sbg securities - mining conference presentation · 2020. 7. 10. · outlook 6. annexures 3....

SBG Securities - Mining Conference

Presentation

Presented by Zanele Matlala (CEO)

Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015

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 The information contained herein shall not be published, rewritten for broadcast or publication or redistributed in any medium without prior written consent from Merafe Resources.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

2


Agenda

1. Corporate Overview

2. Operational Overview

3. Market Dynamics

4. Financial Overview

5. Outlook

6. Annexures

3

Corporate

Overview

4

01


Experienced Management Team

5

Power and ore consumption efficiencies*Zanele Matlala CA(SA) – Chief Executive Officer

Zanele joined the Merafe Board in 2005 as an independent non-executive director.

She was appointed Merafe’s Chief Financial Officer on 1 October 2010 and Chief

Executive Officer on 1 June 2012. She is a non-executive director of Dipula

Income Fund, Stefanutti Stocks Holdings Limited and Old Mutual Investment Group

Holdings.

Kajal Bissessor CA(SA) – Financial Director

Kajal joined Merafe as Financial Controller in March 2009 from KPMG where she

was Audit Manager. Kajal was appointed Finance and Investor Relations

Manager in June 2010 and was appointed Financial Director in January 2015.

Dr Jurg Zaayman – General Manager, Merafe Chrome

Jurg joined Merafe Resources as Operations Manager during 2001. in 2004

he was seconded to the Venture as project leader for the Bokamoso pelletising

plant project before being appointed to his current position in 2007. He is

Chairperson of the Ferroalloys Producers Association and a council member of

the Energy Intensive Users Group (EIUC).


On 1 July 2004 Merafe pooled assets with Glencore to

form the Glencore-Merafe Chrome Venture

6

20.5% of EBITDA 79.5% of EBITDA

Joint Board

EXCO

Treasury Audit SHEQ Transformation Operations Marketing

Glencore-Merafe Chrome Venture(‘PSV’)


The Venture is the largest ferrochrome

producer in the world

7

2014 Global Ferrochrome production 2014 South African production

Total global production = 11 151kt Total SA production = 3 752kt

Europe 6% Kazakhstan

10%

China 37%

India 8%

South Africa 34%

Other 6%

Glencore -Merafe

43%

Samancor 31%

Hernic Ferrochrome

9%

ASA Metals 6%

IFML 6%

Tata Steel, KZN 4%

Afarak, MogaleAlloys

1%

Source: Heinz H. Pariser, Alloy Metals and Market Research

Source: Heinz H. Pariser, Alloy Metals and Market Research


What sets us apart from the competition

8

Strong balance

sheet and cash

flows

Lowest cost

producer in

South Africa with

the gap widening

Energy efficient

technology

reducing impact

of high

electricity costs

in SA

Secure long-

term supply of

ore reserves

Partnership with

Glencore –

leaders in the

marketing of

chrome ore and

ferrochrome

Operational

Overview

9

02


Geographical distribution of the PSV provides

competitive advantage

10

Chrome ore

- 8 mines, +200 million tonnes of mineral resources, 8 UG2 plants and long-term supply agreements with major SA platinum producers

Ferrochrome

- 22 furnaces – 2.339 million tonnesinstalled ferrochrome capacity per

annum

Lion I

Lydenburg

Helena & Magareng

ThorncliffeBoshoek

Rustenburg

Kroondal

Wonderkop

+13 000 employees

Wonderkop

Boshoek

Lion II

Johannesburg

Waterval East & West


Recipe for producing ferrochrome

11

1.25t Slag

Furnace Ferrochrome1.0t

Chrome ore2.1 – 3.1 t

Reductants0.4 – 0.8 t

Electricity 2.4 – 4.2 MWh

Water 2.5m³/t FeCr

Transport (Internal)

Fixed Costs (Primarily Salaries)


Historic projects delivered on time and on

budget

12

Commissioning of Lion II Smelter

Commissioning of Tswelopele

Pelletiser

Waterval mine development -

360ktpa of chrome ore

Ramp-up of Lion II

Commissioning of Boshoek smelter

Acquired interest in Wonderkop smelter and related mines

Commissioning of Lion I smelter

Commissioning of Bokamoso Pelletiser

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Merger to form Glencore-Merafe Chrome Venture

2011 2012 2013 2014 2015


Lion II uses significantly less electricity compared to other

available smelting technologies and has reduced the overall cost

per tonne in the group by 6%

13

Specific Energy Consumption (MWh/T)

Glencore-Merafe Venture anticipated the changes in the South African electricity tariffs and

invested in efficiencies.

