Slide 1: Results Presentation for the Year Ended 31 December 2009
Results Presentation for the Year Ended 31 December 2009
Slide 2: Legal Notice / Disclaimer
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: Contents
Contents 1. Key Highlights for the Year ended 31 December 2010 2. Safety 3. Market Review 4. Operational Review 5. Financial Review 6. Industry Outlook 7. Recent Developments 8. Prospects 3
Slide 4: 1. Key Highlights for the Year ended 31 December 2009
1. Key Highlights for the Year ended 31 December 2009
Slide 5: Key Highlights for the Year Ended 31 December 2009
Key Highlights for the Year Ended 31 December 2009 • 26% increase in sales volumes • 49% reduction in ferrochrome inventory • 81% reduction in net financing costs • Healthy cash balance of R463 million • Maiden cash dividend of 2 cents per share declared* • 30% recovery in ferrochrome price from Q1’
Slide 6: 2. Safety
2. Safety MERAFE RESOURCES
Slide 7: Safety Continues to be the Key Priority for the Venture
Safety Continues to be the Key Priority for the Venture • Venture’s excellent safety record for the year sadly marred by tragic death of contractor Mr Julias Ngele during December 2009 • Mr Ngele was a front end loader operator employed by Fraser Alexander Bulkmech, the main internal transport contr
Slide 8: 3. Market review
3. Market review MERAFE RESOURCES
Slide 9: Stainless Steel: China Drove Demand in H2'09
Stainless Steel: China Drove Demand in H2’09 • Production from Western Europe, Japan and America continued to weaken First Half of 2009 significantly during H1’09 • Chinese stainless steel mills increased capacity to around 90% during Q2’09 – Resulted in increased demand for ferrochrome – Venture ha
Slide 10: Global Stainless Steel Production Breakdown
Global Stainless Steel Production Breakdown Change Forecast Change 2007 2008 2009 09/08 2010 10/09 in ’000t in ’000t in ’000t in % in ’000t in % NAFTA 2,171 1,925 1,618 -16.0 2,140 32.3 European Union 8,109 7,828 5,974 -23.7 6,949 16.3 Japan 3,901 3,564 2,610 -26.8 3,330 27.6 S.Korea/Taiwan/India 5,
Slide 11: Ferrochrome: Difficult Start Followed by Returning Demand
Ferrochrome: Difficult Start Followed by Returning Demand • Weak demand during Q1’09 First Half of 2009 • Reduced demand for ferrochrome in H1’09 led to sharp decline in the European benchmark ferrochrome price – Q3’08: 205 US¢/lb Q1’09: 79 US¢/lb Q2’09: 69 US¢/lb • Increased Chinese stainless steel
Slide 12: Global Ferrochrome Production Breakdown
Global Ferrochrome Production Breakdown G.R. Change Forecast Change 2008 2009 00-09 09/08 2010 10/09 in’000t in ’000t in % in % in ’000t in % Brazil 187 119 1.1 -36.4 165 38.9 EU 27 356 133 -5.9 -62.6 340 155.6 Russia, Turkey, Albania 531 335 10.9 -37.0 560 67.4 India 750 744 -1.2 -0.8 750 0.8 Kazak
Slide 13: Venture's Geographical Sales Fairly Match Geographical Stainless Steel Production
Venture’s Geographical Sales Fairly Match Geographical Stainless Steel Production The Venture’s ferrochrome sales by region for 2009 vs. stainless steel production in 2009 Venture’s sales Stainless steel production Region by region by region Asia 54% 59% Europe 32% 23% USA 11% 7% Others 3% 11% Total
Slide 14: Export Duty Imposed by Indian Government has Curbed Chrome Ore Exports
Export Duty Imposed by Indian Government has Curbed Chrome Ore Exports out of India Chrome ore imports : China • China imported a total of 6.8 Mt of chrome ore in 2009, which was 1.3% lower than 2008 • Primary sources of the imports in 2009 were: Country % of China’s ore imports What the delivered o
Slide 15: 4. Operational review
4. Operational review MERAFE RESOURCES
Slide 16: Challenging Economic Environment Impacted Operations
Challenging Economic Environment Impacted Operations • Extremely challenging year for the Venture – Started the year with high volumes of inventory (reduced by 49% by end of the year) • The Venture started the year operating at 20% of production capacity due to weak demand for ferrochrome seen in th
Slide 17: Implemented Cost Saving Initiatives and Ensured Quick Start up
Implemented Cost Saving Initiatives and Ensured Quick Start up • Premus based furnaces remained in operation through most of the downturn – Contributed a 5% improvement in both ore consumption and a electricity efficiency y-o-y • Training programmes and limited maintenance were carried out during th
Slide 18: 5. Financial review
5. Financial review MERAFE RESOURCES
Slide 19: Key Financial Features for the Year Ended 31 December 2009
Key Financial Features for the Year Ended 31 December 2009 • Revenue down by 34% to R1.8 billion • Full year loss of R152 million equating to a loss of 6c per share • Net financing costs down by 81% • Ferrochrome inventory reduced by 49% • Cash flows from operations of R267 million • Healthy cash ba
Slide 20: Abridged Consolidated Statement of Comprehensive Income
Abridged Consolidated Statement of Comprehensive Income As at As at 31 December 2009 31 December 2008 Audited Audited R’000 R’000 Revenue 1,839,169 2,781,304 EBITDA (100,311) 1,611,923 Depreciation (106,189) (77,918) Net financing costs (11,975) (63,983) (Loss)/profit before income tax (218,475) 1,4
Slide 21: Abridged Consolidated Statement of Comprehensive Income (cont.)
