Kumba Iron Ore Interim Results - for the six months ended 20 June 2013

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  • Estimated global crude steel production, which drives the demand for iron ore, increased by 3% percent in the first half compared to the first half of 2012, driven by output growth in China. Output outside China was up only slightly.Europe's steel production fell by 5%, as European economies struggled to shake off the debt crisis and continued to implement austerity measures, with even normally strong economies such as Germany, slowing down.Japan has benefitted from the weakening of the Yen and the improved sentiment inspired by “Abenomics”. Steel mills have increased production to supply a stronger domestic auto industry and also in expectation of higher export volumes of finished steel. Korean output was down slightly in the first quarter due to maintenance and competitive Japanese exports but the government has announced a stimulus package to support domestic consumption. The Rest of the World contracted by 1% compared to the first half of 2012. China showed significant output growth in the first half of 2013 as mills were optimistic about demand from construction and potential stimulus packages announced by the new government. Run rates reached 806Mt on an annualised basis but slowed towards the end of the half year as mills implemented maintenance plans and otherwise reacted to seeming steel oversupply.China’s crude steel production, which is dominated by integrated steel making, grew by 9% in the first half compared to the comparative period in 2012.Global crude steel production grew by 6% compared to the second half of 2012, with the world, excluding China, up only slightly to 3%.
  • Global seaborne iron ore supply increased by 4% compared to the first half of 2012. Australian iron ore suppliers were affected by three tropical cyclones in the first quarter of this year, which forced the shutdown of their iron ore export terminals, contributing to the 6% month on month decline of Australian exports in February. After tropical cyclone Rusty, the country resumed the strong seaborne supply levels, with an estimated growth in exports of 18% from the first half of 2012. India’s exports continued to decline – down by 73% compared to the first half of 2012, to just 8Mt. Given Indian vested interests to ban illegal mining and resource nationalism issues, it seems highly unlikely that iron ore exports from India will resume any time soon.Brazil’s exports saw a significant seasonal decline compared to the second half of 2012 and a marginal decline compared to the first half of 2012. Brazil has continuously seen its seaborne market share decline, due to combined factors: 1) Vale’s mines depletion / grade issues in Southeast mines, 2) Port operations stoppage from April up to the end of 2013, and 3) CSN’s problems with one of its two stacker reclaimers in Casa de Pedra mine.China increased imports of ore by 5% compared to the same period in 2012. Estimated production of pig iron in the first half was 6% up, and consumption of domestic ore increased significantly to 10% to fill the gap, facilitated by the higher prices in the first half of the year.
  • Iron ore prices hit a low of $88.50/dmt on 6September 2012 (Platts 62% Fe CFR China $/dmt) but showed a rapid recovery during the rest of 2012 and into the beginning of 2013, reaching a high of $160/dmt on 20 February 2013. Since then prices have been relatively volatile, and again hit a low of $110.75/dmt in mid-June 2013. Iron ore prices have since recovered to over $120/dmt (15 July 2013) Prices in the first half of 2013 benefitted from a combination of strong demand – in particular Chinese pig iron production reached high levels, and supply issues – seasonal factors in Australia and Brazil, and mining bans in India, which combined to tighten the supply/demand balance. The iron ore price averaged $137/dmt in the first half of 2013, in comparison to $142/dmt in the first half of 2012. It is likely that iron ore prices in the second half of 2013 will underperform the first half as Chinese steel makers look to dial down their output rates in the traditionally slower third quarter and increased supply continues to come on stream. However, rising finished steel prices and low stocks of iron ore at mills may provide some support to iron ore prices.
  • Kumba’s export sales improved from 18.9Mt in the second half of 2012 to to 20.1Mt as strong prices were realised in the first half.   However, realised prices fell by 7% percent or US$9/tonne, to US$125/tonne compared to the first half of 2012. By comparison, the 62% Platts index fell by US$5/tonne.  This is mainly as a result of lagging prices in some contracts. The lump premium recovered from a low point in the third quarter of 2012, and rose in line with the iron ore spot market. Premiums have slightly outperformed the market in recent months.  Lump premiums in Kumba’s traditional markets such as Japan are significantly stronger than they are in China, where large sinter capacity caps the premium that is possible to achieve.   China accounted for a smaller share as sales were targeted to Japan and Korea where lump premiums are generally higher.  China’s share was 68%, versus 70% in the same period of 2012 and 66% in the second half of 2012.    Europe’s share was virtually unchanged compared to the first half of 2012.  20.3Mt of Kumba ‘s ore was shipped in the first six months.  Including ore from our neighbours Assmang, the port of Saldanha operated above 5Mt per month or 60 million tonnes per annum up to May 2013.  The Platts freight index fell by $1.22/tonne, from $14.08/tonne in the first half of 2012 to $12.86/tonne.
