sbg securities - mining conference presentation · 2020. 7. 10. · outlook 6. annexures 3....
TRANSCRIPT
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 The information contained herein shall not be published, rewritten for broadcast or publication or redistributed in any medium without prior written consent from Merafe Resources.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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
Agenda
1. Corporate Overview
2. Operational Overview
3. Market Dynamics
4. Financial Overview
5. Outlook
6. Annexures
3
Corporate
Overview
4
01
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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).
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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’)
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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)
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
© Heinz H. Pariser, Alloy Metals & Steel Market Research
in ´000 t
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
© Heinz H. Pariser, Alloy Metals & Steel Market Research
in ´000 t
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
Historical EBITDA margin on revenue
21
0
5
10
15
20
25
'10 '11 '12 '13 '14 '15 H1
21
16
12
16 1615
%
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
© Heinz H. Pariser, Alloy Metals & Steel Market Research
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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%
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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%
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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%
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 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)
Merafe Resources Ltd | SBG Securities - Mining Conference Presentation November 2015
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
© Heinz H. Pariser, Alloy Metals & Steel Market Research
Deflated
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