INVESTED · 2013. 3. 5. · Q3 2012 Q4 2012 125 USc/lb 110 USc/lb Positive signs in the Ch inese,...

Merafe Resources Ltd Results presentation for the year ended 31 December 2012

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INVESTEDIN LONG-TERM SUSTAINABLE

PARTNERSHIPS

MERAFE RESOURCES LIMITEDResults PresentationFor the year ended 31 December 2012

Presented by Zanele Matlala (CEO) and Ditabe Chocho (CFO)


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 The information contained herein shall not be published, rewritten for broadcast or publication or redistributed in any medium without prior written consent from Merafe Resources.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.

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Quote from the CEO

“I am pleased to report that we achieved headline earnings per share of 5 cents for the 2012 year despite tough market conditions. Project Tswelopele, our new pelletiser, was commissioned on schedule and on budget in October 2012. We look forward to a further strengthening of our position as the lowest cost producers in South Africa when our flagship and world class project, Lion II, comes on stream during this year.”

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4

Agenda

1. Key features

2. Sustainability

3. Market review

4. Financial review

5. Project pipeline

6. Outlook

Annexures

4


Key features

The Tswelopele pelletising and sintering plant

North West province


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Key features

• 5% increase in Revenue

• Headline EPS of 5 cents

• Projects on schedule and on budget

6


Sustainability

Production Engineer, Charlotte Ntsole, at work on the new Tswelopelepelletising and sintering plant

North West province


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Sustainability

• Safety

– TRIFR - 4.05

– Project Tswelopele - more than 1.6m hours were worked with no lost time injuries

• Employment equity targets exceeded

• Community unrest impacted Project Lion II

• Labour unrest

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Merafe Resources Ltd Results presentation for the year ended 31 December 2012The Lion ferrochrome plant at Steelpoort

Limpopo province

Marketreview


10

Global stainless steel production

110

7

207

4

226

5

325

6

336

0

755

9

1446

0

3408

1

1% 4% 9% 3% 3%

1%

9%

3%

-

5 000

10 000

15 000

20 000

25 000

30 000

35 000

40 000

Others NAFTA India Japan S Korea / Taiwan EU China Total

2011 ACTUAL TONNES in '000 2012 ESTIMATED TONNES in '000

1 11

4

1 98

5

2 46

9

3 17

3

3 24

3

7 44

7

15 7

30

35 1

61

Others NAFTA India Japan South Korea/Taiwan

EU China Total

3% increase instainless steel production

Heinz H. Pariser /Feb 2013

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11

Global ferrochrome demand

-

2 000

4 000

6 000

8 000

10 000

12 000

NAFTA India Japan Others S Korea / Taiwan EU China Total


5%

2%

0.1%

0.1%4%4%10%1%

462

495

664

781

766

1 72

4

4 84

2

9 73

4

OthersNAFTA India Japan South Korea/Taiwan

EU China Total

469

553

695

752

767

1 72

2

4 59

6

9 55

4

2% increase inFerrochrome demand


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12

4% 13% 14% 4% 2%

19% 9%

1%

-

1 000

2 000

3 000

4 000

5 000

6 000

7 000

8 000

9 000

10 000

Others Russia / Turkey /Albania

EU India Kazakhstan China South Africa Total


Global ferrochrome production

348

286

277

941

1 11

4

3 32

0

3 01

7

India

2012 ESTIMATED TONNES IN ‘000

Russia/Turkey/Albania

EU Kazakhstan China South Africa

336

329

323

985

1 08

8

2 79

8

3 31

9

9 30

3

Total

9 17

8

Marginal increase In ferrochrome production

Others


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Chrome ore imports into China

2012 ‘000

2011 ‘000

2010 ‘000

% change2012/2011

South Africa 4 490 4 675 3 100 (4.0)Turkey 1 840 1 612 1 933 14.1Oman 426 645 902 (34.0)India 310 439 389 (29.4)Pakistan 472 440 512 7.3Albania 305 357 363 (14.6)Iran 448 330 350 35.8Zimbabwe 1 212 160 (99.5)Madagascar 118 86 115 37.2Australia 501 208 201 140.9Phillipines 180 137 150 31.4Brazil 29 60 77 (51.7)Kazakhstan 89 94 243 (5.3)Others 91 149 172 (38.9)Total 9 300 9 444 8 667 (1.5)

Heinz H. Pariser, Alloy Metals and Steel Market Research

Chrome ore imports into China remain high

What are we doing about this? – discussions with DMR are continuing

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Volatility in the market during 2012

QuarterFerrochrome

price

Q1 2012 115 USc/lb

Improved sentiment in Europe and Eskom buy-back arrangements Q2 2012 135 USc/lb

Renewed concerns over European debt and general weaknesses across the global economy

Q3 2012Q4 2012

125 USc/lb110 USc/lb

Positive signs in the Chinese, North American and European markets coupled with further Eskom buy-back arrangements Q1 2013 112.5 USc/lb