2.0

3.0

4.0

5.0

6.0

Premus(Proprietary)

Outotec Conventional DC Arc

3.5

4.1

4.8

2.4


Lion addresses the key challenges facing the

SA ferrochrome industry

14

Lagging logistics

Increased fine ore

Escalating energy costs

Skills shortages

Reductant shortages

Proximity to Maputo Harbour

750,000 tonnes pelletising capacity

Lowest specific energy consumption ca. 37% better than nearest rival

In-house training centre established

Requires only 50% of coke, compared to other technologies

Carbon tax Lower scope 2 emissions

Rising mining costsUse of UG2

Close to Mototolo

Market

Dynamics

15

03


Estimated increase in stainless steel

production in all regions in 2016

16

2012 2013 2014 2015e Change 2016f Change

15/14 16/15

in % in ´000 t in %

NAFTA 1,978 2,032 2,389 2,486 4.1 2,585 4.0

Brazil 391 421 425 430 1.3 437 1.5

European Union 7,461 7,142 7,242 7,160 -1.1 7,170 0.1

Other Europe 229 206 189 163 -13.6 165 1.0

Japan 3,132 3,175 3,328 3,076 -7.6 3,122 1.5

S. Korea 2,167 2,143 2,038 2,216 8.7 2,238 1.0

Taiwan 1,106 1,052 1,120 1,107 -1.2 1,118 1.0

S. Africa 505 492 472 484 2.6 504 4.0

Subtotal 16,968 16,663 17,204 17,122 -0.5 17,338 1.3

China 16,372 19,211 21,810 21,918 0.5 23,000 4.9

India 2,469 2,791 2,822 3,022 7.1 3,143 4.0

Subtotal 18,841 22,002 24,632 24,940 1.2 26,143 4.8

Total 35,809 38,665 41,836 42,062 0.5 43,481 3.4

© Heinz H. Pariser, Alloy Metals & Steel Market Research

in ´000 t


Ferrochrome demand estimated to be up 5.5%

in 2016

17

2012 2013 2014 2015eChange

15/142016f

Change

16/15

in % in ´000 t in %

NAFTA 466 439 706 542 -23.2 557 2.8

EU 1,730 1,612 1,584 1,524 -3.8 1,549 1.6

Japan 654 667 757 648 -14.3 664 2.5

South Korea 483 505 468 494 5.7 495 0.1

Taiwan 266 268 243 239 -2.0 244 2.5

Others 763 700 896 814 -9.2 811 -0.3

Subtotal 4,363 4,190 4,654 4,261 -8.4 4,320 1.4

China 4,853 5,558 6,170 6,377 3.4 6,912 8.4

India 525 471 487 518 6.4 541 4.4

Total 9,741 10,219 11,311 11,156 -1.4 11,774 5.5

Charge Cr 5,772 6,311 7,354 7,363 0.1 7,790 5.8

HC FeCr 3,969 3,908 3,956 3,793 -4.1 3,983 5.0


in ´000 t


Global FeCr production overview – estimated

to increase by 7.1% in 2016

18

2012 2013 2014 2015eChange

15/142016f

Change

16/15

in % in ´000 t in %

Brazil 172 172 195 154 -21.0 165 7.4

EU 27 278 483 507 535 5.6 592 10.7

Russia, Turkey, Albania 285 366 288 254 -11.8 299 17.8

India 947 988 875 877 0.2 950 8.3

Kazakhstan 1,114 1,128 1,135 1,270 11.9 1,430 12.6

South Africa 3,175 3,283 3,752 3,712 -1.1 3,782 1.9

Zimbabwe 147 155 221 228 3.2 232 1.8

Others 36 34 67 112 68.4 195 74.1

Subtotal 6,154 6,609 7,039 7,141 1.5 7,645 7.1

China 3,332 3,731 4,112 3,871 -5.9 4,150 7.2

Total 9,486 10,339 11,151 11,013 -1.2 11,795 7.1

Charge Cr 5,728 6,498 7,358 7,385 0.4 7,645 3.5

HC FeCr 3,758 3,842 3,794 3,628 -4.4 4,151 14.4


in ´000 t


Reduction in ferrochrome prices offset by

weakening of the Rand

19

2014 Usc/lb 2015 Usc/lb Change

Q1 118 108 (8%)

Q2 122 108 (11%)

Q3 119 108 (9%)

Q4 115 104 (10%)

