIMITED Results Presentation For the year ended 31 December 2012 Presented by Zanele Matlala (CEO) and Ditabe Chocho (CFO) Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 2: Legal notice/disclaimer
2 Legal notice/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 Merafe Resour
Slide 3: Quote from the CEO
3 Quote from the CEO “I am pleased to report that we achieved headline earnings per share of 5 cents for the 2012 year despite tough market conditions. Project Tswelopele, our new pelletiser, was commissioned on schedule and on budget in October 2012. We look forward to a further strengthening of ou
Slide 4: Agenda
4 Agenda 1. Key features 2. Sustainability 3. Market review 4. Financial review 5. Project pipeline 6. Outlook Annexures Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 5: Key features
Key features The Tswelopele pelletising Merafe Resources and presentation for the year ended 31 December 2012 Ltd Results sintering plant North West province
Slide 6: Key features
6 Key features • 5% increase in Revenue • Headline EPS of 5 cents • Projects on schedule and on budget Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 7: Sustainability
Sustainability Production Engineer, Charlotte Ntsole, at work on the newMerafe Resources Ltd Results presentation for the year ended 31 December 2012 Tswelopele pelletising and sintering plant North West province
Slide 8: Sustainability
8 Sustainability • Safety – TRIFR - 4.05 – Project Tswelopele - more than 1.6m hours were worked with no lost time injuries • Employment equity targets exceeded • Community unrest impacted Project Lion II • Labour unrest Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 9: Market review
Market review The LionMerafe Resources Ltd ferrochrome Results plant at presentation for the year ended 31 December 2012 Steelpoort Limpopo province
Slide 10: Global stainless steel production
10 Global stainless steel production 40 000 2011 ACTUAL TONNES in '000 2012 ESTIMATED TONNES in '000 3% 35 000 30 000 25 000 20 000 9% 15 000 10 000 1% 5 000 3% 3% 4% 9% 1% - 34 081 1 107 3 256 35 161 2 265 1 114 2 469 3 173 3 243 3 360 1 985 7 447 14 460 15 730 7 559 2 074 Others NAFTA India Japan
Slide 11: Global ferrochrome demand
11 Global ferrochrome demand 12 000 2011 ACTUAL TONNES in '000 2012 ESTIMATED TONNES in '000 10 000 2% 8 000 6 000 5% 4 000 0.1% 2 000 4% 4% 0.1% 1% 10% - 462 495 695 752 469 553 664 781 767 766 1 722 1 724 4 596 4 842 9 554 9 734 NAFTA India Japan Others S Korea / Taiwan EU China Total NAFTA India
Slide 12: Global ferrochrome production
12 Global ferrochrome production 10 000 1% 2011 ACTUAL TONNES in '000 2012 ESTIMATED 2012 ESTIMATED TONNES TONNES IN ‘000in '000 9 000 8 000 7 000 6 000 5 000 4 000 19% 9% 3 000 2 000 4% 2% 1 000 4% 13% 14% - 985 348 286 323 336 329 277 941 2 798 3 320 3 319 3 017 9 178 9 303 1 088 1 114 Others Russ
Slide 13: Chrome ore imports into China
13 Chrome ore imports into China 2012 2011 2010 % change ‘000 ‘000 ‘000 2012/2011 South Africa 4 490 4 675 3 100 (4.0) Turkey 1 840 1 612 1 933 14.1 Oman 426 645 902 (34.0) India 310 439 389 (29.4) Pakistan 472 440 512 7.3 Albania 305 357 363 (14.6) Iran 448 330 350 35.8 Zimbabwe 1 212 160 (99.5) Ma
Slide 14: Volatility in the market during 2012
14 Volatility in the market during 2012 Ferrochrome Quarter price Q1 2012 115 USc/lb Improved sentiment in Europe and Eskom buy-back arrangements Q2 2012 135 USc/lb Renewed concerns over European debt and general Q3 2012 125 USc/lb weaknesses across the global economy Q4 2012 110 USc/lb Positive sig
Slide 15: Financial review
Financial review Merafe Resources Ltd Results The Lion ferrochrome plant at presentation for the year ended 31 December 2012 Steelpoort Limpopo province
Slide 16: Contents
16 Contents 1. Key financial features 2. Financial performance 3. Financial position 4. Looking ahead – key priorities Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 17: Key financial features
17 Key financial features R2 542m R 2 427m 5% Revenue 2011 2012 R 380m 17% R314m EBITDA 2011 2012 HEPS 6 cents 1 cent 5 cents 2011 2 011 2012 2 012 R603m Capex R404m 49% 2 011 2011 2 012 2012 R 441m R348m Net debt R 93m 2011 2012 Merafe Resources Ltd Results presentation for the year ended 31 Decemb
Slide 18: Revenue
18 Revenue Ferrochrome sales tonnes Average benchmark ferrochrome price 125 USc/lb 3% 121 USc/lb 254kt 255kt 2011 2012 2011 2012 Rand Dollar exchange rate Chrome ore sales R343m 4% 8.21 R330m 13% 7.26 2011 2012 2011 2012 Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 19: Operating costs
