Interim results for the six months ended 31 December 2009

Transcription

1 Interim results for the six months ended 31 December 29 ARM s financial position continues to be robust with net debt to equity of 8.4%. We are pleased about the significant increase in headline earnings compared to the preceding six months; as well as the increased sales volumes and reduced unit costs relative to the corresponding reporting period Patrice Motsepe ARM Executive Chairman 1

2 Disclaimer Certain statements in this report constitute forward looking statements that are neither reported financial results nor other historical information. They include but are not limited to statements that are predictions of or indicate future earnings, savings, synergies, events, trends, plans or objectives. Such forward looking statements may or may not take into account and may or may not be affected by known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company to be materially different from the future results, performance or achievements expressed or implied by such forward looking statements. Such risks, uncertainties and other important factors include among others: economic, business and political conditions in South Africa; decreases in the market price of commodities; hazards associated with underground and surface mining; labour disruptions; changes in government regulations, particularly environmental regulations; changes in exchange rates; currency devaluations; inflation and other macro-economic factors; and the impact of the AIDS crisis in South Africa. These forward looking statements speak only as of the date of publication of these pages. The Company undertakes no obligation to update publicly or release any revisions to these forward looking statements to reflect events or circumstances after the date of publication of these pages or to reflect the occurrence of unanticipated events. 3 Corporate structure 4 2

3 Overview and strategy Patrice Motsepe, Executive Chairman Salient features Headline earnings of R454 million reflect a decline of R1.78 billion relative to the corresponding period but reflect an increase of R369 million over the headline earnings of the preceding six months Significant decline in commodity prices and a strengthening of the Rand against the US Dollar negatively impacted earnings Increased sales volumes across platinum group metals, nickel, iron ore, manganese ore, chrome ore and alloys Decreased unit costs at platinum, nickel and iron ore operations 6 3

4 Salient features ARM s financial position remains robust with net debt to equity of 8.4% Khumani Iron Ore Mine ramping up to 1 million tonnes per annum Phase 2a of the Nkomati Large Scale Expansion project commissioned o Goedgevonden Coal Mine commissioned; long-term off-take agreement signed with Eskom 7 Earnings recovering after global economic collapse Headline earnings (R million) 3,5 3,272 3, 2,5 2,232 2, 1,5 1, F25 F26 F27 F28 F29 F21 1H 2H Headline earnings per share of 214 cents (1H 29: 1 55 cents per share) 8 4

5 Robust financial position Net cash/ (net debt) excluding partner loans (R million) F25 F26 F27 F28 F29 1H F21 9 Diversified revenues 1H F29 Revenue commodity contributions 1H F21 Revenue commodity contributions Manganese 54% Platinum 9% Nickel 4% Chrome 9% Manganese 28% Platinum 36% Coal 1% Iron ore 23% Iron ore 21% Coal 1% Chrome 6% Nickel 8% 1 5

6 Divisional headline earnings Contribution to headline earnings by commodity group 6 months ended 31 December 6 months ended 3 June % change 29 Platinum Group Metals 131 (293) (55) Nkomati Nickel and Chrome Ferrous Metals (89) 338 Coal (8) (41) Exploration (85) (454) 81 (235) Corporate and Other 34 (33) 73 Total headline earnings (8) ARM strategy Operational efficiencies Organic growth 2 x 21 Partnerships and Acquisitions Africa Owner operator Profit focused Partner of choice Entrepreneurial management World-class management team 12 6

7 Investing in growth ARM s Portion F25 F29 R1.8 bn Projects completed + F29 F212 + R8.8 8 bn Ramp up F25 F212 R19.6 bn Partners Portion F25 F29 F29 F212 F25 F212 R8.2 bn + R8.1 bn R16.3 bn Projected total investment over 8 years in growth ±R36bn 13 Delivering quality growth projects Khumani Iron Ore (1 mtpa) Goedgevonden Thermal Coal Nkomati Nickel Large Scale Expansion Capex committed to date 1% 95% 85% Stage Production ramp up Commissioning 375ktpm plant production ramp up Commissioning (Calendar year) Full production (Financial year) Steady state 1mtpa 3.5mt local; 3.2mt export 2 5t nickel Position on cost curve 4 th percentile 25 th percentile 4 th percentile Comment More efficient, low unit cost Dragline opencast operation C1 cash cost net of by products of $