Average 118.5 107 (10%)Concerns about

Chinese growth –net prices down

European benchmark ferrochrome prices

2014 2015 SeptYTD

Change

10.9 12.2 +12%

Average Rand/Dollar exchange rate

Financial

Overview

20

04


Historical EBITDA margin on revenue

21

0

5

10

15

20

25

'10 '11 '12 '13 '14 '15 H1

21

16

12

16 1615

%


Headline earnings per share

22

0

5

10

15

20

25

'10 '11 '12 '13 '14 '15 H1

5

11

8

5

11

6

Ce

nts


Cash generated from operating activities

23

0

100

200

300

400

500

600

'10 '11 '12 '13 '14 '15 H1

R’m

illion

233

295

257

487

306

251

Outlook

24

05


Conclusion

25

• Remain profitable despite challenging times

• Continue to reap benefits of capital investments made

• No significant expansionary capex going forward

o Reduce debt and increase dividends in short to medium term

QUESTIONS

ANNEXURES

27

06


Stainless grade mix

28

Austenitic CrMn Ferritic Total

2011 19.3 6.0 8.8 34.1

2012 19.8 7.2 8.9 35.8

2013 20.8 8.5 9.3 38.7

2014 22.2 9.4 10.3 41.8

2015e 23.2 8.9 9.9 42.1

2016f 23.6 9.5 10.4 43.5

Growth Rate in %:

05-14 3.1 14.9 5.7 5.6

2011 56.6 17.5 25.9 100.0

2012 55.2 20.0 24.8 100.0

2013 53.8 22.0 24.1 100.0

2014 53.1 22.4 24.5 100.0

2015e 55.1 21.2 23.7 100.0

2016f 54.4 21.8 23.8 100.0


in %

in Mill t

55

.1

54

.4

21

.2

21

.8

23

.7

23

.8

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2005 2007 2009 2011 2013 2015e

Sh

are

of

Pro

du

cti

on

, in

%

300 Series

200 Series

400 Series

© Heinz H. Pariser


Stainless weighted indices

29

22.018.0

15.7

14.7

15.031.3

10.1

5.26.4

8.14.2

2.910.1

6.4

16.3 13.3

Industrialized Developing & Emerging

Typical End Use Structure

Machinery &

Equipment

Basic Metals

Fabricated

Metal Products

Motor Vehicles

Other Transport

Others

(Furniture, etc.)

Others

(ABC, etc.)

Electro /

Electronics

80

100

120

140

160

2011 2012 2013 2014 2015

20

11

=1

00

Developing & Emerging Countries(Weighted Stainless Index)

Change 15/14:

3.0%

90

95

100

105

110

2011 2012 2013 2014 2015

20

11

=1

00

Industrialized Countries(Weighted Stainless Index)

Change 15/14:

-0.4%


Stainless steel supply and demand balance

30

4.0

5.0

6.0

7.0

8.0

9.0

10.0

11.0

12.0

13.0

2004 2006 2008 2010 2012 2014 2016

in M

ill t

Cru

de

Sta

inle

ss S

tee

l p

er

Qu

art

er

Destocking

Nickel Price

Bubble

Financial

Crisis© Heinz H. Pariser

Demand

Supply


South Africa’s Cr ore exports

31

SA Rising Export Levels:

2005-08: ramp-up of oreexports as China-boomkicks-in

2008-12: ~ 425 kt per monthof which >75% to China

2013: rising towards new„heights“ of 700 kt per month

2014: average 590 kt per month, <66% to China(UG2 loss)

2015: Again rising shipments toChina

946

0

100

200

300

400

500

600

700

800

900

1,000

2006 2008 2010 2012 2014

Ex

po

rt,

in k

t p

er

Mo

nth

Total Exports

G.R. 14.9%

© Heinz H. Pariser

Exports to "RoW"i.e. Non-China


Chrome ore imports into China

32

South

Africa

South

Africa

Turkey

Turkey

Oman

Oman

Albania

Albania

Pakistan

Pakistan

Iran

Iran

Others

Others

2014

(Monthly Average)

2015

(Monthly Average)

782

8582013 2014 Change

2015

(1-8)

in % in ´000 t

South Africa 6,736 5,748 -14.7 4,885

Turkey 1,988 1,280 -35.6 689

Oman 687 489 -28.8 264

I ran 428 494 15.6 295

Albania 677 555 -18.1 330

Pakistan 482 339 -29.7 214

Madagascar 118 113 -4.0 132

Philippines 126 67 -47.3 23

Sudan 17 40 133.3 27

India 168 63 -62.8

Australia 407 44 -89.3

Brazil 12 n.a.