  • Our revenue increase of 5% has again set a record for the group.  This was due to a 13% increase in export volumes and weaker exchange rate. Partially offset by the decline in iron ore prices. For some time now we have been talking about the need for increased waste mining as guided by Chris, and the impact this would have on costs.  As you can see, our operating expenses, have increased to R10.8 billion, driven by : One mining volumes at Sishen. Two growth logistics volumes from the mines to our customer; and Three The end of capitalisation of operating costs at Kolomela.  In addition to the impact of this growth on our business, operating profit of R14.4 billion was adversely impacted by the decline in iron ore prices from the record levels achieved last year. Our operating margin of 57% decreased 13% from 70% in 2011, while the group’s mining margin remains robust at 62%. Profit for the group amounted to R9.7  billion, of which R7.4 billion is attributable to shareholders of Kumba, and R2.3 billion to the empowerment shareholders of SIOC. Our headline earnings of R7.4 billion (or R23.07 per share) decreased by 18%. Our effective tax rate, before STC, remains stable at about 25%.  Our cash generation remains healthy at R13.9 billion, 8% down year-on-year, on the back of the robust market conditions and increased sales volumes. Capex for the six months of R1.9 billion was incurred. We remain on track to incur R4.8 to R5.4 billion for the full year.  
  • Kumba Iron Ore Interim Results - for the six months ended 20 June 2013

    1. 1. INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2013
    2. 2. 1 Certain statements made in this presentation constitute forward-looking statements. Forward-looking statements are typically identified by the use of forward-looking terminology such as ‘believes’, ‘expects’, ‘may’, ‘will’, ‘could’, ‘should’, ‘intends’, ‘estimates’, ‘plans’, ‘assumes’ or ‘anticipates’, or the negative thereof or other variations thereon or comparable terminology, or by discussions of, e.g. future plans, present or future events, or strategy that involve risks and uncertainties. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the Company's control and all of which are based on the Company's current beliefs and expectations about future events. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statement. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the Company and its subsidiaries. The forward- looking statements contained in this presentation speak only as of the date of this presentation and the Company undertakes no duty to, and will not necessarily, update any of them in light of new information or future events, except to the extent required by applicable law or regulation. DISCLAIMER
    3. 3. KEY FEATURES Receiving operator training on a drill rig are trainee operators NATTIE GROENEWALD, FLORENCIA BEKEND, GABRIEL BOSMAN and HEIN ROETS, with senior instructor ENOS DLADLA (far left)
    4. 4. 3 KEY FEATURES Increasing quarterly production; no loss of life +1% +19%+4% -3% Revenue HEPS Waste mined at Sishen Export sales R26.3 billion R24.13 82Mt 20Mt 19.2 12.5 20.1 1H12 2H12 1H13 Interim cash dividend (Rand per share) • No loss of life • Production in line with 1H12 – Sishen mine’s 2Q13 production up by 13% on 1Q13 with continued improvement following unprotected strike in 4Q12 – Exceptional performance at Kolomela mine continues • Operating profit decreased by 4% due to increased mining activities • Export sales volumes down by 3% from record levels in 1H12 • R6.5 billion interim cash dividend declared to shareholders, in line with 1.2 times dividend cover
    5. 5. 4 SAFETY, HEALTH AND ENVIRONMENT Continued focus on achieving zero harm 0.12 0.08 0.10 0.15 2010 2011 2012 1H13 LTIFR 3 0 2 0 2010 2011 2012 1H13 Fatalities SAFETY • No loss of life incidents • Kolomela achieved over 21.7 million fatality-free and LTI-free hours • Safety Indaba held to ensure collective ownership of improvements • Engineering controls complemented by renewed focus on people-centred initiatives on mindsets and behaviours HEALTH • Progress made on exposure reduction plans for noise and dust • HCT uptake at 57% and expected to exceed 90% • Class-leading fatigue management interventions developed ENVIRONMENT • Implemented energy and water savings projects delivering quantifiable gains • Improved reporting with participation in JSE SRI and Carbon Disclosure Project
