Post on 14-Sep-2020
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
`+
mining, global player, ferrochrome, safety,
partnerships, JSE SRI index, diversification,
joint venture, South Africa, communities,
empowerment, Mining Charter, diversity,
stainless steel, cooperation, social
responsibility, assurance, producer, skills
profitability, loyalty, development, sharing,
stakeholders
Results Presentation For the six months ended 30 June 2012
Presented by Zanele Matlala and Kajal Bissessor
Merafe Resources Limited
Merafe Resources Ltd results presentation for the six months ended 30 June 2012 Merafe Resources Ltd results presentation for the six months ended 30 June 2012
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The information contained herein shall not be published, rewritten for broadcast or publication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.
Merafe Resources Ltd results presentation for the six months ended 30 June 2012 Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Quote from the CEO
“I am delighted that in my first report as Chief Executive Officer I am able to
advise you that despite the challenges in the first half of 2012, we achieved a
57% increase in our basic earnings per share, period on period. Production
costs were contained at an overall increase of 4.5%, period on period, despite
high mining inflation levels. We closed the period with a cash balance of R80m
and have undrawn debt facilities with ABSA of approximately R500m. I am also
pleased to report that project Tswelopele, our new pelletiser at the Rustenburg
plant is on track and on budget and will be commissioned in the second half of
this year. Our flagship project, Lion II, is also within budget and on track to be
completed in the second half of 2013.” Zanele Matlala
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
4
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Agenda
1. Key features
2. Sustainability
3. Market review
4. Financial review
5. Project pipeline
6. Outlook and way forward
Appendices
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Workers in the metal extraction plant at Boshoek ferrochrome plant performing a visual inspection of moving
parts in the plant
1. Key features
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
6
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Key features for the period
• 7% decrease in revenue
• Profit of R138m, increase of 57% in basic EPS
• Cash flows from operations of R134m
• Total recordable injury frequency rate improved by 7%
• Contained mining costs despite high mining inflation levels
• Project Tswelopele is on track and on budget - expected to be
commissioned in H2 2012
• Lion II is on track and on budget - expected to be commissioned
in H2 2013
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
The sustainable development team at the Lion ferrochrome plant records the details of an indigenous plant being
relocated to make way for a new development at the plant in Limpopo province
2. Sustainability
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
8
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Sustainability
• Safety
– TRIFR improved by 7%
• Labour and Community unrest
– Impacted Project Lion II
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Maintenance work under way on the tailings dam at Boshoek ferrochrome plant in North West province
3. Market review
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
10
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
-
002
004
006
008
010
012
014
016
018
020
Others India NAFTA Japan S. Korea/Taiwan European Union China Total
2011 June YTD Actual tonnes in millions
2012 June YTD Estimated tonnes inmillions
7%
(1%)
0.60/0.59 1.07/1.21 4.11/4.06
Marginal increase in stainless steel production
2012 2011 Change
Full year tonnes in millions
*Estimate
35.4* 34.1 4%
(2%) 13% (13%)
(6%)
2%
0.6%
1.17/1.02 1.69/1.59 1.63/1.74 7.26/7.42 17.53/17.63
Source:
Heinz H. Pariser July 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
11
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
2% increase in global ferrochrome demand
0
1000
2000
3000
4000
5000
6000
NAFTA Japan Others S. Korea, Taiwan,India
EU China Total
2011 June YTD Actual tonnes in '000
2012 June YTD Estimated tonnes in '000
277/261 344/339 368/421 4957/5046
(6%) (1%) 14%
19% (6%)
2%
656/778 936/877 2376/2370
2012 2011 Change
Full year tonnes in ‘000 *Estimate
10 023* 9 554 5%
Source:
Heinz H. Pariser July 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
12
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
9/24 76/78 89/110 158/162 167/183 540/580 4730/4808 556/557 0
1000
2000
3000
4000
5000
6000
Iran, Oman Brazil Zimbabwe Russia,Turkey,Albania
EU India Kazakhstan China South Africa Total
2011 June YTD Actual tonnes in '000
2012 June YTD Estimated tonnes in '000
167%
Ferrochrome production
in China grew from 5%
in 2001 to 33% in H1
2012
2% increase in global ferrochrome supply
3% 24% 3% 10% 7%
18% (15%)
2%
1331/1575 1804/1539
2012 2011 Change
Full year tonnes in ‘000 *Estimate
9 646* 9 183 5%
Source:
Heinz H. Pariser July 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
13
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Chrome ore imports into China remain significant
2012 (June YTD) 2011 2010
‘000t ‘000t ‘000t
South Africa 2 133 4 675 3 100
Turkey 832 1 612 1 933
Oman 222 645 902
India 201 439 389
Pakistan 215 440 512
Albania 122 357 363
Iran 253 330 350
Zimbabwe 1 212 160
Madagascar 51 86 115
Australia 235 208 201
Philippines 109 137 150
Brazil - 60 77
Kazakhstan 19 94 243
Others 46 149 172
Total 4 439 9 444 8 667
Source:
Chinese Customs / July 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
14
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
What are we doing about this?
