KUMBA IRON ORE LIMITED RE-IMAGINING MINING TO IMPROVE PEOPLE’S LIVES 2019 Annual Results, 18 February 2020
Disclaimer Certain statements made in this presentation constitute forward-looking statements. Forward-looking statements are typically identified by the use of forward-looking terminology such as ‘believes’, ‘expects’, ‘may’, ‘will’, ‘could’, ‘should’, ‘intends’, ‘estimates’, ‘plans’, ‘assumes’ or ‘anticipates’ or the negative thereof or other variations thereon or comparable terminology, or by discussions of, e.g. future plans, present or future events, or strategy that involve risks and uncertainties. Such forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond the company's control and all of which are based on the company's current beliefs and expectations about future events. Such statements are based on current expectations and, by their nature, are subject to a number of risks and uncertainties that could cause actual results and performance to differ materially from any expected future results or performance, expressed or implied, by the forward-looking statement. No assurance can be given that such future results will be achieved; actual events or results may differ materially as a result of risks and uncertainties facing the company and its subsidiaries. The forward-looking statements contained in this presentation speak only as of the date of this presentation and the company undertakes no duty to, and will not necessarily, update any of them in light of new information or future events, except to the extent required by applicable law or regulation. The conversion of Mineral Resource to Ore Reserves is dependent on the approval of pre-feasibility and feasibility studies by the relevant Kumba and Anglo American Investment Committees. Any exclusive Mineral Resources quoted in this presentation, currently under investigation for conversion to Ore Reserves is based on Kumba’s current interpretation of its potential prior to the completion and approval of the required studies. Only Measured and Indicated Mineral Resources can be converted to Ore Reserves. The Mineral Resources being considered for potential conversion to Ore Reserves includes a material amount of Inferred Resource. Due to the uncertainty that may be attached to some Inferred Mineral Resource, it cannot be assumed that all or part of the Inferred Mineral Resource will necessarily be upgraded to an Indicated or Measured Resource after continued infill drilling. Please refer to the 2019 Mineral Resource and Ore Reserve statement for further information. (https://www.angloamericankumba.com/investors/annual-reporting.aspx) 1
Safety and sustainability is our core value Environment Safety Health LTI TRC Occupational diseases Major incidents (new cases) (level 3 – 5) 158 92% Achieved 3.5 years voluntary rehabilitation fatality free HIV test targets 97 77 51 28 41 12 8 1 2 7 41 35 20 21 17 0 0 0 0 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Elimination of fatalities framework Focused on reducing exposure to Enhanced environmental management occupational hazards leading to improved performance Technology enabling improved safety Wellness and disease management Increased awareness and monitoring Leading indicator drives proactive safety management 2
Continuing to deliver exceptional shareholder value Favourable export demand Strong EBITDA growth Exceptional returns and higher realised price and cash generation ROCE Export sales EBITDA 83% 40Mt R33.4bn FY18: 49% FY18: 40Mt FY18: R20.6bn Average realised FOB price Attributable free cash flow DPS US$97.4/t R17.1bn R46.78 FY18: US$72.1/t FY18: R7.8bn FY18: R30.24 3
Delivering value through margin enhancement and life extension Enhanced EBITDA margin Kolomela pit optimisation: 52% LoM strip ratio reduced to 3.8 FY18: 45% Sishen UHDMS Feasibility completed H2 2020e Implemented by H1 2023e Improved operational efficiency 68% Exploration drill programmes 2 new prospective targets FY18: 65% Ploegfontein: 65% completed Heuningkranz: 90% completed Delivering cost savings R920m Zandrivierspoort Expiry of prospecting right in Limpopo FY18: ~R1bn | To date: R1.9bn Strategic focus in Northern Cape 4 1. Estimates as at 31 December 2019. Please refer to the Kumba 2019 Ore Reserves & Mineral Resource Report for a breakdown of the classification categories