Abridged Consolidated Statement of Comprehensive Income (cont.) As at As at 31 December 2009 31 December 2008 Audited Audited R’000 R’000 Income tax income/(expense) 66,150 (442,331) Current tax (1,902) (84,216) Deferred tax 68,052 357,247 Secondary tax on companies - (868) (Loss)/profit and total c
Slide 22: Dividend Declared on 26 February 2010
Dividend Declared on 26 February 2010 Total amount of the cash dividend R49.185 million Dividend per share 2 cents Key dates: Last date to trade cum-dividend Thursday, 18 March 2010 Shares trade ex-dividend Friday, 19 March 2010 Record date Friday, 26 March 2010 Payment date Monday, 29 March 2010 22
Slide 23: Abridged Consolidated Statement of Financial Position
Abridged Consolidated Statement of Financial Position As at As at 31 December 2009 31 December 2008 Audited Audited R’000 R’000 Total non-current assets 1,949,464 1,861,185 Property, plant and equipment 1,949,464 1,861,185 Total current assets 1,454,435 1,893,165 Trade and other receivables 234,346
Slide 24: Abridged Consolidated Statement of Financial Position (cont.)
Abridged Consolidated Statement of Financial Position (cont.) As at As at 31 December 2009 31 December 2008 Audited Audited R’000 R’000 Total non-current liabilities 782,153 845,136 Loans and borrowings 363,626 366,174 Provision for closure and restoration costs 37,347 29,730 Deferred tax liability
Slide 25: Abridged Consolidated Statement of Cash Flow
Abridged Consolidated Statement of Cash Flow As at As at 31 December 2009 31 December 2008 Audited Audited R’000 R’000 (Loss)/profit before income tax (218,475) 1,470,022 Net interest paid 11,975 52,517 Depreciation 106,189 77,918 Adjusted for non-cash items 3,625 12,485 Adjusted for working capital
Slide 26: Abridged Consolidated Statement of Cash Flow (cont.)
Abridged Consolidated Statement of Cash Flow (cont.) As at As at 31 December 2009 31 December 2008 Audited Audited R’000 R’000 Net acquisition of property, plant and equipment (182,583) (138,262) Cash flows from financing activities (2,548) (114,351) Net (decrease)/increase in cash and cash equivale
Slide 27: Increasing Production Costs Limited by Executing on Cost Saving Initiatives
Increasing Production Costs Limited by Executing on Cost Saving Initiatives • Despite the Venture improving efficiencies, variable costs rose by 20% in nominal Rand terms, primarily due to: – A 34% increase in electricity costs – A 30% increase in average reductant prices – Labour cost increases (al
Slide 28: Royalty Tax
Royalty Tax • Royalty tax effective 1 March 2010 • Merafe (“the Venture”) subject to the “Unrefined” formula • Royalty % is: 0.5% + [(EBIT)/(gross sales x 9)] % • Taxable EBIT – can deduct unredeemed capex but not assessable losses • Maximum Royalty is 7% of gross sales • Royalty is tax deductable 2
Slide 29: 6. Industry outlook - 2010
6. Industry outlook - 2010 MERAFE RESOURCES
Slide 30: Stainless Steel Outlook: Market Review – What we See in Q1'10
Stainless Steel Outlook: Market Review – What we See in Q1’10 • Stainless steel production in Q1’10 estimated to be at similar levels to that of Q4’09 • China – Rising domestic demand due to the government stimulus programme and lower exports of finished products resulted in higher domestic consumpt
Slide 31: Ferrochrome Outlook: Market Review – What we See in Q1'10
Ferrochrome Outlook: Market Review – What we See in Q1’10 • Global stockpiles significantly reduced and currently at about 10 weeks consumption – 14 – 16 weeks considered to be optimal level • Costs for South African ferrochrome producers continue to be under pressure – Eskom’s electricity tariff in
Slide 32: 7. Recent developments
7. Recent developments MERAFE RESOURCES
Slide 33: Merafe Coal Joint Venture Terminated
Merafe Coal Joint Venture Terminated • 2007: Merafe formed a 50/50 JV with Sentula Mining Limited called Merafe Coal • Merafe Coal’s objective was to develop existing coal projects in its portfolio as well as pursue further opportunities in South Africa • By mutual agreement, the joint venture has b
Slide 34: UG2 Chrome Contract Signed with Lonmin
UG2 Chrome Contract Signed with Lonmin • The Venture has signed a contract with Lonmin for construction of a Chrome Recovery Plant (CRP) to treat the current tailings from UG2 concentrators at Lonmin’s Marikana operations • The Venture will construct, own and operate the CRP and purchase the chromit
Slide 35: 8. Prospects
8. Prospects MERAFE RESOURCES
Slide 36: Immediate Outlook for Ferrochrome Very Positive
Immediate Outlook for Ferrochrome Very Positive • Ferrochrome stock levels are at historic lows • Increase in forecast production of stainless steel for the next five years will result in the demand for ferrochrome increasing by 6% CAGR over the same period • Ferrochrome prices expected to increase
Slide 37: www.meraferesources.co.za
www.meraferesources.co.za