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Merafe Resources Limited FY 2013 financial results presentation

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  • 1. Merafe Resources Results Presentation for the year ended 31 December 2013 Results Presentation For the year ended 31 December 2013 Zanele Matlala (CEO) and Ditabe Chocho (CFO)
  • 2. Merafe Resources Results Presentation for the year ended 31 December 2013 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 The information contained herein shall not be published, rewritten for broadcast or publication or redistributed in any medium without prior written consent from Merafe Resources.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.
  • 3. Merafe Resources Results Presentation for the year ended 31 December 2013 1. Year in review 2. Operational review 3. Market review 4. Financial review 5. Future outlook Annexures Key agenda
  • 4. Merafe Resources Results Presentation for the year ended 31 December 2013 Year in review 01
  • 5. Merafe Resources Results Presentation for the year ended 31 December 2013 Year in review 5
  • 6. Merafe Resources Results Presentation for the year ended 31 December 2013 Operational review 02
  • 7. Merafe Resources Results Presentation for the year ended 31 December 2013 Operational review Ferrochrome production • 32% increase in production to a record 319kt • Excellent performance of Lion I and Rustenburg smelters • Eskom buy-back agreements in H1 2013 Employee relations and safety • Wage negotiations successfully concluded • TRIFR improved by 5% Projects Lion II • Hot commissioning of Lion II commenced in the last quarter of 2013 • Expected to be within budget • Anticipated to be fully operational in mid 2014 Tswelopele • Two consecutive monthly production records • Improved energy efficiency of Rustenburg furnaces • Improved ore consumption efficiency Ferrochrome production costs • Increases contained below sector inflation despite higher than inflation increases in labour and electricity 7
  • 8. Merafe Resources Results Presentation for the year ended 31 December 2013 Market review 03
  • 9. Merafe Resources Results Presentation for the year ended 31 December 2013 8% increase in stainless steel production 9 1 124/1 212 1 978/2 056 2 469/2 607 3 132/3 149 3 273/3 217 7 461/7 095 16 372/19 211 35 809/38 547 8% 4% 6% 1% 2% 5% 17% 8% - 5 000 10 000 15 000 20 000 25 000 30 000 35 000 40 000 45 000 Others NAFTA India Japan S Korea / Taiwan EU China Total Source: Heinz Pariser/Jan 2014 2013 estimated tonnes in ‘000 2012 actual tonnes in ‘000
  • 10. Merafe Resources Results Presentation for the year ended 31 December 2013 465/486 548/510 653/680 765/697 1 695/1 577 4 842/5 557 9 717/10 274749/767 0 1 000 2 000 3 000 4 000 5 000 6 000 NAFTA India Japan Others S Korea / Taiwan EU China Total 6% increase in ferrochrome demand 10 2013 estimated tonnes in ‘000 2012 actual tonnes in ‘000 5% 9% 2% 15% 6% 7% 4%7% - - Source: Heinz Pariser/Jan 2014
  • 11. Merafe Resources Results Presentation for the year ended 31 December 2013 347/337 285/312 286/486 947/988 1 114/1 138 3 320 /3 750 3 175/3 234 9 474/10 245 3% 9% 70% 4% 2% 13% 2% 8% - 2 000 4 000 6 000 8 000 10 000 12 000 Others Russia / Turkey / Albania EU India Kazakhstan China South Africa Total 8% increase in ferrochrome production 11 2013 estimated tonnes in ‘000 2012 actual tonnes in ‘000 Source: Heinz Pariser/Jan 2014
  • 12. Merafe Resources Results Presentation for the year ended 31 December 2013 2013 market overview 12 Ferrochrome price overview Q1 – 2013 112.5 USc/lb Positive signs in the Chinese, North American and European markets coupled with further Eskom buy-back arrangements Q2 – 2013 127 Usc/lb Global economic uncertainty, weakening Rand, concerns about Chinese growth and lower nickel prices Q3 – 2013 112.5 USc/lb Q4 – 2013 112.5 USc/lb General Improvement in market sentiment in Europe, Japan and US Q1 – 2014 118 USc/lb
  • 13. Merafe Resources Results Presentation for the year ended 31 December 2013 Financial review 04
  • 14. Merafe Resources Results Presentation for the year ended 31 December 2013 Key financial features 14 H1 2013 H2 2013 FY 2013 FY 2012 Revenue (R'm) 1 469 2 028 3 497 2 542 EBITDA (R'm) 210 348 558 314 HEPS (cents) 3.8 7.0 10.8 5.1 Capex (R'm) 280 325 605 603 Net Debt (R'm) 525 606 606 441 Revenue  38% EBITDA  78% HEPS  112% Capex Net Debt  37%
  • 15. Merafe Resources Results Presentation for the year ended 31 December 2013 Revenue 15 FY 2013 FY 2012 Ferrochrome sales (kt) 314 255 Average European benchmark ferrochrome price (Usc/lb) 116 121 Rand/US$ exchange rate 9.6 8.2 Ferrochrome revenue (R’m) 3 005 2 212 Chrome ore revenue (R’m) 492 330 Total revenue (R’m) 3 497 2 542 Ferrochrome sales tonnes  23% Average ferrochrome price  4% Rand/US$ exchange rate  17% Ferrochrome revenue  36% Chrome ore revenue  49%