• Advancing our engagement with the South African government
• A solution for the entire chrome value chain
– Short term: chrome export levy on unbeneficiated ores
– Long term: regulation of the supply of ore in line with demand
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
• Eurozone debt crisis and US debt ceiling
debacle coupled with the Chinese New
Year resulted in an unstable market at the
end of 2011
• The Q1 2012 ferrochrome price was
settled 4% down
• Improved sentiment in Europe and a good
start to the US earnings season as well
as SA Eskom buy back arrangements
resulted in ferrochrome prices improving
by 17% in Q2 2012
• Renewed concerns over European debt,
lower growth rates in China, lower nickel
prices as well as general weaknesses
across the global economy resulted in a
7% decrease in the ferrochrome price
Volatility in the market in the first half of 2012
Ferrochrome price overview
Q4 2011 120 USc/lb
Q1 2012 115 USc/lb
Q2 2012 135 USc/lb
Q3 2012 125 USc/lb
15
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Boshoek ferrochrome plant in the North West province
4. Financial review
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
17
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Weaker rand and contained costs result in
higher profits
• Profit of R138m in comparison to R86m
• Production cost increases contained at 4,5%
• Cash balance of R80m
• Long Term Debt of R300m and unutilised ABSA facility of R500m
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
18
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Revenue decreased by 7%
2012 June YTD 2011 June YTD
Reviewed Reviewed % Change
Ferrochrome sales tonnes 123 900 146 100 (15%)
Average exchange rate (Rand:USD) 7.90 6.90 14%
Average benchmark ferrochrome price in Usc/lb 125.00 130.00 (4%)
Chrome ore revenue as a percentage of total revenue increased from 11% in the first half of 2011 to 14% in the
first half of 2012
– Reduced ferrochrome sales tonnes
– Reduced ferrochrome sales prices
+ Weaker Rand
+ Increase in chrome ore sales
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
19
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Reconciliation of EBITDA to profit
279
138
(10)
(16)
(68)
(47)
0
50
100
150
200
250
300
Merafe's 20.5% of EBITDAfrom the Venture
Corporate costs Depreciation Net financing costs Taxation expense Profit
R‘m
illio
ns
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
20
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
EBITDA increased by 28%
• Production costs per tonne increases contained at 4.5%
• Non-recurring 2011 indirect tax charges of R30m
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
21
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Power buy-back arrangement
• The Venture temporarily closed seven of its furnaces from
February 2012 to May 2012 resulting in 130 000 lost
ferrochrome tonnes
• In return, Eskom bought back the energy not consumed by
these seven furnaces
• This resulted in a net positive impact for both the Venture
and Eskom
• No job losses
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
22
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Balance sheet
As at
30 June 2012
As at
31 December 2011
Reviewed R’000 Audited R’000
Property, plant and equipment 2 541 110 2 372 768
Total current assets 1 558 603 1 549 370
Inventories 1 090 031 1 065 932
Trade and other receivables 362 845 262 979
Current tax asset 26 102 –
Cash and cash equivalents 79 625 220 459
Total assets 4 099 713 3 922 138
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
23
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Balance sheet
As at
30 June 2012
As at
31 December 2011
Reviewed R’000 Audited R’000
Total non-current liabilities 947 844 867 378
Loans and borrowings 312 477 312 778
Provision for close down and restoration costs 50 109 48 396
Deferred tax 585 258 506 204
Total current liabilities 355 965 396 092
Trade and other payables 352 229 375 946
Loans and borrowings 592 508
Financial liability 3 144 6 098
Current tax liability – 13 540
Total liabilities 1 303 809 1 263 470
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
24
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Cash flows from operations of R134m
