Invested

in lonG-term sustainable

partnerships

Merafe Resources Limited

Results presentation
For the six months ended ...
Legal notice/disclaimer
This presentation is published solely for informational purposes and does not constitute investmen...
Agenda
1.

Key features

2.

Sustainability

3.

Market review

4.

Financial review

5.

Outlook
Annexures

Key features
6

Key features
•  Increase in production of 23%
•  Increase in revenue of 19%
•  Decrease in EBITDA from R263m to R210m
•...
8

Sustainability
•  Safety
– Regrettably two fatalities
– TRIFR – 4.27
•  Labour issues

–  Eastern mines unprotected str...
10

7% increase in stainless steel production
25 000
2012 June actual tonnes in '000

2013 June estimated tonnes in '000

...
12

3% increase in ferrochrome production
6 000
2012 June actual tonnes in '000

2013 June estimated tonnes in '000
3%

5 ...
14

Volatility in the market during 2013

Ferrochrome price
in Usc/lb

Quarter

Q1 2013

112.5

Positive signs in the Chin...
16

Key financial features
R1 469m

R1 230m

19%

Revenue
June 2012
R263m

June 2013
20%

R210m

EBITDA
June 2012

5.5c

H...
18

Key contributors to lower EBITDA
•  Mining division costs
–  Development costs
–  Strike related costs
–  Inflationary...
20

Reconciliation of EBITDA to profit
250

236

200

(26)

R million

150

100

(145)

50

(9)

1

(1)

34

Prior year
ov...
22

Balance sheet (continued)
As at
As at
30 June 2013 31 December 2012
Reviewed
Audited
R’000
R’000
Total non-current lia...
24

Lion II is on track and within budget

Description

Project cost
(Merafe’s portion
at 20.5%)

Commissioning
date Progr...
Outlook

27

Outlook
•  Stainless steel production is expected to grow by 7% in 2013 and
by 5% in the long-term which is e...
28

Questions

Annexures
30

Ferrochrome Industry Cost Curve

Cost in US$ ct per lb Cr Content

140.0

© Heinz H. Pariser

120.0

2012

Charge Cr B...
32

Globally Rising Power Prices
All data based on average power prices and exchange rates for the years stated /
South Af...
Notes
Reviewed interim results
For the six months ended 30 June 2013
Merafe Resources LIMITED (incorporated in the Republic of S...
Commentary
Basis of preparation
In compliance with the JSE Limited Listings Requirements, Merafe Resources Limited (“Meraf...
Review of operations
Ferrochrome production for the first six months of 2013 was 23% higher than the comparative 2012 peri...
Outlook
Stainless steel production is expected to grow by 7%* in 2013 and by 5%* in the long-term which is expected to
lea...
Group condensed statement of comprehensive income
Six months ended Six months ended
30 June 2013
30 June 2012
Reviewed
Rev...
Group condensed statement of financial position
As at
30 June 2013
Reviewed
R’000

As at
31 December 2012
Audited
R’000

A...
Group condensed statement of changes in equity
Six months ended Six months ended
30 June 2013
30 June 2012
Reviewed
Review...
Group condensed statement of cash flow
Six months ended Six months ended
30 June 2013
30 June 2012
Reviewed
Reviewed
R’000...
Sponsor: Merrill Lynch South Africa Proprietary Limited
Executive directors: Z Matlala (Chief Executive Officer),
D Chocho...
Notes
Notes
www.meraferesources.co.za
Merafe Resources Limited HY 2013 financial results presentation
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Merafe Resources Limited HY 2013 financial results presentation