  • 16. Merafe Resources Results Presentation for the year ended 31 December 2013 Venture year-on-year EBITDA movement – Merafe’s share 16 349 583 (17) (30) 310 (117) 88 0 100 200 300 400 500 600 700 2012 Actual Venture EBITDA EBITDA impact of higher ferrochrome and chrome ore tonnes and weaker Rand Costs impact Foreign exchange impact Standing charges impact Other 2013 Actual Venture EBITDA R'm Impact of higher ferrochrome and chrome ore sales and weaker Rand
  • 17. Merafe Resources Results Presentation for the year ended 31 December 2013 EBITDA reconciliation to profit 17 583 211 (17) (60) (25) (253) (17) 0 100 200 300 400 500 600 700 Merafe's 20.5% of EBITDA from the Venture Corporate costs Depreciation Net financing costs Current tax expense Deferred tax expense Profit R'm and impairment
  • 18. Merafe Resources Results Presentation for the year ended 31 December 2013 Capital expenditure 18 Project Lion II • At 31 December 2013, the project was 87% complete. • Approximately R170m will be spent in 2014 to complete the project. Expansionary (Rm) Sustaining (Rm) Note: Capital expenditure in the last three years comprises primarily Project Lion II and Project Tswelopele 404 603 605
  • 19. Merafe Resources Results Presentation for the year ended 31 December 2013 Balance sheet 19 As at 31 December 2013 As at 31 December 2012 Audited R’000 Audited R’000 Total non-current assets 3 099 988 2 677 308 Property, plant and equipment 3 099 988 2 677 308 Total current assets 1 903 622 1 614 804 Inventories 1 132 986 1 088 885 Trade and other receivables 677 649 344 725 Current tax asset 7 440 26 424 Cash and cash equivalents 85 547 82 643 Assets held for sale – 72 127 Total assets 5 003 610 4 292 112
  • 20. Merafe Resources Results Presentation for the year ended 31 December 2013 Balance sheet (continued) 20 As at 31 December 2013 As at 31 December 2012 Audited R’000 Audited R’000 Total non-current liabilities 1 313 866 1 132 929 Loans and borrowings 576 311 523 872 Provision for close down and restoration costs 111 456 57 892 Deferred tax 626 099 551 165 Total current liabilities 763 907 449 554 Loans and borrowings 19 471 636 Trade and other payables 648 143 430 368 Bank overdraft 96 293 – Liabilities held for sale – 18 550 Total liabilities 2 077 773 1 582 483
  • 21. Merafe Resources Results Presentation for the year ended 31 December 2013 Debt and facilities 21 Facilities R'm Utilised facilities at 31 December 2013 ABSA loan 581 Overdraft facilitiesa 96 Total 677 Headroom at 31 December 2013 ABSA loan 219 Overdraft facilitiesa 296 Total 515 a USD facilities converted at the closing exchange rate of R10.50 Net debt movement R’m ** Comprises R576m loans and borrowings, R19m short-term loans and borrowings, R96m overdraft and cash of R85m Net debt at 31 December 2012 Cash flows from operating activities Exchange rate fluctuations on cash held Other Expan- sionary capex Sustaining capex Net debt at 31 December 2013
  • 22. Merafe Resources Results Presentation for the year ended 31 December 2013 Future outlook 05
  • 23. Merafe Resources Results Presentation for the year ended 31 December 2013 Future outlook 23 • Demand fundamentals for ferrochrome remain strong • Investments in energy efficient technology provide us with a significant advantage • Strong balance sheet, healthy cash flows and the lowest cost producer in South Africa leave us well positioned to grow our market share • No immediate major expansionary capital planned and we look forward to repaying our debt, paying dividends and pursuing value enhancing opportunities for shareholders
  • 24. Merafe Resources Results Presentation for the year ended 31 December 2013 Annexures 06
  • 25. Merafe Resources Results Presentation for the year ended 31 December 2013 Chrome ore imports into China 25 2011 ‘000t 2012 ‘000t 2013 ‘000t % change 2013/2012 South Africa 4 675 4 490 6 736 50.0 Turkey 1 612 1 840 1 988 8.0 Oman 645 426 687 61.3 India 439 310 168 (45.8) Pakistan 440 472 482 2.1 Albania 357 305 677 122.0 Iran 330 448 428 (4.5) Zimbabwe 212 1 – (100.0) Madagascar 86 118 118 – Australia 208 501 407 (18.8) Philippines 137 180 126 (30.0) Brazil 60 29 – (100.0) Kazakhstan 94 89 167 87.6 Others 149 91 108 18.7 Total 9 444 9 300 12 092 30.0 © Heinz H Pariser, Alloy Metals and Steel Market Research
  • 26. Merafe Resources Results Presentation for the year ended 31 December 2013 Globally rising power prices 26