    6. 6. 5 STAKEHOLDER EMPOWERMENT Positively supporting our employees and our communities LABOUR AND EMPLOYMENT • Employment for 12,651 people • A further 5,726 people employed on capital projects • 84% local employees (drawn from the province in which the operation is located) • Stable labour environment in 1H13 with 2 year wage agreement concluded in July 2012 HOUSING • R310 million spent on housing in 1H13; R2.2 billion spent since 2006 DIRECT SOCIAL INVESTMENT IN HOST COMMUNITIES • R77 million spent, mainly in host communities • Focus on education, skills, health and welfare, enterprise and infrastructure development SIOC COMMUNITY DEVELOPMENT TRUST • 361,000 beneficiaries in 5 communities • Funded 140 projects to the value of ~R850 million, including 31 new projects approved in 1H13
    7. 7. MARKET OVERVIEW Mining in the Leeuwfontein pit at Kolomela mine
    8. 8. 7 GLOBAL CRUDE STEEL PRODUCTION Growth driven by China • China remains the key driver of production growth in the global steel industry • Compared to 1H12, global crude steel production increased by 3%: – China’s crude steel production increased by 8% to 385Mt – Europe decreased by 5% – Japan and Korea were subdued – Rest of the world saw a 1% decline • Compared to 2H12, global crude steel production increased by 6%, driven by China – China’s crude steel production increased by 9%, reaching an annualised production rate above 780Mt in May – Europe increased by 6% – Japan and Korea grew by 1% – Rest of the world increased by 2% • Steel fundamentals remain under pressure as the Chinese economy slows Source: WSA, Kumba analysis 351 332 356 353 385 240 239 231 224 229 88 88 89 87 88 93 84 89 80 85 +6% +3% 1H13e 787 2H12 744 1H12 765 2H11 743 1H11 772 ChinaROWJ&KEU +6% +1% +2% +9% H-on-H Crude steel production (Mt)
    9. 9. 8 335 352 367 378 386 157 111 141 106 155 0 100 200 300 400 500 600 700 800 900 1,000 1H11 2H11 1H12 2H12 1H13e Chinese iron ore imports versus implied use of domestic ore* (Mt) Rich Ore Import Rich Ore Domestic SEABORNE IRON ORE MARKET Australian supply growth offset by Brazilian and Indian supply declines • Large growth in supply from Australia partly offset by supply constraints in Brazil and India • Estimated global seaborne iron ore supply increased by 4% Y-on-Y in 1H13, but fell by 3% compared to 2H12: – Australia performed strongly, growing exports by 18% Y-on-Y and by 4% H-on-H – Brazil’s exports fell by 1% Y-on-Y and by 22% H-on-H – Indian exports declined by 73% Y-on-Y but grew by 14% H-on-H – South African exports declined by 7% Y-on-Y but grew by 8% H-on-H • China used 6% more ore in 1H13 compared to 1H12: – China’s use of imported ore increased by 5% – China’s use of domestic ore increased by 10% Source: WSA,GTIS, CNBS, Anglo American analysis * Rich-ore equivalent (@ 62% Fe), based on published data available +6% +10% 492 463 508 484 541 +5% Global seaborne iron ore exports* 1H13e 2H12 1H12 H-on-H 2013e Y-on-Y 2013e Mt % Australia 269 258 228 4% 18% Brazil 147 188 149 (22%) (1%) India 8 7 30 14% (73%) S. Africa 28 26 30 8% (7%) RoW 87 79 80 10% 9% Total 539 558 517 (3%) 4%
    10. 10. 9 TREND IN PRICES DOWN BUT VOLATILITY REMAINS Source: Platts & Anglo American analysis • Iron ore prices (62% Fe Platts CFR China) in 1H13 averaged $137/dmt, down by 5% Y-on-Y • However prices recovered sharply from 2H12 lows: – Strong growth in Chinese crude steel output – Seasonal factors to supply including cyclones in Australia and heavy rainfall in Brazil – Supply constrained by mining ban in Goa, India • Iron ore prices expected to remain under pressure as supply exceeds demand in 2H13, though restocking by steel mills may support prices in near term Price recovery in 1H13 has slowed but positive signs seen at start of 2H13 100 110 120 130 140 150 160 170 180 190 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 US$/dmtCFRQingdao Platts IODEX Monthly 2011 IODEX Average 2012 IODEX Average 2013 H1 IODEX Average $169/dmt2011 Average = -23% YoY $130/dmt2012 Average = $155/dmt - 26% $115/dmt 2013 YTD Average = $137/dmt
    11. 11. OPERATIONAL REVIEW The Ultra High Dense media separation (UHDMS) pilot plant is being constructed at Sishen mine. The pilot plant will assess the viability of recovering ore using the very high dense media separation process