  1. 1. Invested in lonG-term sustainable partnerships Merafe Resources Limited Results presentation For the six months ended 30 June 2013 Zanele Matlala (CEO) and Ditabe Chocho (CFO)
  2. 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 Resources to be reliable but no warranty is given that such information is accurate or complete and it should not be relied upon as such. Views and opinions expressed in this presentation reflect the judgment of Merafe Resources as of the date of this presentation and are subject to change. Merafe Resources will not be responsible for any liability for loss or damage of any kind which arises, directly or indirectly, and is caused by the use of any of the information provided. The entire presentation is subject to copyright with all rights reserved. The information contained herein shall not be published, rewritten for broadcast or publication or redistributed in any medium without prior written consent from Merafe Resources. Prospective investors should take appropriate investment advice and inform themselves as to applicable legal requirements, exchange control regulations and tax considerations in the countries of their citizenship, residence or domicile. The distribution of the information contained in this presentation in certain countries may be restricted by law and persons who access it are required to inform themselves and to comply with any such restrictions. This information does not constitute an offer or solicitation in any jurisdiction in which such an offer or solicitation is not authorised or to any person to whom it is unlawful to make such an offer or solicitation. Past performance is not a guarantee of future performance. The price of shares can go down as well as up and may be affected by change in exchange rates, market conditions and risks associated with a mining venture. Quote from the CEO “We managed to achieve headline earnings per share of 4 cents for the six-month period, despite the difficult operating environment. We are delighted to report that good progress has been made on our flagship Lion II smelter project which is on track to be commissioned at the end of this year. Our significant investments in improving the cost efficiencies in our operations leave us well positioned as one of the lowest cost producers in the world which should enable us to take advantage of the forecasted increase in demand for ferrochrome and to grow our market share going forward”.
  3. 3. Agenda 1. Key features 2. Sustainability 3. Market review 4. Financial review 5. Outlook Annexures Key features
  4. 4. 6 Key features •  Increase in production of 23% •  Increase in revenue of 19% •  Decrease in EBITDA from R263m to R210m •  Decrease in HEPS from 5.5 cents to 3.8 cents •  Operating cash flows of R234m •  The Venture’s R5bn Project Lion II is on schedule and within budget Sustainability
  5. 5. 8 Sustainability •  Safety – Regrettably two fatalities – TRIFR – 4.27 •  Labour issues –  Eastern mines unprotected strike which resulted in the dismissal of more than 1 200 employees –  Wage negotiations are ongoing Market review
  6. 6. 10 7% increase in stainless steel production 25 000 2012 June actual tonnes in '000 2013 June estimated tonnes in '000 7% 20 000 15 000 17% 10 000 2% 5 000 10% 5% 589/645 Others - 6% 1 011/1 070 NAFTA 1 167/1 231 India 2% 6% 1 593/1 560 Japan 1 694/1 594 S Korea/ Taiwan 4 084/4 003 EU 2012 Full year – tonnes in ‘000 7 823/9 117 China 2013 35 809 17 961/19 220 Total Change 38 284* 7% * Estimate Source: Heinz H Pariser/July 2013 11 4% increase in ferrochrome demand 6 000 2012 June actual tonnes in '000 4% 2013 June estimated tonnes in '000 5 000 4 000 13% 3 000 2 000 1 000 - 1% 7% 3% 11% 6% 11% 413/368 S Korea/ Taiwan 248/231 259/268 397/352 322/340 NAFTA India Others Japan 938/930 EU 2 317/2 613 China 2012 Full year – tonnes in ‘000 * Estimate Source: Heinz H Pariser/July 2013 2013 9 717 10 368* 4 894/5 102 Total Change 7%