Kazakhstan 167 77 -54.2

Others 90 63 -30.6 3

TOTAL 12,094 9,384 -22.4 6,862© Heinz H. Pariser, Alloy Metals & Steel Market Research

in ´000 t

+9.7%

+27.5%


Ferrochrome Producer's Return-on-Sales(Selected Companies, 5 Yr Average)

33

-30.0

-20.0

-10.0

0.0

10.0

20.0

30.0

40.0

50.0C

om

pa

ny

1

Gle

nc

ore

Co

mp

an

y 3

Me

rafe

Co

mp

an

y 5

Co

mp

an

y 6

Co

mp

an

y 7

Co

mp

an

y 8

Co

mp

an

y 9

Co

mp

an

y 1

0

Co

mp

an

y 1

1

Co

mp

an

y 1

2

Co

mp

an

y 1

3

Co

mp

an

y 1

4

Co

mp

an

y 1

5

Co

mp

an

y 1

6

Co

mp

an

y 1

7

Co

mp

an

y 1

8

Co

mp

an

y 1

9

Re

turn

on

Sa

les,

in

%

Weighted Average: 20.2%

© Heinz H. Pariser

Arithmetic Average: 3.5%


Global power prices

34

0.00

0.02

0.04

0.06

0.08

0.10

0.12

Av

era

ge

po

we

r p

ric

e,

in U

S$

pe

r k

Wh

Scandi-

navia

IndiaCaptive

PowerChina

South

AfricaEskom

IndiaPurchased

Power

Kazakh-

stanTurkey

Sources: Individual annual and company reports, NordPool Electricity Spot Prices, NRDC, Eskom, Heinz H. Pariser

2010/11

2009/10

All data based on average power prices and exchange rates for the years stated /

South African Projection based on Exchange Rate of ZAR 12.1 per US$

2008/092008

2009

2010

2011

2009

2010

20112009

2010

2011

20102011

2009/10

2010/11

2008/092012

2012/14

2009

2008

BrazilHydro

2010

2011

20092008

Russia

201020112012/14

2009

20082012

2011/12

2012/14

2016/172012

2013/14

MY

PD

3

2012/13

2013/14

2013/15

2013

2013

2013

20132013

2014

2014/15

20152015

2015

2015


2015 Costs ex Works Estimate(Status October 2015)

35

1

2 3 45 6 7

8

91011

12

1314

1516

1718

19 20 21 2322

24

0.0

20.0

40.0

60.0

80.0

100.0

120.0

140.0

0.0 20.0 40.0 60.0 80.0 100.0

Co

st i

n U

S$

ct

pe

r lb

Cr

Co

nte

nt

Share of Production, in %

Average Cost Ex Works (C3):

US$ ct 69.1 per lb

© Heinz H. Pariser

1. KazChrome

2. GlencoreMerafe

3. Outokumpu

4. Samancor Cr

5. Hernic

6. Ferbasa

7. Afarak SA

8. Albchrome

9. Zimasco

10. Serov

11. ASA Metals

12. IMFA

13. Balasore

14. CHEMK

15. Tikhvin

16. IFML

17. JSL Ltd.

18. Tata Steel KZN

19. Vargön

20. China - I

21. Etikrom

22. Facor Group

23. China - II

24. Rohit

2014

Charge Cr Benchmark (2015):

US$ ct 107 per lb

China Tender (2015 Y-t-D, excl VAT):

US$ ct 78 per lb (50% Cr)

636_002_2015_002_D1 (AK)


Long-term Benchmark Price Development

36

0.00

0.50

1.00

1.50

2.00

2.50

2005 2010 2015 2020 2025

Pri

ce

s /

Co

sts,

in

US$

pe

r lb

Cr

(20

14

US$

)

Deflated

Prices

Actual Forecast

Long-term

Trend

© Heinz H. Pariser

Estimate

Realistic Price

Forecast

FeCr Production

Cost

Actual Trend

95-30 Realistic

Forecast

FeCr

Production

Cost

in US$ of

2014 US$/lb

2010 1.33 1.11 0.77

2015 1.07 1.34 1.07 0.69

2016 1.38 1.07 0.69

2020 1.56 1.23 0.83

2025 1.78 1.44 1.04


Deflated

THANK YOU

sbg securities - mining conference presentation · 2020. 7. 10. · outlook 6. annexures 3....

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