    12. 12. 11 OPTIMISATION: NORTHERN CAPE ASSETS Ensuring optimal value from our Northern Cape portfolio Technical and strategic review of Northern Cape assets conducted • Technical and production status and potential of Sishen and Kolomela mines • Objective is to satisfy domestic demand and optimally fill available export capacity – Kumba’s export capacity on the Iron Ore Export Channel (IOEC) is ~42Mt and will remain so in the near future • Balance between production and costs for both mines to ensure maximum value • Growth options including IOEC capacity expansion • Estimated production level at this stage for Sishen mine ~37Mtpa • Potential to increase production from Kolomela mine beyond 9Mt from current pits – Potential for incremental growth at Kolomela mine Optimisation review continues; expected finalisation of estimates late in 2H13
    13. 13. 12 SISHEN MINE Waste ramp-up continues; quarterly production run rate recovers Mt 6 months 30 June 2013 6 months 30 June 2012 % change 6 months 31 Dec 2012 % change Total tonnes mined 102 89 15% 83 24% Waste mined 82 69 19% 65 27% Ex-pit ore 20 20 2% 18 13% Production 16 18 (10%) 16 2% DMS plant 11 13 (14%) 11 1% Jig plant 5 5 - 5 4% Stripping ratio* 4.0 3.4 3.6 Finished product inventory (closing) 0.6 1.2 (50%) 0.7 (14%) * Waste tonnes mined / ex-pit ore • Tonnes mined increased by 15% to 102Mt • Planned increase in waste mined, up by 19% to 82Mt – Waste levels estimated to peak at ~240 – 270Mtpa • Production decreased by 10% to 16Mt impacted by pit constraints, but improved Q-on-Q as expected, following unprotected strike in 4Q12 • B Grade resource reclassification in recent years; investigating new technologies • Decision on Dingleton town relocation project expected in 1H14
    14. 14. 13 KOLOMELA MINE Exceptional performance continues after successful commissioning ahead of schedule Mt 6 months 30 June 2013 6 months 30 June 2012 % change 6 months 31 Dec 2012 % change Total tonnes mined 30 20 55% 24 22% Waste mined 23 16 49% 18 30% Ex-pit ore 7 4 86% 7 - Production 5 3 61% 5 2% Stripping ratio 3.3 4.5 2.8 Finished product inventory (closing) 0.5 0.7 (29%) 0.8 (38%) • Successfully ramped up in 2012 • Tonnes mined increased by 55% to 30Mt • Planned increase in waste mined; up by 49% to 23Mt • Production of 5Mt up by 61%
    15. 15. 14 THABAZIMBI MINE Planned decrease in production Mt 6 months 30 June 2013 6 months 30 June 2012 % change 6 months 31 Dec 2012 % change Total tonnes mined 13 17 (20%) 15 (14%) Waste mined 13 16 (20%) 15 (13%) Ex-pit ore 0.3 0.6 (50%) 0.5 (40%) Production 0.2 0.4 (50%) 0.4 (50%) Sales – domestic 0.3 0.7 (56%) 0.5 (40%) Finished product inventory (AMSA) 0.2 0.4 (50%) 0.2 - • Planned decrease in activities in line with AMSA’s requirements, while pit complexities and geotechnical challenges continue – Tonnes mined decreased by 20% to 13Mt – Production down by 50% to 0.2Mt – Domestic sales down by 56% to 0.3Mt • Ore sold to AMSA at cost plus 3% • Future of Thabazimbi under ongoing discussions with AMSA
    16. 16. 15 LOGISTICS AND SALES Record volumes railed • Record 21Mt railed to port • Decrease in total sales as expected following unprotected strike – Down by 5% to 22Mt due to lower production at Sishen mine and subsequent rebuilding of stocks – Export sales of 20Mt, down by 3% – Domestic offtake declined by 25% to 2Mt Mt 6 months 30 June 2013 6 months 30 June 2012 % change 6 months 31 Dec 2012 % change Railed to port 21 21 4% 20 4% Sishen mine (incl. Saldanha Steel) 15 17 (7%) 15 3% Kolomela mine 6 4 57% 5 8% Total sales 22 23 (5%) 21 5% Export 20 21 (3%) 19 6% Domestic 2 3 (25%) 2 - Sishen mine 2 2 (15%) 2 13% Thabazimbi mine 0.3 0.7 (57%) 0.5 (40%) Finished product inventory at ports (closing) 2.3 1.8 28% 2.2 5% Saldanha 1.9 1.3 46% 1.7 12% Qingdao 0.4 0.5 (20%) 0.5 (20%)
    17. 17. 16 EXPORT SALES AND CUSTOMERS Export sales improved and strong export prices achieved on 2H12, but down from record 1H12 levels • Kumba’s average 1H13 FOB price fell to US$125/tonne, down by US$9/tonne Y-on-Y • By comparison, the 62% Fe Platts assessment (CFR China) fell by US$5/tonne Y-on-Y • China continued to account for approximately two-thirds of Kumba’s export sales portfolio; estimated 68% • Contract sales increased to 77% Y-on-Y • 20Mt of Kumba’s ore was shipped Export sales and prices 1H13 2H12 1H12 Total export sales (Mt) 20 19 21 Quarterly/monthly pricing (%) 77 79 72 Spot (%) 23 21 28 Average FOB price received (US$/tonne) 125 113 134 Export sales geographical split % 1H13 2H12 1H12 Europe/MENA/India 11 14 12 Japan and Korea 21 20 18 China 68 66 70 Total 100 100 100 Volumes shipped Mt 1H13 2H12 1H12 Total Kumba ore shipped 20 19 20 Total shipped by Kumba 13 12 12