  7. 7. 12 3% increase in ferrochrome production 6 000 2012 June actual tonnes in '000 2013 June estimated tonnes in '000 3% 5 000 4 000 3 000 13% 13% 2 000 3% 19% 1 000 18% 35% 177/145 154//170 171/230 459/545 537/551 1 596/1 798 1 591/1 390 4 685/4 829 Others - 10% Russia/ Turkey/ Albania EU India Kazakhstan China South Africa Total 444 2012 2013 Full year – tonnes in ‘000 9 478 10 349* Change 9% * Estimate Source: Heinz H Pariser/July 2013 Chrome ore imports into China increased 26% period on period Albania Algeria Australia Brazil India Indonesia Iran Kazakhstan Madagascar Mozambique Oman Pakistan Philippines South Africa Sudan Turkey United Arab Emirates Vietnam Zimbabwe Others Total 2011 ‘000 357 – 208 60 439 13 330 94 86 24 645 440 137 4 675 61 1 612 11 25 212 15 9 444 2012 ‘000 305 1 501 29 310 16 448 89 118 11 426 472 180 4 490 14 1 840 17 2 1 31 9 300 2013 (June year-to-date) ‘000 296 – 233 – 66 – 204 67 53 19 298 261 54 3 136 11 871 5 10 – 3 5 590 Six months ended 30 June 2012 ‘000 tonnes Source: Chinese Customs/July 2013 Six months ended 30 June 2013 Change 4 439 5 590 26% 13
  8. 8. 14 Volatility in the market during 2013 Ferrochrome price in Usc/lb Quarter Q1 2013 112.5 Positive signs in the Chinese, North American and European markets coupled with further Eskom buy-back arrangements Q2 2013 127 Global economic uncertainty, weakening Rand, concerns about Chinese growth and lower nickel prices Q3 2013 112.5 Financial review
  9. 9. 16 Key financial features R1 469m R1 230m 19% Revenue June 2012 R263m June 2013 20% R210m EBITDA June 2012 5.5c HEPS June 2013 1.7 cents June 2012 R242m Capex June 2013 R280m 16% June 2012 Net debt R441m June 2012 3.8c June 2013 R85m R525m June 2013 17 Revenue Ferrochrome sales tonnes 124kt 10% Average benchmark ferrochrome price 137kt 125 USc/lb 4% 120 USc/lb June 2013 June 2012 Rand/Dollar exchange rate June 2012 June 2013 Chrome ore sales R180m 9.2 7.9 16% 7% R168m June 2012 June 2013 June 2012 June 2013
  10. 10. 18 Key contributors to lower EBITDA •  Mining division costs –  Development costs –  Strike related costs –  Inflationary increases •  Smelting division costs –  Inflationary increases (power, fuel and labour) •  Foreign exchange losses Decrease of 2% in production costs* per tonne of ferrochrome Negatively impacted by: lower EBITDA contributors increased winter production Positively impacted by: ferrochrome production volumes efficiencies at plants recovery from slag * including fixed costs, standing charges and head-office costs 19
  11. 11. 20 Reconciliation of EBITDA to profit 250 236 200 (26) R million 150 100 (145) 50 (9) 1 (1) 34 Prior year overprovision Profit (22) 0 Merafe's 20.5% of EBITDA from the venture Corporate costs Depreciation Net financing and impairment costs Current tax expense Deferred tax expense 21 Balance sheet As at 30 June 2013 Reviewed R’000 As at 31 December 2012 Audited R’000 Total non-current assets 2 902 009 2 677 308 Property, plant and equipment 2 902 009 2 677 308 Total current assets 1 611 793 1 614 804 Inventories 1 142 276 1 088 885 5% 395 990 344 725 15% Current tax asset 26 986 26 424 Cash and cash equivalents 46 541 82 643 – 72 127 4 513 802 4 292 112 Trade and other receivables Assets held for sale Total assets Movement 8%
  12. 12. 22 Balance sheet (continued) As at As at 30 June 2013 31 December 2012 Reviewed Audited R’000 R’000 Total non-current liabilities 1 215 224 1 132 929 571 791 523 872 54 800 57 892 Deferred tax 588 633 551 165 Total current liabilities 553 172 449 554 667 636 552 505 430 368 – 18 550 1 768 396 Movement 1 582 483 Loans and borrowings Provision for close down and restoration costs Loans and borrowings Trade and other payables Liabilities held for sale Total liabilities 9% 28% 23 Net debt bridge 300 196 200 100 R million 0 -100 (80) -200 (200) -300 -400 -500 (441) (525) -600 Net debt at 31 December 2012 Cash flows from operating activities* Closing net debt at 30 June 2013 Expansionary capex Sustaining capex Net debt at 30 June 2013 (525) Cash at 30 June 2013 46 Debt at 30 June 2013 (571) * Net of effect of exchange rate fluctuations