Positive signs of recovery are expected to result in improved pricing Q2 2013

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Financialreview

The Lion ferrochrome plant at Steelpoort

Limpopo province


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Contents

1. Key financial features

2. Financial performance

3. Financial position

4. Looking ahead – key priorities

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Revenue

EBITDA

HEPS

Capex

Key financial features

Net debt

R 2 427m R2 542m

2011 2012

5%

R 380m R314m

2011 2012

17%

R 93m

R 441m

2011 2012

R348m

6 cents 5 cents

2 011 2 012

1 cent

20122011

R404m R603m

2 011 2 012

49%

20122011

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Revenue

Ferrochrome sales tonnes

Rand Dollar exchange rate

Average benchmark ferrochrome price

Chrome ore sales

3%

R343mR330m

2011 2012

4%

13%

125 USc/lb 121 USc/lb

2011 2012

7.26

8.21

2011 2012

254kt 255kt

2011 2012

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Operating costs

Average energy efficiency improvements the Venture has achieved and expects to achieve

2012 total cost per tonne increases contained at 9%

This improvement represents more than 25% in energy efficiency over the past decade.

MW

h/t

Ven

ture

tech

nolo

gy

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Reconciliation of EBITDA to profit

349

(35)

(218) (20)

33

(60)

49

-300

-200

-100

0

100

200

300

400M

eraf

e's

20.5

% E

BIT

DA

from

Vent

ure

Cor

pora

te c

osts

Dep

reci

atio

n an

d im

pairm

ent

Net

fina

ncin

g co

sts

Prio

r yea

rs' o

verp

rovi

sion

Def

erre

d ta

x

Prof

it

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21

Capital expenditure (R’m)

Average EBITDA Margin of 20% through the cycle

‘08 ‘09 ‘10 ‘11 ‘12

138 183270

404

603703

2 301

0

500

1 000

1 500

2 000

2 500

2008 2009 2010 2011 2012 2013 estimate Total

SUSTAINING IN R'M EXPANSIONARY IN R'M

Total

2013 estimate

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Balance sheet

As at31 December

2012Audited

R’000

As at31 December

2011Audited

R’000 Movement

Total non-current assets 2 677 308 2 372 768Property, plant and equipment 2 677 308 2 372 768 13%Total current assets 1 614 804 1 549 370Inventories 1 088 885 1 065 932 2%Trade and other receivables 344 725 262 979 31%Current tax asset 26 424 – 100%Cash and cash equivalents 82 643 220 459 (63%)Assets held for sale 72 127 – 100%Total assets 4 292 112 3 922 138

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Balance sheet (continued)

As at31 December

2012Audited

R’000

As at31 December

2011Audited

R’000 Movement

Total non-current liabilities 1 132 929 867 378

Loans and borrowings 523 872 312 778 67%

Provision for close down and restoration costs 57 892 48 396 20%

Deferred tax 551 165 506 204 9%

Total current liabilities 449 554 396 092

Loans and borrowings 636 508 25%

Trade and other payables 430 368 375 946 14%

Financial liability – 6 098 (100%)

Current tax liability – 13 540 (100%)

Liabilities held for sale* 18 550 – 100%

Total liabilities 1 582 483 1 263 470* Relates to assets held for sales

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Net debt bridge

*Net of effect of exchange rate fluctuations

**Closing net debt at 31 Dec 2012 (441)

Cash 83

Debt (524)

(93)

254

(179)

(423) (441)-500

-400

-300

-200

-100

0

100

200

300

Sustaining capex

Cash from operating activities*

Net debt at31 Dec 2011

Expansionary capex Net debt at

31 Dec 2012**

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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 31 December 2012 (472)

Capital expenditure outstanding 528Expected financing:

Cash 83

ABSA debt – unutilised facility 288

Venture overdraft facility (Merafe's 20.5%) 180

Total facilities available 551

Facilities above exclude free cash flow

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26

Looking ahead – key priorities

2013Capacity building and efficiency improvements

2014 / 2015Reduction of debt and balance sheet strengthening

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Projectpipeline

Inside the Tswelopele pelletisingand sintering plant

North West province


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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 Magarengmine

R1bn H2 2013 On track to be completed within schedule/budget

2 Project Tswelopele- 600 000 tpa pelletising and sintering plant

R190m H2 2012 Completed within schedule/budget

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Outlook

Welders at work on the Kiln at the Lion II project

Limpopo province


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Outlook

• Stainless steel production is expected to grow by 4% in 2013 and by 5% in the long-term which is expected to increase demand for ferrochrome

• Improved market sentiments coupled with Eskom buy-back arrangements are expected to result in improved pricing for 2013

• Existing low cost base further strengthened by Lion II, leaves us well positioned to take advantage of increased demand for ferrochrome

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Questions31


Annexures

Lion II ferrochrome plant under construction

Limpopo province


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Stainless steel cluster


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34

Stainless steel product mix


34


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Globally rising power prices35

INVESTED · 2013. 3. 5. · Q3 2012 Q4 2012 125 USc/lb 110 USc/lb Positive signs in the Ch inese,...

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