Creating shared value and improving people’s lives Delivering shareholder returns Rewarding employee talent R15.1bn R5.0bn Owners of Kumba (FY18: R9.7bn) Salaries and benefits (FY18: R4.6bn) R4.7bn Supporting local businesses Empowerment partners (FY18: R3bn) R13.9bn BEE business suppliers (FY18: R11.8bn) R2.4bn Contributing to South Africa Host community suppliers (FY18: R1.4bn) R7.8bn Income tax (FY18: R4.1bn) Building communities R2.6bn R171m Mineral royalty (FY18: R983m) Direct social investment (FY18: R124m) Environmental, Social & Governance Investing SRI Index 5
MARKETING AND OPERATIONAL OVERVIEW Reimagining Mining, Improving People’s Lives 6
Unexpectedly strong Chinese demand coincided with supply disruptions China pig iron production 1 (Mt) Platts IODEX average (US$/dmt) 130 1% 7% 3% 5% 110 809 748 768 701 696 2019 $93 US$/dmt, cfr Qingdao 2015 2016 2017 2018 2019 90 Big 4 miners iron ore shipments, actual vs guidance 2 2017 2018 $71 (2019 Wet Mt) $70 2015 70 $56 2016 $58 Brumadinho TC Veronica 380 344 50 327 313 275 273 174 169 30 Jan-15 2015 Jan-16 2016 2017 Jan-17 Jan-18 2018 Jan-19 2019 2020 Jan-20 Vale Rio Tinto BHP FMG Guidance (mid-point) Actual/expectation Source: Platts, Company reports 7 1. World Steel Association (WSA) 2. Early 2019 company guidance
Premia underpinned by ‘flight to quality’, but limited by mill margins Platts lump premium High grade premium and mill margins (US$/dmtu) (Monthly average, US$/dmt) 300 30 2015 2016 2017 2018 2019 YTD $0.14 $0.15 $0.15 $0.25 $0.27 $0.25 0.5 250 25 0.4 200 20 0.3 150 15 LT view ~$0.21 0.2 100 10 0.1 50 5 0.0 0 0 2015 2016 2017 2018 2019 2020 2015 2016 2017 2018 2019 2020 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Jan-20 42005 Feb-16 Feb-17 Feb-18 Feb-19 Period average Daily lump premium 1 China hot metal spread - LHS 65-62 differential - RHS Source: Platts, Mysteel 8 1. Hot metal spread = Tangshan billet price/1.13 - (1.6x62%Fe)-(0.72xPLV Shanxi CFR China)
Greater reliance on seaborne ore as mills move to the coast …but seaborne iron ore supply growth from the big 4 is Seaborne iron ore demand will rise as mills shift to coastal tapering off provinces… Big 4 miners iron ore shipments (Wet Mt) Hebei Steel Shougang Ansteel 366 344 345 313 335 Sinogiant CITIC 317 Qingdao Liuzhou Steel Shagang Baosteel 306 168 174 169 CITIC 171 167 Tongling 303 Others 153 299 Planned/ UC Baosteel 99 274 Desheng 268 273 261 261 Sanming 66 47 242 206 177 162 Guangxi Liuzhou Shenglong 330 338 319 328 327 288 244 233 225 2011 2012 2013 2014 2015 2016 2017 2018 2019 Shifting steel making capacity Meet environmental agenda to reduce Moving away from populated to coastal regions to gain emissions through cleaner, larger blast provinces Rio Tinto BHP FMG Vale market access furnaces, with higher quality raw materials 9 Source: Company reports
Diversified customer portfolio results in higher premia Traditional market share in Kumba’s total sales (%) Price premium over Platts 62 FOB (US$/dmt) 42 40 18 35 17 17 31 30 19 17 12 11 17 20 25 6 21 18 14 10 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Europe/MENA/Americas Japan and Korea 10 Source: Iron Ore Marketing
Our quality is our competitive advantage 2019 average Fe content comparison (%) 2019 realised price comparison US$/dmt, FOB 97 Kumba 64.5 64.2 60.8 60.7 57.8 Vale 76 (Est.) Kumba Vale Rio Tinto BHP FMG 86 Rio Tinto 2019 lump:fine ratio comparison (%) 67 85 BHP 28 25 6 73 3 FMG Kumba Vale Rio Tinto BHP FMG 11 Source: Company reports, Woodmackenzie
Sishen – challenging start to the year, recovery demonstrated in H2 Total waste mined Total production volumes Reduced LTIs 181.1Mt 29.2Mt 14% FY18: 182Mt FY18: 29.2Mt FY19: 12 (FY18: 14) Competitive Fe quality Mt Mt 64.3% 19% 12% FY18: 64.6% 98.3 15.4 Lump:Fine ratio 13.8 82.8 71.4% FY18: 71.8% 1H19 2H19 1H19 2H19 12
Kolomela – solid mining performance, lower production due to DMS upgrade Total waste mined Total production volumes Reduced LTIs 63.2Mt 13.2Mt 40% FY18: 56Mt FY18: 13.9Mt FY19: 3 (FY18: 5) Competitive Fe quality Mt Mt 64.1% 5% 10% FY18: 64.3% 32.3 Lump:Fine ratio 6.9 30.9 6.3 58.1% FY18: 58.7% 1H19 2H19 1H19 2H19 13
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