  13. 13. 24 Lion II is on track and within budget Description Project cost (Merafe’s portion at 20.5%) Commissioning date Progress Lion II smelter complex 360 000 tpa of ferrochrome smelting capacity and development of Magareng mine R1 billion Q4 2013 On track to be completed on schedule and within budget 25 Financing of Lion II R’million Total project cost (Merafe’s 20.5%) 1 000 Less: Capital expenditure to 30 June 2013 (650) Capital expenditure outstanding Cash on balance sheet 350 46 ABSA debt* 240 Glencore warehousing facility (Merafe’s 20.5%)*# 100 Glencore overdraft facilities (Merafe’s 20.5%)*# 250 Total facilities available (excluding cash generated) 636 * Unutilised facility # Based on the closing R/$ exchange rate at 30 June 2013
  14. 14. Outlook 27 Outlook •  Stainless steel production is expected to grow by 7% in 2013 and by 5% in the long-term which is expected to increase demand for ferrochrome. •  We are well positioned to take advantage of the increase in demand for ferrochrome: Cost performance of Rustenburg plant on par with our other non-premus furnaces which enables higher capacity utilisation 6% forecasted improvement in total cost per tonne as a result of Lion II •  Strong balance sheet will enable debt reduction and payment of dividends post Lion II expansion.
  15. 15. 28 Questions Annexures
  16. 16. 30 Ferrochrome Industry Cost Curve Cost in US$ ct per lb Cr Content 140.0 © Heinz H. Pariser 120.0 2012 Charge Cr Benchmark (Q3): US$ ct 112.5 per lb Y-t-D 2013 July 2013 21 China Tender (Q2): US$ ct 102 per lb (50% Cr) 100.0 20 80.0 4 5 60.0 6 9 78 3 2 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 1 40.0 2012: Y-t-D 2013: July 2013: 20.0 0.0 0.0 10.0 17 16 15 121314 10 11 18 19 US$ ct 88.0 per lb US$ ct 83.5 per lb US$ ct 81.1 per lb 20.0 30.0 KazChrom Xstrata Merafe Samancor Cr IFML Ruukki SA Hernic IMFA Facor Group Outokumpu ASA Metals Balasore 40.0 50.0 60.0 70.0 Share of Production, in % 12. 13. 14. 15. 16. 17. 18. 19. 20. 21. Vargön Rohit JSL Ltd China - I Assmang China - II Ferbasa Tata Steel KZN Eti Krom Tikhvin 80.0 90.0 100.0 Source: Heinz H Pariser/July 2013 31 Stainless Production by Grade 40 23.8 70% 60% 300 Series 53.8 30% 20% 10% 30 China 25 20 15 17.8 10 5 1.9 1.0 2013 2012 2011 2010 2009 2008 2007 2006 0 2005 2014 2013 2011 2010 2009 2008 2007 2006 2005 2004 Source: Heinz H Pariser/July 2013 2012 © Heinz H. Pariser 0% © Heinz H. Pariser * USA, EU, Japan, Taiwan, South Korea, South Africa 2004 40% 200 Series 36.0 "Traditional" Producers * 2003 50% 2003 Share of Production, in % 80% 35 200 Series Production Share 2014 400 Series 200 Series Melting Production Share 90% Global Grade Structure 22.5 100%
  17. 17. 32 Globally Rising Power Prices All data based on average power prices and exchange rates for the years stated / South African Projection based on Exchange Rate of ZAR 9.5 per US$ 0.12 2012 2011 2010 0.10 2011/12 2010/11 2016/17 2009/10 0.08 2012 2011 2008/09 2010 2010 2011 0.06 2012 2011 2010 2009 2008 0.04 2012 2011 2010 0.02 0.00 2009 2012 2011 2010 2009 2008 2013/14 2012/13 2011/12 2010/11 2012 2009/10 2008 2009 KazakhRussia stan 2009 2008 2009 MYPD 3 Average power price, in US$ per kWh 0.14 2008/09 Scandinavia India India Captive Power Purchased Power Brazil Hydro China Turkey South Africa Eskom Sources: Individual annual and company reports, NordPool Electricity Spot Prices, NRDC, Eskom, Heinz H. Pariser 33 Asia – Centre of Stainless Demand 35 80.0 Others % Total Asia of Global Demand Japan America 70.0 EU 25 Other Asia 60.0 China 20 50.0 15 40.0 10 30.0 5 20.0 % China of Global Demand 0 2003 2004 2005 Source: Heinz H Pariser/July 2013 2006 2007 2008 © Heinz H. Pariser 2009 2010 2011 2012 10.0 Share of Global Demand, in % Stainless Steel Demand, Mill t 30
  18. 18. Notes
