African Rainbow Minerals Limited · JSE:ARI
African Rainbow Minerals — FY2020 Earnings Presentation
46 slides from African Rainbow Minerals's earnings presentation, August 2020
Slide 1: ARM benefits from commodity diversification
“ARM benefits from commodity diversification as headline earnings from the Platinum Group Metals (PGM) operations increased by R1.4 billion. ARM is in a strong financial position with net cash of R3.8 billion.” Dr Patrice Motsepe, Executive Chairman 1
Slide 2: Disclaimer
Disclaimer Disclaimer Throughout this presentation a range of financial and non-financial measures are used to assess the company’s performance, including, but not limited to financial measures that are not defined under International Financial Reporting Standards (IFRS). These adjusted financial me
Slide 3: Results overview
Results overview Executive Chairman: Dr Patrice Motsepe Two Rivers Mine 3
Slide 4: Salient features: Safety and health
Salient features: Safety and health Safety highlights COVID-19 Strict protocols to Black Rock Mine prevent the spread of achieved 8 million COVID-19 have been fatality-free shifts. implemented and are ongoing. Fatalities Lost-time injury frequency (LTIFR) 3 fatalities at the Two Rivers, Nkomati and
Slide 5: Salient features: Earnings
Salient features: Earnings Headline earnings Adjusted headline earnings* 6% to 2% to R5.5 billion R5.1 billion F2019: R5.2 billion F2019: R5.2 billion Segmental EBITDA Basic earnings 18% to 11% to R11.0 billion R4.0 billion F2019: R9.3 billion F2019: R3.6 billion** *Adjusted headline earnings exclud
Slide 6: Salient features: Dividends and financial position
Salient features: Dividends and financial position Total dividend Dividends received from Assmang R12.00 per share 13% to (including a R5.00 interim dividend) R3.8 billion F2019: R13.00 per share F2019 : R3.3 billion (including a R4.00 interim dividend) Dividends received from Two Rivers* Net cash 3
Slide 7: Headline earnings (R million)
Headline earnings (R million) 6 000 5 534 5 226 3 379 5 000 4 814 3 025 2 869 4 000 3 196 3 000 1 503 2 000 2 201 2 155 1 945 1 051 1 693 1 000 544 507 0 F2016 F2017 F2018 F2019 * F2020* Second half (2H) First half (1H) *The F2019 and F2020 headline earnings includes re-measurement gains which are d
Slide 8: Diversified earnings
Diversified earnings EBITDA split by commodity (%) 110% 2% 5% 4% 5% 3% 2% 2% 90% 14% 15% 27% 29% 38% 70% 49% 50% 58% 50% 54% 37% 30% 40% 30% 10% 17% 19% 16% (7%) (3%) (6%) -10% F2016 F2017 F2018 F2019 F2020 PGMs Iron Ore Manganese Coal (GGV) Other * Significantly improved EBITDA contribution from PG
Slide 9: Dividends per share (cents)
Dividends per share (cents) 1 400 1 300 1 200 1 200 1 000 1 000 900 700 800 600 750 * ** 400 650 500 200 400 225 250 0 F2016 F2017 F2018 F2019 1H F2020 Interim dividend per share Final dividend per share Committed to paying dividends in line with dividend guiding principles. 9
Slide 10: Strategy
Strategy FarRM African Rainbow Minerals FaxtM African Rainbow Minerals STRATEGY q DELIVER COMPETITIVE RETURNS AND CREATE fo SUTAINABLE VALUE FOR ; ALL STAKEHOLDERS Operate @ our portfolio of assets safely, responsibly and efficiently. @ Focus on eo value-enhancing and integrated growth. Allocate cap
Slide 11: Focus on value-enhancing growth