8 2 x 21 growth strategy attributable PGM in concentrate sales Thousand ounces F25a F26a F27a F28a F29a F21e F211e F212e Thermal coal Million tonnes Modikwa Two Rivers Nkomati a 26a 27a 28a 29e 21e 211e 212e GGV PCB The a included in the x-axis refers to actual and the e to estimate 15 2 x 21 growth strategy 1% basis Nkomati nickel Thousand tonnes Chrome ore Thousand tonnes 1,2 1, F25a F26a F27a F28a F29a F21e F211e F212e F25a F26a F27a F28a F29a F21e F211e F212e The a included in the x-axis refers to actual and the e to estimate 16 8

9 2 x 21 growth strategy 1% basis Manganese ore Thousand tonnes F25a F26a F27a F28a F29a F21e F211e F212e Iron ore Thousand tonnes F25a F26a F27a F28a F29a F21e F211e F212e Khumani Beeshoek 17 Continuous focus on cost reduction 18 9

10 Safety and sustainable development Zero fatalities in this period Modikwa achieves 6 million consecutive fatality-free man shifts worked ARM accepted as a member of the International ti Council of Mining i and Minerals 19 Outlook Commodity demand and prices improving China and Asia leading global recovery Growth projects ramping up production at Khumani, Goedgevonden and Nkomati Continuing focus on reducing unit costs Robust financial position 2 1

11 Operational review André Wilkens, Chief Executive Officer Operational performance: Volumes 29% increase in iron ore sales to 4.4 million tonnes 13% increase in external manganese ore sales to 1.5 million tonnes 71% increase in manganese alloy sales to 12 thousand tonnes 11% increase in PGMs produced to ounces 52% increase in contained nickel to tonnes 26% increase in chrome ore/chrome concentrate to 537 thousand tonnes All 1% basis, except for PGMs which are indicated on an attributable basis

12 Solid EBITDA margins ARM EBITDA margin is 29% for the period Iron Ore Manganese Chrome * Coal Platinum Nickel -4% -2% % 2% 4% 6% 8% 1% 12% * Coal EBITDA margin is impacted by inventory increases and capitalisation of ramp up costs 23 Cash generated from operations ARM cash generated from operations (R million) Iron Ore Manganese Chrome Coal Platinum Nickel Exploration Corporate and Other

13 Revenue drivers: Volumes 1H F21 compared to 1H F29 volume changes 8% 7% 6% 5% 4% 3% 2% 1% % Palladium (oz) Platinum (oz) Rhodium (oz) Manganese ore (t) Chrome (t) Iron ore (t) Nickel (t) Manganese alloys (t) 25 Revenue drivers: Commodity prices 1H F21 compared to 1H F29 average price changes 4% 2% % -2% -4% -6% -8% Gold ($/oz) Palladium ($/oz) Nickel ($/lb) Platinum ($/t) Chrome ore (R/t) Rand/Dollar exchange rate Export thermal coal ($/t) Iron ore ($/t) Rhodium ($/oz) FeMn ($/t) Manganese ore ($/t) 26 13

14 Unit operating costs Cost containment continues to be a key focus for ARM Commodity group Unit cost (metric) % change 1H F21 vs 1H F29 (decrease)/increase 1H F21 EBITDA margin (%) Nickel R/tonne milled (27.9) 29.9 Iron ore R/tonne (19.5) 44.6 Platinum R/PGMs (7.1) 32.7 Coal R/tonne (on mine, saleable) 5. 12* Manganese alloys R/tonne Charge chrome R/tonne 11.8 (22.3) Manganese ore R/tonne * Coal EBITDA margin impacted by inventory increases and capitalisation of ramp up costs 27 Mining costs ARM Ferrous ARM Platinum ARM Coal Increasing volumes, decreasing operating unit cost Cost containment and plant optimisation with restructuring completed Increasing volumes and local supply contract secured Approximate on mine and smelter cash cost split Approximate on mine cash cost split Approximate on mine cash cost split Other 1% Labour 34% Other 23% Labour 46% Other 31% Labour 33% Consumables 46% Electricity 1% Consumables 27% Electricity 4% Consumables 33% Electricity 3% All 1H F21 figures attributable 28 14