    18. 18. PROJECTS UPDATE The load out station at Kolomela mine is designed to load a train of 340 wagons with 100 tonnes of iron ore per wagon, which is then transported to Saldanha Bay for export to international markets
    19. 19. 18 GROWTH Studies progress South African growth portfolio progress • Kolomela expansion: Study is progressing according to plan • SEP1B: The pilot module has been completed and full scale technology tests being conducted IOEC expansion study • In discussion with Transnet regarding the next potential expansion of the IOEC Second footprint into Africa continues • Assessment of various options in several target countries continuing • Exploration continues in Liberia under the joint venture between Kumba and Jonah Capital
    20. 20. FINANCIAL REVIEW ORENTSENG TUE is a maintenance officer in the plant maintenance workshops at Kolomela mine
    21. 21. 20 FINANCIAL REVIEW Strong financial performance • Revenue of R26.3 billion • Operating profit of R14.3 billion • Headline earnings of R24.13 per share • Interim cash dividend of R6.5 billion or R20.10 per share • R2.3 billion capital expenditure • Net cash position of R2.3 billion 19.20 12.50 20.10 Interim '12 Final '12 Interim '13 Dividend per share (Rand per share) 14.9 8.7 14.3 1H12 Restated 2H12 Restated 1H13 Operating profit (Rand billion)
    22. 22. 21 FINANCIAL REVIEW Headline earnings marginally up * Excluding Secondary Taxation on Companies (STC) and the mineral royalty ** 2012 restated due to adoption of IFRIC 20 Stripping costs in the production phase of a surface mine Rand million 6 months 30 June 2013 Restated** 6 months 30 June 2012 % change Restated** 6 months 31 Dec 2012 % change Revenue 26,299 25,236 4% 20,210 30% Operating expenses (11,960) (10,317) 16% (11,483) 4% Operating expenses (excl. royalty) (11,438) (10,069) 14% (11,097) 3% Mineral royalty (904) (718) 26% (409) >100% Deferred waste stripping (IFRIC 20) 382 470 (19%) 23 >100% Operating profit 14,339 14,919 (4%) 8,727 64% Operating margin (%) 55% 59% 43% Profit attributable to: 10,165 10,071 1% 6,384 59% Equity holders of Kumba 7,759 7,661 1% 4,825 61% Non-controlling interest 2,406 2,410 (<1%) 1,559 54% Headline earnings 7,748 7,669 1% 4,803 61% Effective tax rate (%)* 28% 25% 25% Cash generated from operations 17,092 14,383 19% 10,291 66% Capital expenditure 2,322 2,338 (1%) 3,554 (35%) 21
    23. 23. 22 REVENUE Increased revenue on the back of weaker currency • Revenue increased by 4% to R26.3 billion – Weaker Rand/US Dollar exchange rate resulting in R3.2 billion increase (1H13: R9.19; 1H12: R7.93) – 0.6Mt decrease in volumes exported; R1.1 billion decrease in revenue earned – Export prices decreased by 7% after dipping sharply in December 2012 (net decrease of R913 million) Revenue (Rand million) 23,533 24,737 1,703 1,562 3,182 1,065 913 141 15,000 17,500 20,000 22,500 25,000 27,500 1H12 Volume Price Currency Shipping 1H13 Mining operations Shipping 25,236 26,299 22
    24. 24. 23 5,796 7,051 1,766 1,681 597 325 201 88 44 287 85 2,037 2,324 4,000 6,000 8,000 10,000 12,000 1H12 Restated Escalation, non-cash and forex Sishen Kolomela Deferred stripping costs Stock movement Selling and distribution Shipping 1H13 Mining operations Shipping Selling and distribution 9,599 OPERATING EXPENDITURE Increase in costs – a function of increased mining volumes and above inflationary escalations • Cost escalation in excess of inflation, non-cash cost and forex effects (R597 million) • Growth in our mining operations (R658 million) – Sishen and Kolomela mining volumes – Lower deferred stripping costs capitalised – Decreased finished product stockpiles • Logistics volume growth, supporting 20Mt exports (R202 million) Operating expenses excluding mineral royalty (Rand million) 11,056 Mining 658 Logistics 202 23
    25. 25. 24 7 21 11 10 8 198 239 12 20 150 170 190 210 230 250 270 Restated FY12 Inflation Cost escalation Mining volume Production volume Deferred stripping 1H13 Unit cash cost (excl deferred stripping) Impact of deferred stripping on unit cash cost SISHEN UNIT CASH COST Increase driven by above inflationary cost escalations and mining volume growth • Sishen unit cash cost increased by 21% to R239/tonne – Above inflationary increases in input costs (R28/tonne)  Diesel, contractor prices and blasting materials – Intended increase in mining volume – mostly waste removal (R11/tonne) – Production volumes lower, impacted by pit constraints and recovery from strike (R10/tonne) – Decrease in quantum of waste costs deferred to the balance sheet (R8/tonne) Unit cash cost (Rand per tonne) 28 24