Focus on value-enhancing growth ARM is in a strong financial position and is pursuing value-enhancing and integrated growth opportunities. A dedicated management team is assessing both internal and acquisition growth opportunities. Preferred commodities to strengthen portfolio diversification includ
Slide 12: Capital allocation
Capital allocation Allocation of funds* INVEST IN GROWTH OF R695 million EXISTING BUSINESSES (GROWTH CAPITAL EXPENDITURE) INVEST IN EXISTING MERGERS AND ACQUISITIONS BUSINESSES DEBT (STAY-IN-BUSINESS/ REPAYMENT MAINTENANCE R2 717 billion CAPITAL DIVIDEND PAYMENTS** EXPENDITURE) R2 322 million R264 m
Slide 13: Creating shared value for all stakeholders
Creating shared value for all stakeholders Total value created for all stakeholders in F2020* R14.5 billion F2019: R12.6 billion DISTRIBUTED AS FOLLOWS REINVESTED NON- EMPLOYEE GOVERNMENT DIVIDENDS CONTROLLING IN THE SALARIES TAXES TO SHAREHOLDERS INTEREST** BUSINESSES R3.9 billion R3.9 billion R2.9
Slide 14: COVID-19 response
COVID-19 response Contributions made by ARM in F2020 to communities and SMMEs* in response to COVID-19 R1.6 million In addition, the Motsepe family R13.4 million in partnership with companies and organisations that they are associated with (including R35.3 million R58.0 million ARM), have pledged co
Slide 15: Operational review
Operational review Chief Executive Officer: Mike Schmidt Beeshoek Mine 15
Slide 16: Headline earnings/(loss) by division / operation
Headline earnings/(loss) by division / operation Reviewed Audited R million % change F2020 F2019 ARM Platinum 1 142 112 >200 Two Rivers Mine 1 065 322 >200 Modikwa Mine 781 105 >200 Nkomati Mine (704) (315) (123) ARM Ferrous 4 479 4 960 (10) Iron ore division 3 688 3 397 9 Manganese division 836 1 6
Slide 17: EBITDA margins by commodity
EBITDA margins by commodity 38% Manganese division 31% 49% Iron ore division 53% 26% Coal (GGV)* 5% 26% PGM operations* 49% (16%) Nickel (55%) (60%) (40%) (20%) 0 20% 40% 60% F2019 F2020 *Excludes any fair value re-measurement adjustments. 17
Slide 18: ARM Ferrous
FatM African Rainbow Minerals Khumani Mine
Slide 19: ARM Ferrous variance analysis
ARM Ferrous Variance analysis – Attributable profit before tax Changes in on-mine unit production costs (%) (R million) 9 000 1 585 8 000 6 887 Iron ore 10% 7 000 324 1 031 6 153 6 000 (1 938) 5 000 SA manganese alloy 4 000 (1 736) 7% operations 3 000 2 000 1 000 Sakura (23%) 0 F2019 ZAR:USD USD Vol
Slide 20: Iron ore (100% basis)
Iron ore (100% basis) Salient features (100% basis) unit F2020 F2019 % change • The iron ore market remained strong in Export sales 000 F2020. volumes tonnes 13 129 14 430 (9) Local sales 000 • Volumes were impacted by the COVID- volumes tonnes 2 439 3 114 (22) 19 lockdown. Export sales % 54:46 60:4
Slide 21: Export iron ore volumes (100% basis)
Export iron ore volumes (100% basis) (million tonnes) 15.00 14.00 14.30 14.43 14.35 14.35 14.06 1.22 1.31 13.00 13.13 13.05 12.00 11.00 10.00 9.00 8.00 7.00 6.00 5.00 F2017 F2018 F2019 F2020 F2021e * F2022e * F2023e* Sales COVID-19 lost volumes * Based on management’s current view of the COVID-19 im
Slide 22: Local iron ore volumes (100% basis)
Local iron ore volumes (100% basis) (million tonnes) 4.00 3.50 3.56 3.21 3.00 3.10 0.74 0.23 2.92 2.80 2.80 2.50 2.44 2.00 1.50 1.00 F2017 2018 2019 2020 F2021e * F2022e * F2023e* Local Sales COVID-19 lost volumes * Based on management’s current view of the COVID-19 impact which is subject to change