15 Growth projects continue Attributable capital expenditure by division R million 4, 3, , , , 1,5 1, 5 F28a F29a F21e F211e F212e Modikwa Nkomati Two Rivers ARM Ferrous ARM Coal ARM Exploration F25 F29: R>1bn F21 F212: R>8bn The a included in the x-axis refers to actual and the e to estimated 29 Delivering company transforming internal growth projects Completed projects > R1 bn* F25 - F29 Khumani Iron Ore (1 mtpa) Nchwaning III Manganese Modikwa Platinum Two Rivers Platinum Nkomati Nickel Interim Plant Nkomati Chrome Mine Dwarsrivier Chrome Mine * Total attributable capital expenditure 3 15

16 Delivering company transforming internal growth projects Projects in progress > R8 bn* F21 - F212 Khumani Iron Ore (+6 mtpa) Nkomati Nickel (2 ktpa) GGV Thermal Coal (6.7 mtpa) * Total attributable capital expenditure 31 Khumani expansion: additional 6 mtpa Total project cost R6.7 billion approved Capital expenditure to date R1.2 billion spent in 29 (calendar year) Production ramp up Expected to begin production ramp up July 212 Full production 213 (financial year) Position on cost curve Comment 4 th percentile Tariff agreed for railway transportation for additional 4 mtpa; 2 mtpa to be allocated to the local market 32 16

17 2 x 21 growth strategy Nickel Nkomati nickel (thousand tonnes) F25a F26a F27a F28a F29a F21e F211e F212e The a included in the x-axis refers to actual and the e to estimate 33 Delivering quality long-term growth projects: The Nkomati Nickel Expansion Project Nkomati Nickel Large Scale Expansion Capex committed to date Stage Commissioning (Calendar year) Full production (Financial year) Steady state Position on cost curve Comment 85% 375ktpm plant production ramp up t nickel 4 th percentile C1 cash cost net of by products of $

18 2 x 21 growth strategy Thermal coal Thermal coal * (million tonnes) a 26a 27a 28a 29e 21e 211e 212e GGV PCB * Tonnes attributable to African Rainbow Minerals The a included in the x-axis refers to actual and the e to estimate 35 Delivering quality long-term growth projects: The Goedgevonden Project Goedgevonden Thermal Coal Capex committed to date Stage Commissioning (Calendar year) Full production (Financial year) Steady state Position on cost curve Comment 95% Commissioning mt local; 3.2mt export 25 th percentile Dragline opencast operation 36 18

19 Delivering company transforming internal growth projects Potential ti Future Projects Konkola North Copper Modikwa Platinum expansion Smelter expansions Thermal Coal Kalplats Platinum 37 Financial position strength continues EBITDA excluding exceptional items R million Capital expenditure R million F25 F26 F27 F28 F29 1H F F25 F26 F27 F28 F29 1H F21 Cash on statement of financial position R million 4, 3,5 3, 2,5 2, 1,5 1, Net cash/(net debt) excluding partners loans R million 2, 1,5 1, , -1,5-2, -2, F25 F26 F27 F28 F29 1H F25 F26 F27 F28 F29 1H F

20 Questions Interim results for the six months ended 31 December 29 Appendix Interim results for the six months ended 31 December 29 2