    26. 26. 25 KOLOMELA UNIT CASH COST Increased mining volumes offset by production growth • Kolomela unit cash cost decreased by 4% to R172/tonne – Intended increase in mining volume as production reaches design capacity (R49/tonne) – Production volumes increased (R40/tonne) – Ramp-up costs included in base cost, not incurred in 2013 (R23/tonne) – Increases in input costs (R11/tonne) – Decrease in quantum of waste costs deferred to the balance sheet (R5/tonne) 7 4 49 23 40 5 180 172 11 16 120 140 160 180 200 220 240 Restated FY12 Inflation Cost escalation Ramp-up costs in base Mining volume Production volume Deferred stripping 1H13 Unit cash cost (excl deferred stripping) Impact of deferred stripping on unit cash cost Unit cash cost (Rand per tonne) 11 25
    27. 27. 26 SELLING AND DISTRIBUTION COSTS Record volumes railed and shipped • 14% increase in Y-on-Y selling and distribution costs – Increase in tariffs  annual escalation  5.5Mt of Kolomela ore railed, at a higher tariff – 0.9Mt increase in volumes railed to 20.9Mt – 0.5Mt increase in volumes shipped from Saldanha to 20Mt 5 6864 79 161 56 2,037 2,028 2,324 1,750 1,950 2,150 2,350 1H12 Volume Tariff Selling, marketing and other 2H12 Volume Tariff Selling, marketing and other 1H13 Selling and distribution costs (Rand million) 26
    28. 28. 2727 CAPITAL EXPENDITURE Increased SIB capex driven by mining fleet and housing • Capital expenditure of R2.3 billion – Expansion capex of R451 million; stay-in-business (SIB) capex of R1.5 billion and deferred stripping of R397 million* • R5.3 billion to R6.0 billion forecasted for FY13 • Level of sustainable SIB capex going forward: ~R1.5 billion average through the cycle * Adoption of IFRIC 20 results in increased capital expenditure balances 470 34 397 1,095 2,109 1,474 773 1,422 451 0 1,000 2,000 3,000 4,000 1H12 Restated 2H12 Restated 1H13 Capital expenditure per half year (Rand million) Deferred stripping SIB Expansion 504 700 – 850 700 – 850 1,289 1,350 – 1,450 1,750 – 1,850 1,915 2,450 – 2,650 2,250 – 2,450 2,195 800 – 1 000 100 – 200 0 1,500 3,000 4,500 6,000 2012 Restated 2013 2014 Capital expenditure (Rand million) Deferred stripping SIB - sustainable SIB - ramp up Approved expansion capital R5.3bn – R6.0bnR5.9bn Full year forecast (nominal) R4.8bn – R5.4bn 2,338 3,565 2,322
    29. 29. 2828 838 179 2,322 2,756 847 5,831 1,079 4,047 Utilisation of R17,899 million cash generated from operations Cash retained Other* Capital expenditure Taxation Mineral royalties Repaid debt Dividends - non-controlling interest Dividends - owners of Kumba CASH FLOW Exceptional returns of R8.7 billion to stakeholders • Net cash position of R2.3 billion (2H12: Net debt of R4.3 billion) • R17.9 billion cash generated from operations, excluding mineral royalties paid • R5.1 billion returned to shareholders • R3.6 billion paid to South African government in income taxes and mineral royalties • R2.3 billion invested in capital expenditure * ‘Other’ includes finance charges R5.1 billion R3.6 billion
    30. 30. 29 NET CASH/DEBT Healthy balance sheet • Net cash position of R2.3 billion • R5.4 billion facility matured in 2013, re-financed with a R6 billion five-year committed revolving facility • Total debt facilities R15.1 billion * R2 billion of the uncommitted facility has been committed for the peak net debt period in 2013 Rand million 6 months 30 June 2013 Restated 6 months 30 June 2012 Restated 12 months 31 Dec 2012 Interest-bearing borrowings 358 3,194 5,869 Cash and cash equivalents (2,685) (2,526) (1,527) Net (cash)/debt (2,327) 668 4,342 Total equity 25,338 21,431 19,664 Interest cover (times) 108 113 76 Gross debt/equity (%) 1 15 30 Gross debt/market capitalisation (%) 0 2 3 Debt facilities 15,050 14,857 14,863 Committed 9,200 8,595 8,600 Uncommitted* 5,850 6,262 6,263 29
    31. 31. 30 SIOC DIVIDEND Substantial cash distribution of R8.8 billion • BEE shareholders portion of the dividend is R2.3 billion for 1H13 – Exxaro: R1.8 billion – Envision: R271 million – Further R262 million available for our communities * The interim dividend was declared after 30 June 2013 and is presented for information purposes only ** The 2012 and 2013 dividends are subject to dividends withholding tax and not STC Rand million Interim dividend 30 June 2013* Total dividend 2012 Final dividend 31 Dec 2012 Interim dividend 30 June 2012 Total dividend 2011 Gross dividend declared by SIOC 8,757 13,797 4,573 9,224 21,192 STC ** - - - - 1,926 Dividend declared by SIOC 8,757 13,797 4,573 9,224 19,266 Kumba 6,474 10,200 3,381 6,819 14,250 Exxaro 1,750 2,757 914 1,843 3,851 Envision (Employee share ownership scheme) 271 426 140 286 587 SIOC Community Development Trust 262 414 138 276 578 30