Slide 23: Unit cost breakdown
Unit cost breakdown All in export iron ore unit costs on a 62% Fe equivalent basis (US$/t) 80 70 6.34 60 7.38 63.98 5.64 (8.29) 55.69 50 28.62 40 30 20 16.00 10 On-mine Logistics, Royalties Capital Other 64% to 65% Quality 62% Fe costs Freight and Expenditure Fe delivered differential Delivered mark
Slide 24: Manganese ore (100% basis)
Manganese ore (100% basis) Salient features unit F2020 F2019 % change Export sales 000 • Despite the impact of the COVID-19 3 128 3 321 (6) volumes tonnes lockdown, production volumes increased Local sales 000 by 6% as the Black Rock and Gloria 99 113 (12) volumes tonnes projects progressed. Change
Slide 25: Export manganese ore volumes (100% basis)
Export manganese ore volumes (100% basis) (million tonnes) 4.50 4.00 0.28 4.01 4.00 3.50 0,53 3.73 3.32 3.00 3.08 3.10 2.87 2.50 2.00 1.50 1.00 0.50 0 F2017 F2018 F2019 F2020 F2021 e * F2022 e * F2023 e * Export Sales COVID-19 * Based on management’s current view of the COVID-19 impact which is subj
Slide 26: Manganese alloys (100% basis)
Manganese alloys (100% basis) Salient features 100% basis unit F2020 F2019 % change • Manganese alloy prices remained Sales volumes: South 000 107 148 (28) under pressure in F2020. African operations tonnes 000 Sales volumes: Sakura 216 248 (13) • COVID-19 had a negative impact on tonnes manganese a
Slide 27: ARM Platinum
ARM Platinum Two Rivers Mine 27
Slide 28: ARM Platinum variance analysis
ARM Platinum Variance analysis – Attributable profit before tax Changes in on-mine unit production costs (%) (R million) (excluding Nkomati Mine) 6 000 3 204 5 000 PGM: Two Rivers 24% 273 4 110 4 000 (1 189) (113) (123) 3 000 PGM: Modikwa 19% 920 2 000 1 138 Nickel (3%) 1 000 0 (10%) 10% 20% 30% F20
Slide 29: PGMs (excluding Nkomati) (100% basis)
PGMs (excluding Nkomati) (100% basis) Salient features unit F2020 F2019 % change • Over R1.0 billion improvement in headline earnings. 6E PGM Production 520 620 (16) ounces • Rand PGM basket prices were 73% and 66% higher at Modikwa and Two Rivers, Modikwa cash cost R/oz 6E 11 974 10 027 19 respecti
Slide 30: PGM volumes (including Nkomati)
PGM volumes (including Nkomati) (100% basis) (thousand ounces 6E) 900 800 700 89 81 600 500 400 815 793 730 706 657 300 601 591 200 100 0 F2017 F2018 F2019 F2020 F2021e* F2022e* F2023e* 6e PGM ounces COVID-19 lost volumes * Based on management’s current view of the COVID-19 impact which is subject t
Slide 31: Progress on Nkomati Mine care and maintenance
Progress on Nkomati Mine care and maintenance Nkomati Mine’s plan to scale down in preparation for care and maintenance continues to progress. Production is now expected to cease in February 2021 and not September 2020 as previously planned. The most recent assessment estimates the undiscounted reha
Slide 32: Nickel (100% basis)
Nickel (100% basis) Items affecting Nkomati F2020 headline earnings Salient features (on an attributable basis): • Waste volumes mined reduced as part of the plan to scale down the open pit • Rehabilitation provision increased by R384 million operations. • Provision for diesel rebate of R131 million
Slide 33: ARM Coal
ARM Coal Goedgevonden Coal Mine 33
Slide 34: ARM Coal variance analysis