21 ARM operational summary 1H F21 1H F29 % change Modikwa PGMs in concentrate (6E) Ounces Cash cost R/kg (8) Cash operating margin % 29 (71) Two Rivers PGMs in concentrate Ounces ARM Platinum Cash cost R/kg (6) (1% basis) Cash operating margin % 37 (73) Nkomati Contained nickel Tonnes Chrome ore/ concentrate sold tonnes C1 cash cost net of by-products $/lb >5 Cash operating margin % Iron ore Sales tonnes Mt Change in costs compared to comparable period % (19.5) 9.9 EBITA margin % (44) Manganese ore Sales tonnes (excl intra-group sales) Mt Change in costs compared to comparable period % ARM Ferrous (1% basis) ARM Coal (Attributable) EBITA margin % (6) Manganese alloy Sales tonnes (excl intra-group sales) kt Change in costs compared to comparable period % EBITA margin % Charge chrome Sales tonnes kt Change in costs compared to comparable period % EBITA margin % (22.3) 43.9 Thermal coal Total sales Mt (4) On mine saleable cost R/tonne Operating margin % ARM Exploration attributable headline loss reduced Restructuring of ARM exploration together with the joint venture partnership with Vale yields a favourable impact on exploration costs H 2H 42 21

22 Sufficient capacity to fund growth platforms Net cash/ (Net debt) calculation Per statement of financial position December 29 Dec 28 June 29 Cash and cash equivalents Long-term interest bearing borrowings (2 743) Short-term interest bearing borrowings (929) Total interest bearing borrowings (3 672) (3 672) (4 22) (3 744) Assmang (5%) (1) ARM company (979) Vale/ARM JV (8) Other (37) Two Rivers (344) Modikwa (14) Modikwa (Anglo Platinum) (132) Two Rivers (loan from Impala) (539) ARM Coal (loan from Xstrata) (1 69) ARM attributable total debt (excluding partner loans) (1 392) (2 565) (1 938) Net cash/ (Net debt) (excluding partner loans) Net cash/ (Net debt) (1 41) (56) (231) Net debt to equity 8% 3% 1% 43 Summarised income statement 6 months ended 31 December Unaudited Unaudited R million % change Sales (35) Profit from operations (before exceptional items) (78) Income from investments (34) Finance costs (93) (224) 58 Income from associate (92) Exceptional items - (33) Taxation (276) (1 375) 8 Non-controlling o interest es (74) 165 Profit after tax and non-controlling interest (8) Headline earnings (8) Headline earnings cents per share (8) EBITDA (67) 44 22

23 Summarised cash flow Unaudited Unaudited R million December 29 December 28 Cash generated by operations Net finance costs Dividends received Dividends paid (371) (847) Tax paid (377) (1 57) Capital expenditure (1 213) (1 776) Net borrowings raised / (repaid) (234) (67) Other 15 1 Net cash (decrease) / increase (1 238) Summarised statement of financial position Unaudited Unaudited R million December 29 December 28 Non-current assets Property, plant, equipment and other Investments Current assets Other Cash and equivalents Total assets Total Equity Non-current liabilities: Long-term borrowings Other Current liabilities: Short-term borrowings Other Total equity and liabilities

24 Manganese and iron ore market outlook Both manganese and iron ore are used in the steelmaking process Manganese is used as an alloy agent and for its properties as a sulphide and deoxidant Average manganese consumption per tonne of steel is estimated at 1kg manganese alloy per 1mt of crude steel produced In 29 South Africa, China, Australia and Gabon accounted for 69% of the world s manganese ore production Iron ore is used for its hardening qualities in steel production Although South Africa s share of the seaborne iron ore market is small relative to China, Australia and Brazil, South Africa benefits from good quality iron ore The world ex China uses c. 1.1 tonnes of iron ore per 1 tonne of steel produced China s consumption of iron ore per tonne of steel, however, has increased since 22. In 29 it was estimated to be 32% higher than the rest of the world The outlook on steel is a positive growth trend driven mainly by China and the rest of the developing world This positive growth trend is expected to translate to increased demand in iron ore and manganese Developed world Developing world China Source: World steel; base steel demand scenario, CCM/Corporate Strategy demand model (November 29) 47 24