19 Operating costs Average energy efficiency improvements the Venture has achieved and expects to achieve Venture technology This improvement represents more than MWh/t 25% in energy efficiency over the past decade. 2012 total cost per tonne increases contained at 9% Merafe Resources Ltd Results pre
Slide 20: Reconciliation of EBITDA to profit
20 Reconciliation of EBITDA to profit 400 349 300 (35) 200 33 100 (218) (20) (60) 49 0 Net financing costs Prior years' overprovision Depreciation and impairment Profit Merafe's 20.5% EBITDA from Corporate costs Deferred tax -100 Venture -200 -300 Merafe Resources Ltd Results presentation for the ye
Slide 21: Capital expenditure (R'm)
21 Capital expenditure (R’m) 2 500 SUSTAINING IN R'M EXPANSIONARY IN R'M 2 301 2 000 1 500 1 000 703 603 500 404 270 138 183 Total 0 ‘08 ‘09 ‘10 ‘11 ‘12 2013 estimate 2008 2009 2010 2011 2012 2013 estimate Total Average EBITDA Margin of 20% through the cycle Merafe Resources Ltd Results presentation
Slide 22: Balance sheet
22 Balance sheet As at As at 31 December 31 December 2012 2011 Audited Audited R’000 R’000 Movement Total non-current assets 2 677 308 2 372 768 Property, plant and equipment 2 677 308 2 372 768 13% Total current assets 1 614 804 1 549 370 Inventories 1 088 885 1 065 932 2% Trade and other receivabl
Slide 23: Balance sheet (continued)
23 Balance sheet (continued) As at As at 31 December 31 December 2012 2011 Audited Audited R’000 R’000 Movement Total non-current liabilities 1 132 929 867 378 Loans and borrowings 523 872 312 778 67% Provision for close down and restoration costs 57 892 48 396 20% Deferred tax 551 165 506 204 9% To
Slide 24: Net debt bridge
24 Net debt bridge Cash from operating activities* 300 254 200 100 Net debt at 31 Dec 2011 0 -100 (93) -200 (179) -300 Sustaining capex -400 (423) (441) -500 Expansionary Net debt at capex 31 Dec 2012** *Net of effect of exchange rate fluctuations **Closing net debt at 31 Dec 2012 (441) Cash 83 Debt
Slide 25: Financing of Lion II – no rights issue expected
25 Financing of Lion II – no rights issue expected R’millions Total Project cost (Merafe’s portion at 20.5%) 1 000 Less: Capital expenditure to 31 December 2012 (472) Capital expenditure outstanding 528 Expected financing: Cash 83 ABSA debt – unutilised facility 288 Venture overdraft facility (Meraf
Slide 26: Looking ahead – key priorities
26 Looking ahead – key priorities 2013 Capacity building and efficiency improvements 2014 / 2015 Reduction of debt and balance sheet strengthening Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 27: Project pipeline
Project pipeline Inside theMerafe Resourcespelletising Tswelopele Ltd Results presentation for the year ended 31 December 2012 and sintering plant North West province
Slide 28: Projects are on track and on budget
28 Projects are on track and on budget Project cost (Merafe’s portion Completion Description at 20.5%) date Progress 1 Lion II smelter complex R1bn H2 2013 On track to be - 360 000 tpa of ferrochrome completed within smelting capacity and schedule/budget development of Magareng mine 2 Project Tswelo
Slide 29: Outlook
Outlook WeldersMerafe Resources at work on theLtdKiln Results at presentation for the year ended 31 December 2012 the Lion II project Limpopo province
Slide 30: Outlook
30 Outlook • Stainless steel production is expected to grow by 4% in 2013 and by 5% in the long-term which is expected to increase demand for ferrochrome • Improved market sentiments coupled with Eskom buy-back arrangements are expected to result in improved pricing for 2013 • Existing low cost base
Slide 31: Questions
31 Questions Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 32: Annexures
Annexures Merafe Resources Lion II ferrochrome Ltdunder plant Results presentation for the year ended 31 December 2012 construction Limpopo province
Slide 33: Stainless steel cluster
33 Stainless steel cluster Heinz H. Pariser /Feb 2013 Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 34: Stainless steel product mix
34 Stainless steel product mix Heinz H. Pariser /Feb 2013 Merafe Resources Ltd Results presentation for the year ended 31 December 2012
Slide 35: Globally rising power prices
35 Globally rising power prices Merafe Resources Ltd Results presentation for the year ended 31 December 2012