ARM Coal Variance analysis – Attributable profit before tax (R million) Changes in on-mine unit production costs (%) 500 119 400 PCB 24% 332 (385) 300 160 200 GGV 13% (176) 16 100 66 0% 10% 20% 30% 0 F2019 ZAR:USD USD Prices Volume Costs Re-measurement F2020 gains Changes in sales volumes (%) ARM at
Slide 35: GGV and PCB (100% basis)
GGV and PCB (100% basis) Salient features % Unit F2020 F2019 • Attributable impairments of the ARM Coal change assets of R1 524 million (after tax) were Export sales volumes Mt 12.02 14.22 (16) recognised due to lower expected production Domestic sales volumes Mt 7.99 8.18 (2) volumes and above infl
Slide 36: ARM Coal sales volumes
ARM Coal (attributable) sales volumes (100% basis) (thousand tonnes) 6 000 5 000 1 362 1 360 1 489 1 323 4 000 1 869 4 022 3 945 3 840 3 482 1 743 3 000 3 069 2 676 2 000 1 000 0 F2018 F2019 F2020 F2021e F2022e F2023e Export Local 36
Slide 37: Capital allocation
Capital allocation FD: Abigail Mukhuba Beeshoek Mine 37
Slide 38: Cash Flow Analysis (R million)
Cash Flow Analysis (R million)* Investing in Interest and Shareholder 14 000 existing debt returns Sources of funds repayments business 3 752 12 000 294 (800) 10 000 (805) (221) 3 866 8 000 (2 717) (57) (566) 5 512 6 000 66 4 239 (1 539) 4 000 2 000 Increase Decrease 0 Balance Cash Dividends Taxatio
Slide 39: Net cash and debt
Net cash and debt R million 30 June 2020 30 June 2019 Cash and cash equivalents * 5 715 4 632 Total borrowings (1 925) (2 031) Long-term borrowings (1 512) (1 095) Short-term borrowings (413) (936) Net cash* 3 790 2 601 Total equity 34 108 29 703 Net cash to equity ratio 11.1% 8.8% Add back: Partner
Slide 40: ARM Coal receivable
ARM Coal receivable ARM Coal previously recorded a long-term receivable payable by Glencore Operations South Africa (GOSA) to ARM Coal of R452 million (ARM's attributable portion: R230 million). ARM Coal, to the date of this presentation, is unable to provide sufficient evidence to support this rece
Slide 41: Segmental capital expenditure (R million)
Segmental capital expenditure* (R million) 4 000 3 600 3 506 3 242 3 400 3 500 3 000 2 700 2 464 2 500 2 352 2 383 2 000 1 500 1 000 500 0 F2016a F2017a F2018a F2019a F2020a F2021e ** F2022e ** F2023e** F2022e ** ARM Platinum ARM Ferrous ARM Coal ARM Copper * Capital expenditure includes (i) deferre
Slide 42: Thank you
Thank you Beeshoek Iron Ore Mine 42
Slide 43: Additional slides
Additional slides Black Rock Manganese Ore Mine 43
Slide 44: Headline earnings analysis by operation / division
Headline earnings analysis by operation / division (R million) 8 000 2% 7 000 632 291 6 000 743 (389) 5 534 441 5 226 5 177 (772) 64 5 093 5 000 (49) (653) 4 000 3 000 2 000 1 000 0 F2019 Net re- F2019 Two River Modikwa Nkomati Iron ore Manganese Coal Corporate F2020 Net re- F2020 headline measureme
Slide 45: Summary of re-measurement gains and losses
Summary of re-measurement gains and losses F2020 F2019 % change ARM Mining Consortium (Modikwa) (112) (156) 28 ARM Mining Consortium (Modikwa) - (127) (175) 27 Intercompany Anglo American Platinum (8) (12) 33 Non-controlling interest 23 31 (26) ARM Coal 485 245 98 Goedgevonden Mine 206 190 8 PCB ope
Slide 46: Gross profit margin by commodity
Gross profit margin by commodity 44% Manganese 30% 51% Iron ore 51% 6% Coal (GGV)* 3% 24% PGMs* 49% (15%) Nickel (15%) (20%) (10%) 0 10% 20% 30% 40% 50% 60% F2019 F2020 46
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