  19. 19. Reviewed interim results For the six months ended 30 June 2013 Merafe Resources LIMITED (incorporated in the Republic of South Africa) Company Registration Number: 1987/003452/06 Share code: MRF ISIN: ZAE000060000 (Merafe or the Company or the Group) Key features Increase in production of 23% Decrease in EBITDA from R263m to R210m Increase in revenue of 19% Decrease in HEPS from 5.5 cents to 3.8 cents The Venture’s Operating cash flows of R234m R5bnII is Project Lion on schedule and within budget Cor po ra t e t en nce Sustainability na ver go Fer ro e rom ch Empo we rm Preparation of this report The following individuals were responsible for the preparation of the reviewed interim results: Kajal Bissessor CA(SA), Financial Manager Ditabe Chocho CA(SA), Chief Financial Officer Our goals remain focused . . . • To ensure our interests in the ferrochrome industry are profitable and sustainable • To continue with organic growth of our ferrochrome business and to grow through diversification
  20. 20. Commentary Basis of preparation In compliance with the JSE Limited Listings Requirements, Merafe Resources Limited (“Merafe”) prepared its interim financial report for the six months ended 30 June 2013 in accordance with and containing the information required by IAS 34: Interim Financial Reporting, as well as the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by Financial Reporting Standards Council. The accounting policies adopted are in line with IFRS and are consistent with those applied in the annual financial statements for the year ended 31 December 2012. Review of results The condensed consolidated interim financial results of Merafe and its subsidiaries (“Company”) for the six months ended 30 June 2013 have been reviewed by the Company’s auditor, KPMG Inc. In their review report dated 6 August 2013, which is available for inspection at the Company’s Registered Office, KPMG Inc state that their review was conducted in accordance with the International Standard on Review Engagements 2410, Review of Interim Information Performed by the Independent Auditor of the Entity, and have expressed an unmodified conclusion on the condensed consolidated interim financial statements. Merafe’s revenue and operating income is primarily generated from the Glencore-Merafe Chrome Venture (“the Venture”), one of the world’s largest producers of ferrochrome, with a total installed capacity of 1.98 million tonnes of ferrochrome per annum. Merafe shares in 20.5% of the earnings before interest, taxation, depreciation and amortisation (“EBITDA”) from the Venture. Merafe’s share of ferrochrome sales volume from the Venture for the first half of 2013 amounted to 137 000 tonnes which was 10% above the 2012 comparative period of 124 000 tonnes. Chrome ore revenue as a percentage of total revenue decreased from 14% in the first half of 2012 to 12% in the first half of 2013. The average Rand US Dollar exchange rate was R9.21 in the first half of 2013, compared to R7.90 for the 2012 comparative period. The average European benchmark ferrochrome price was 120USc/lb in the first half of 2013 compared to 125USc/lb in the first half of 2012. Merafe’s share of EBITDA from the Venture for the first half of 2013 was R236.5m (2012 H1: R279.3m). EBITDA from the Venture decreased period on period primarily as a result of the decrease in the average European benchmark ferrochrome price, inflationary increases, an increase in standing charges relating to the unprotected strike at the eastern mining operations and foreign exchange losses incurred which were partially offset by the weakening of the Rand compared to the US Dollar and the increase in ferrochrome sales tonnes. EBITDA for the first half of 2013 includes a foreign exchange (“forex”) loss of R28.7m against a forex gain of R3.6m in the comparative period. The forex loss primarily arose as a result of the realised losses on the forex contract hedge. After accounting for corporate costs of R23.3m (H1 2012: R17.2m) and a share-based payment expense of R3m (H1 2012: share based payment income of R0.8m), Merafe’s EBITDA was R210.2m. Corporate costs increased from the 2012 comparative period primarily as a result of the reversal of an overprovision for an indirect