    32. 32. 31 KUMBA DIVIDEND R6.5 billion to be returned to shareholders • Interim cash dividend of R20.10/share • Dividend cover of 1.2 times maintained * The interim dividend was declared after 30 June 2013 and is presented for information purposes only Interim dividend 30 June 2013* Total dividend 2012 Final dividend 31 Dec 2012 Interim dividend 30 June 2012 Total dividend 2011 Earnings per share (Rand per share) 24.16 38.87 15.01 23.86 53.11 Dividend per share (Rand per share) 20.10 31.70 12.50 19.20 44.20 Total dividend declared (Rm) 6,474 10,209 4,026 6,183 14,250 Dividend cover (times) 1.2 1.2 1.2 1.2 1.2 31
    33. 33. LEGAL UPDATE SUSAN SEIPOTLANE (electrician) with JAMES SEPUSHI (maintenance operator) on the transfer belt walk way beneath the primary crusher at Sishen mine
    34. 34. 33 LEGAL UPDATE Continuing to protect shareholders’ interests MINING RIGHT REVIEW: SISHEN MINE • On 28 March 2013, the Supreme Court of Appeal issued its judgment - that SIOC is the exclusive holder of the mining right at the Sishen mine • The DMR’s and ICT’s application for leave to appeal to the Constitutional Court will be heard on 3 September 2013 ARBITRATION WITH AMSA • The hearing of the Arbitration has been postponed until after the Constitutional Court has decided the appeal STAKEHOLDER ENGAGEMENT • SIOC continues to engage with AMSA with regard to the sale of iron ore and with relevant Government departments 33
    35. 35. OUTLOOK Female haul truck operators BOITUMELO MOSALA (assistant foreman), TSHEGOFATSO LOETO and KEIIMMETSE TSELE in front of a giant Caterpillar 795F haul truck at a parking area on Sishen mine
    36. 36. 35 PRODUCTION AND COSTS • Production outlook maintained at ~37Mt for Sishen mine and ~9Mt for Kolomela mine in 2013 • In 2013, 40Mt to 50Mt more waste will be mined at Sishen mine to make up mining volumes lost due to the strike in 4Q12. This will put further upward pressure on Sishen mine’s cash unit costs • Kolomela mine anticipated to mine ~45Mt of waste in 2013 SALES • Export sales estimate maintained at ~40Mt for 2013 • Interim supply agreement of 4.8Mt for domestic sales from Sishen mine to AMSA MARKETS • Steel fundamentals remain under pressure as Chinese economy slows • Iron ore prices expected to remain under pressure as supply exceeds demand in 2H13, though restocking by steel mills may support prices in the near term 2013 BUSINESS OUTLOOK 35
    37. 37. 36 • No loss of life and journey towards achieving zero harm continues • Exceptional performance from Kolomela mine continues • Improved production run rates at Sishen mine • Optimisation of Northern Cape assets ongoing to fill export allocation • Strong financial performance • Exceptional returns to stakeholders continue SUMMARY 36
    38. 38. 37 • Ranked 12th in market capitalisation and 4th in the ‘Return on Average Total Assets’ categories in Finweek’s Annual Top 200 Companies review • Ranked 6th overall in the annual Financial Mail Top Companies review and the only resources company in the Top 20 • Kumba’s Batho Pele health project was the runner up in the ‘Resources and Non-renewable Energy’ category at the Nedbank Capital Sustainable Business Awards • Three Kumba communication projects won Excellence Awards at the International Association of Business Communicators Gold Quill Awards 1H13 ACCOLADES 37
    39. 39. THANK YOU
    40. 40. ANNEXURES A Kalahari sunset over the process plant at Kolomela mine
    41. 41. 40 ANNEXURE 1 Revenue: Sector analyses 6 months 30 June 2013 6 months 30 June 2012 % change 6 months 31 Dec 2012 % change Export (Rm) 23,097 21,987 5% 17,435 32% Tonnes sold (Mt) 20 21 (3%) 19 6% US Dollar per tonne 125 134 (7%) 109 15% Rand per tonne 1,148 1,061 8% 920 25% Domestic (Sishen mine) (Rm) 1,118 1,040 8% 778 44% Tonnes sold (Mt) 2 2 (15%) 2 13% Rand per tonne 654 519 26% 541 21% Domestic (Thabazimbi mine) (Rm) 522 506 3% 508 3% Tonnes sold (Mt) 0.3 0.7 (57%) 0.5 (40%) Rand per tonne 1,722 737 >100% 929 85% Shipping operations (Rm) 1,562 1,703 (8%) 1,489 5% Total revenue 26,299 25,236 4% 20,210 30% Rand/US Dollar exchange rate 9.19 7.93 16% 8.46 9% 40