220
80
134
(14)
(11)
(164)
(78) (7)
0
50
100
150
200
250
300
350
400
Balance at 1January 2012
Cash flowsfrom operations
Net financingcosts
Expansionarycapex
Sustainingcapex
Current Taxpaid
Exchange ratefluctuations
Balance at 30June 2012
R'm
illio
ns
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
25
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Financing of Lion II – No rights issue expected
R’ millions
Total Project cost (Merafe’s portion at 20.5%) 1 000
Less: Capital expenditure to 30 June 2012 (240)
Capital expenditure outstanding 760
Expected financing:
Cash on balance sheet 80
ABSA debt – unutilised facility 500
Venture overdraft facility (Merafe’s portion at 20.5%) 180
Total facilities available 760
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Lion I: a worker inside the Furnace Workshop store is attending to some of the routine maintenance on specialist
equipment
5. Project pipeline
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
27
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Projects are on track and on budget
Description
Project Cost
(Merafe’s portion
at 20.5%)
Completion
Date Progress
1
Lion II smelter complex
360 000 tpa of ferrochrome smelting
capacity and development of
Magareng mine
R1bn H2 2013
On track to be
completed within
schedule/budget
2
Project Tswelopele
600 000 tpa pelletising and sintering
plant at Rustenburg smelter
R190m H2 2012
On track to be
completed within
schedule/budget
3 Horizon mine development
480 000 tpa R66m H1 2013
On track to be
completed within
schedule/budget
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
6. Outlook and the way forward
The Lion ferrochrome plant at Steelpoort, Limpopo province, which the lowest-cost producer of ferrochrome in
the Venture. The plant uses the Venture’s proprietary Premus technology
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
29
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Outlook
• We expect the stainless steel production to grow by 4% in 2012
and by 5% in the long-term which is expected to increase demand
for ferrochrome
• Lower production in South Africa is expected to result in tight supply
• The Venture’s suite of energy efficient technologies leaves it well
positioned for the upturn in global demand
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
The way forward
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
• To grow through diversification
30
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
31
Questions
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
The sustainable development team at the Lion ferrochrome plant in Limpopo province inspect a lining laid in
preparation for the construction of a tailings dam. The lining prevents any leakage from the tailings dam
7. Appendices
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
33
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
Stainless steel cluster
100
400
700
1,000
1,300
1,600
1,900
2,200
2,500
2,800
3,100
3,400
3,700
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015
Ind
ex
po
ints
External Stainless Scrap
G. R.: 7.9%
Stainless Steel
G. R.: 5.3%
Chrome
G. R.: 4.2%
Nickel
G. R.: 3.6%Molybdenum
G. R.: 3.9%
Source:
Heinz H. Pariser July 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
34
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
2000 2002 2004 2006 2008 2010 2012 2014
in M
ill t
Cru
de
Sta
inle
ss S
tee
l
Source: Heinz H. Pariser
9/11
Destocking
Nickel Price
Bubble
Financial
CrisisDemand
Supply
Demand
Forecast
Stainless steel supply and demand balance
Source:
Heinz H. Pariser July 2012
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
35
Merafe Resources Ltd results presentation for the six months ended 30 June 2012
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
Sh
are
of
Pro
du
cti
on
, in
%
2002 2013201120102009200820072006200520042003
300 Series
200 Series
400 Series
2012
Stainless steel product mix
400 Series (Ferritic: 10.5%-22%
chrome, no nickel )
300 Series (Austenitic: 17%-22%
chrome & 7%-25% nickel, most
corrosion resistant)
200 Series (Chrome
manganese: 16%-18% chrome,
2%-4% nickel and 6%-9%
manganese)
Source:
Heinz H. Pariser July 2012