tax liability that was included in the prior period. The profit and total comprehensive income for the period was R33.5m after taking into account depreciation of R69.4m, an impairment loss of R75.9m, net financing costs of R9.6m, current tax expense of R0.8m, deferred tax expense of R22.3m and a R1.3m write-back arising from prior years’ overprovision of current tax. The impairment loss was as a result of the Venture considering the sale of its Horizon mine. The balance of unredeemed capital expenditure is estimated to be R507m at 30 June 2013. Property, plant and equipment increased over the six months to 30 June 2013 as a result of capital expenditure of R280m of which R200m was expansionary and R80m was sustaining. Expansionary capital comprised expenditure primarily on Project Lion II. Trade and other payables include a new financing facility made available by Glencore on 30 June 2013. Merafe’s share of the utilised portion of the facility was R101m. Merafe started the year with a cash balance of R83m, generated operating cash flows of R234m, invested R280m in capital expenditure, raised loans of R48m, incurred R38m foreign exchange fluctuations on cash held and closed with a cash balance of R47m at 30 June 2013. Of this balance, cash held by Merafe was R17m and Merafe’s share of cash in the Venture was R30m. At 30 June 2013, Merafe had long-term debt owing to ABSA Capital of R560m and approximately R240m unutilised ABSA long-term debt facilities.
  21. 21. Review of operations Ferrochrome production for the first six months of 2013 was 23% higher than the comparative 2012 period. Operating capacity utilisation for the first six months of 2013 was 79% compared to 64% for the prior comparative period. This was primarily as a result of operational improvements of furnaces, higher winter month production and the impact of the successful commissioning and ramp up of the Tswelopele pelletising plant. Ferrochrome production volumes in the first half of 2013 were also impacted by the Eskom power buyback agreement as in the 2012 comparative period. Unfortunately, the Venture suffered an unprotected strike at its eastern mining operations towards the end of the first half of 2013 which resulted in the dismissal of more than 1 200 employees. These mining operations were recently resumed and the smelters that were supplied by these mines were not significantly affected due to sufficient stockpiles of chrome ore. Safety The safety of our employees remains a key focus area as evident from our total recordable injury frequency rate of 4.27 for the first half of 2013 which was at similar levels to the prior year. Despite these efforts, we deeply regret to report that there were two fatalities during 2013. In addition to the fatality already reported on 5 March 2013, another employee, Mr Gabafiwe Petrus Ramatlapeng passed away on 10 July 2013. Our deepest sympathies go out to his family, colleagues and friends. Market review Global stainless steel production was 19.2m* tonnes in the first half of 2013 which was 7% higher than the 2012 comparative period. Global consumption of ferrochrome reached 5.1m* tonnes in the first half of 2013, driven by stronger stainless steel production. Despite a strong start to the year, stainless steel production continues to be threatened by global economic uncertainty and weak market sentiment. In addition, the downward trend in the nickel price continues to negatively impact prices, keeping inventory levels and apparent consumption of stainless steel suppressed. Global ferrochrome production was 4.8m* tonnes in first half of 2013 which was 3%* higher than the comparative 2012 period. China remains the determining factor in the industry producing more than 47%* of the world’s stainless steel and accounting for 37%* of the world’s total ferrochrome production in the first half of 2013. Chinese ferrochrome production continues its forward growth momentum and China maintained its position as the largest producing country in the world. China is currently