    42. 42. 4141 Rand million 6 months 30 June 2013 Restated 6 months 30 June 2012 % change Restated 6 months 31 Dec 2012 % change Cost of goods sold 7,067 5,801 22% 7,597 (7%) Cost of goods produced 6,313 4,734 33% 6,638 (5%) Production costs 6,657 4,916 35% 6,838 (3%) Sishen mine 4,788 3,600 33% 4,689 2% Thabazimbi mine 472 443 7% 555 (15%) Kolomela mine 1,344 835 61% 1,524 (12%) Other 53 38 39% 70 (24%) Inventory movement WIP (344) (182) 89% (200) 72% A grade (172) (144) 19% (269) (36%) B grade (172) (38) >100% 69 (>100%) Inventory movement finished product 497 291 71% 150 >100% Other 257 776 (67%) 809 (68%) Mineral royalty 904 718 26% 409 >100% Sublease rentals (16) (5) >100% (7) >100% Selling and distribution 2,324 2,037 14% 2,028 15% Shipping operations 1,681 1,766 (5%) 1,456 15% Operating expenses 11,960 10,317 16% 11,483 4% ANNEXURE 2 Aggregate operating expenditure
    43. 43. 42 ANNEXURE 3 A summary of the impact of IFRIC 20 Stripping Costs in the Production Phase of a Surface Mine Rand million 6 months 30 June 2013 6 months 30 June 2012 12 months 31 Dec 2012 Balance sheet Increase in assets Property, plant and equipment 382 470 493 Cost 397 470 504 Accumulated depreciation (15) - (11) Increase in equity and liabilities 107 Retained earnings 212 260 274 Non-controlling interest 63 78 81 Deferred tax liabilities 107 132 138 Income statement Decrease in operating expenses (382) (470) (493) Increase in taxation – deferred tax 107 132 138 Increase in net income for the period 275 338 355 Attributable to owners of Kumba 212 260 274 Attributable to non-controlling interest 63 78 81 Basic earnings per share 0.66 0.81 0.85 Headline earnings per share 0.66 0.81 0.85 42
    44. 44. 43 Rand million 6 months 30 June 2013 Restated 6 months 30 June 2012 Restated 6 months 31 Dec 2012 Opening balance 4,426 4,759 4,945 Profit for the period 2,477 2,410 1,585 Exxaro 2,111 2,003 1,291 SIOC Community Development Trust 317 301 194 Envision 49 106 100 Dividends paid (1,079) (2,313) (2,177) Exxaro (914) (1,958) (1,843) SIOC Community Development Trust (137) (294) (277) Envision (49) (106) (100) Recoupment of Envision dividend * 21 45 43 Interest in movement in equity reserves 54 89 73 Non-controlling interest – closing balance 5,878 4,945 4,426 ANNEXURE 4 Reconciliation of non-controlling interest * Non-controlling interest in the recoupment by SIOC of the dividend received by Envision 43
    45. 45. 44 ANNEXURE 5 Reconciliation of attributable profit Rand million 6 months 30 June 2013 Restated 6 months 30 June 2012 Restated 6 months 31 Dec 2012 Profit 10,165 10,071 6,384 Attributable to non-controlling interests (2,406) (2,410) (1,560) Exxaro (2,049) (2,003) (1,269) SIOC Community Development Trust (308) (301) (191) SIOC Employee Share Participation Scheme (49) (106) (100) Attributable to owners of Kumba 7,759 7,661 4,824 44
    46. 46. 45 ANNEXURE 6 Headline earnings Rand million 6 months 30 June 2013 Restated 6 months 30 June 2012 Restated 6 months 31 Dec 2012 Profit attributable to owners of Kumba 7,759 7,661 4,825 Net (profit)/loss on disposal and scrapping of property, plant and equipment (13) 13 (34) Net profit on disposal of investment (5) - (3) 7,741 7,674 4,788 Taxation effect of adjustments 4 (2) 8 Non-controlling interest in adjustment 3 (3) 7 Headline earnings 7,748 7,669 4,803 45
    47. 47. 4646 -22 -1 -12 -20 -35 -2 -11 -16 31 56 41 46 49 45 43 346 8 7 7 3 3 3 311 12 11 13 19 16 17 17 22 30 26 32 17 10 13 17 36 54 44 62 55 45 49 55 35 37 36 49 27 24 25 28 41 51 45 50 43 40 41 33 -60 -45 -30 -15 - 15 30 45 60 75 90 105 120 135 150 165 180 195 210 225 240 Sishen mine 1H12 Sishen mine 2H12 Sishen mine FY12 Sishen mine 1H13 Kolomela mine 1H12 Kolomela mine 2H12 Kolomela mine FY12 Kolomela mine 1H13 Deferred stripping Other Energy Drilling and blasting Maintenance Outside services Fuel Labour ANNEXURE 7 Sishen and Kolomela mines’ unit cash cost structure (Rand per tonne) 198 181178 180 172 239 247 160
    48. 48. 4747 -14% -1% -6% -8% -20% -1% -6% -9% 19% 23% 20% 19% 27% 24% 24% 20% 4% 3% 4% 3% 2% 2% 2% 2%7% 5% 6% 5% 11% 9% 9% 10% 14% 12% 13% 13% 10% 6% 7% 10% 23% 22% 22% 26% 31% 25% 27% 32% 22% 15% 18% 21% 15% 13% 14% 16% 25% 21% 23% 21% 24% 22% 23% 19% -0 -0 - 0 0 1 1 1 1 Sishen mine 1H12 Sishen mine 2H12 Sishen mine FY12 Sishen mine 1H13 Kolomela mine 1H12 Kolomela mine 2H12 Kolomela mine FY12 Kolomela mine 1H13 Deferred stripping Other Energy Drilling and blasting Maintenance Outside services Fuel Labour ANNEXURE 8 Sishen and Kolomela mines’ unit cash cost structure (%)

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