ahead of South Africa, which accounted for only 29%* of global ferrochrome production in the first half of 2013. Ferrochrome supply from South Africa was most impacted in the first half of 2013 by producers participating in Eskom’s buyback programme. Most South African ferrochrome producers are expected to produce at higher capacity utilisation rates in the second half of 2013, post the buyback programme. South African ferrochrome imports into China continue to be displaced by domestic Chinese ferrochrome production on the back of unbeneficiated chrome ore exports from South Africa. It is estimated that 3.1m** tonnes of chrome ore was imported into China from South Africa in the first half of 2013, which is an increase of 48% period on period. The South African ferrochrome industry has continued to advance its engagement with the South African Government to find sustainable solutions to this challenge. The European benchmark ferrochrome price for the first quarter of 2013 was settled at 112.5 USc/lb and increased to 127USc/lb in the second quarter of 2013. The third quarter European benchmark ferrochrome price was settled at 112.5USc/lb. Developments We are delighted to report that good progress has been made on our flagship Lion II smelter project which should be ready for hot commissioning by the end of this year. The Magareng mine, which will be supplying chrome ore to the Lion II smelter, is already in production and the surface processing plant at the mine was recently commissioned. The overall Lion II project remains on schedule and within budget and to 30 June 2013 about 65% of the total budgeted cost of R5bn, Merafe’s portion of which is R1bn, was spent.
  22. 22. Outlook Stainless steel production is expected to grow by 7%* in 2013 and by 5%* in the long-term which is expected to lead to increased demand for ferrochrome globally. Since the Tswelopele pelletising plant is in full operation, we are proud to report that our Rustenburg plant is now on par with the cost performance of our other non-premus furnaces. This should enable an increase in production going forward as already evidenced by our capacity utilisation improvement in the first half of 2013. In addition, once Lion II ramps-up to full production capacity, we forecast an improvement of 6% in total cost per tonne, across our operations. These investments in improving our cost efficiencies in our operations leave us well positioned as one of the lowest cost producers in the world. This will enable us to take advantage of the increased demand for ferrochrome and grow our market share. Merafe has the advantage of a strong balance sheet, low gearing, a healthy cash-flow and a partnership with Glencore, one of the world’s largest and profitable mining companies. *source: Heinz Pariser/July2013 **source: Chinese Customs/June 2013 Chris Molefe Zanele Matlala Non-executive Chairman Chief Executive Officer Sandton 6 August 2013
  23. 23. Group condensed statement of comprehensive income Six months ended Six months ended 30 June 2013 30 June 2012 Reviewed Reviewed R’000 R’000 Revenue EBITDA Depreciation and impairment Net financing costs Profit before taxation Taxation Current tax Deferred tax Prior years overprovision Profit and total comprehensive income for the period Basic earnings per share (cents) Diluted earnings per share (cents) Headline earnings per share (cents) Diluted headline earnings per share (cents) Ordinary shares in issue Weighted average number of shares for the period Diluted weighted average number of shares for the period 1 469 324 1 229 840 210 185 (145 370) (9 579) 262 898 (67 832) (10 426) 55 236 (21 713) 184 640 (46 570) (797) (22 275) 1 359 (501) (79 054) 32 985 33 523 138 070 1,3 1,3 3,8 # 3,8 # 2 493 221 394 2 493 221 394 2 509 534 023 5,5 5,5 5,5 5,5 2 493 221 394 2 493 221 394 2 499 047 985 Profit and total comprehensive income for the period Impairment Taxation effect of impairment Profit on disposal of fixed assets Taxation effect of profit on disposal of fixed assets 33 523 75 933 (15 194) (37) 10 138 070 – – – – Headline earnings 94 235 138 070 # Headline earnings reconciliation:
  24. 24. Group condensed statement of financial position As at 30 June 2013 Reviewed R’000 As at 31 December 2012 Audited R’000 Assets Property, plant and equipment 2 902 009 2 677 308 Total non-current assets 2 902 009 2 677 308 1 142 276 395 990 26 986 46 541 – 1 088 885 344 725 26 424 82 643 72 127 Total current assets 1 611 793 1 614 804 Total assets 4 513 802 4 292 112 Equity Share capital Share premium Equity-settled share-based payment reserve Retained earnings 24 932 1 262 481 36 101 1 421 892 24 932 1 262 481 33 847 1 388 369 Total equity attributable to equity holders 2 745 406 2 709 629 571 791 54 800 588 633 523 872 57 892 551 165 1 215 224 1 132 929 667 552 505 – 636 430 368 18 550 553 172 449 554 Total liabilities 1 768 396 1 582 483 Total equity and liabilities 4 513 802 4 292 112 Inventories Trade and other receivables Current tax assets Cash and cash equivalents Assets held for sale Liabilities Loans and borrowings Provision for close down and restoration costs Deferred tax liabilities Total non-current liabilities Loans and borrowings Trade and other payables Liabilities held for sale Total current liabilities
  25. 25. Group condensed statement of changes in equity Six months ended Six months ended 30 June 2013 30 June 2012 Reviewed Reviewed R’000 R’000 Share capital 24 932 24 932 Balance at beginning of the period Share options exercised 24 932 – 24 932 – Share premium 1 262 481 1 262 481 Balance at beginning of the period Share premium arising from share options exercised 1 262 481 – 1 262 481 – Equity-settled share-based payment reserve 36 101 30 925 Balance at beginning of the period Share grants exercised Share-based payment 33 847 (716) 2 970 31 759 – (834) Retained earnings 1 421 892 1 477 566 Balance at beginning of the period Profit and total comprehensive income for the period 1 388 369 33 523 1 339 496 138 070 Total equity at end of the period 2 745 406 2 795 904
  26. 26. Group condensed statement of cash flow Six months ended Six months ended 30 June 2013 30 June 2012 Reviewed Reviewed R’000 R’000 Profit before taxation Interest paid Interest received Depreciation and impairment Adjusted for non-cash items Share grants excercised Adjusted for working capital changes 55 236 9 919 (340) 145 370 2 970 (716) 31 001 184 640 15 903 (5 477) 67 832 (834) – (128 378) Cash flows from operations Interest paid Interest received Tax paid 243 440 (9 757) 340 – 133 686 (15 903) 2 305* (7 158) Cash flows from operating activities Cash flows from investing activities 234 023 (280 016) 112 930 (241 699) Proceeds on disposal of property, plant and equipment Acquisition of property, plant and equipment – expansionary Acquisition of property, plant and equipment – sustaining 97 (200 442) (79 671) – (163 875) (77 824) Cash flows from financing activities 47 919 (301) Increase/(decrease) in non-current borrowings 47 919 (301) 1 926 82 643 (38 028) (129 070) 220 459 (11 764) 46 541 79 625 Net increase/(decrease) in cash and cash equivalents Cash and cash equivalents at the beginning of the period Effect of exchange rate fluctuations on cash held Cash and cash equivalents at the end of the period * Excludes R2.9 million income relating to the fair value adjustment on the interest rate swap.
  27. 27. Sponsor: Merrill Lynch South Africa Proprietary Limited Executive directors: Z Matlala (Chief Executive Officer), D Chocho (Chief Financial Officer), B McBride Non-executive directors: CK Molefe (Chairman)*, NB Majova*, M Mamathuba, A Mngomezulu*, K Nondumo*, M Salanje*, S Phiri, M Mosweu, Z van der Walt*, Company secretary: A Mahendranath Registered office: First Floor, Block B, Sandton Place, 68 Wierda Road East, Wierda Valley, Sandton, 2196 Transfer secretaries: Link Market Services South Africa Proprietary Limited * Independent
  28. 28. Notes
  29. 29. Notes
  30. 30. www.meraferesources.co.za

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