2015 ANNUAL RESULTS 9 FEBRUARY 2016
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. 1
THE YEAR IN CONTEXT A turbulent and challenging operating environment • No loss of life in 2015 • Price decline severely impacted earnings and profitability • Sishen production underperformance, but in line with revised Q3 guidance • Kolomela continued to perform well • Cost and capital management delivered R4.0bn reduction in controllable costs • Net debt reduced 42% to R4.6bn • Dividend suspended in 2015 2
REPOSITIONING THE BUSINESS FOR LOWER PRICES Actions taken during the year • Operational focus on value (cash generation) versus volume • Sishen reconfigured to a lower cost pit shell • Kolomela waste profile optimised and incremental ramp up of low cost tonnes continues • Thabazimbi closure in progress • Full review of capital expenditure to reduce, cancel or defer • Rationalisation of operating costs • Reduced overheads, study costs and support services headcount • No dividend payable for 2015 3
R4.0bn REDUCTION IN CONTROLLABLE COSTS Strong focus on cash preservation Headcount reduction for head office, Capex (Rbn) Corporate overheads and Study costs (Rbn) support services and Thabazimbi (20%) (43%) (53% 1 ) 8.5–9.3 2.1 8.5 6.8 1.2 2,578 1,222 2014 2015 2014 2015 2014 2015 Feb 2015 Guidance Permanent employees • On mine cash costs reduced by R1.1bn • Despite growth in mining volumes and lower production at Sishen • Sishen mining cost down 8% in real terms • Overheads down by R900m • Corporate office overhead cut, study cost optimised and headcount reduced to target of R1.2bn set at 1H15 • SIB capex reduction of ~R2bn • Lower fleet procurement and optimisation of related support infrastructure at the mines 1. Target of 69% will be achieved when Thabazimbi’s closure process is complete. 4
RESPONSE TO FURTHER DETERIORATION IN PRICE Sishen reconfigured to lower cost pit shell Sishen waste profile (Mt) 250 Objectives 200 • Transition mine to lower cost of production 150 100 • Ensure sustainability at lower prices 50 0 Impact (2016 – 2020) 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 • Production ~27Mtpa Previous guidance Current and indicative waste profile Sishen production profile (Mt) • Waste ~135Mtpa to 150Mtpa 40 • Average strip ratio of 3.5 (2016–2020) 30 • LOM strip ratio being optimised 20 • No material change to LOM 10 • Estimated reserve reduction of ~150Mt 0 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 Previous guidance Current and indicative production profile 5
MAINTAINING COST REDUCTION MOMENTUM Breakeven price anticipated to reduce to ˂ $40/t for 2016 Total cash costs vs Breakeven ($/t) 63 28 49 18 41 13 32–40 45 36 30 FY2014 FY2015 Dec 15 2016e 1 Controllable costs Non controllable costs Breakeven • Breakeven target achieved ($41/t vs $45/t set in 1H15) Controllable costs • >$10/t YoY reduction in controllable costs planned for 2016 • Key savings to be derived from Sishen reconfiguration • Continued focus on SIB capex savings, on mine cash cost reduction and overhead cost optimisation Non controllable costs • Volatility in non controllable costs anticipated to continue • Freight rates at historical lows and R/$ may remain weak • Non controllables difficult to forecast 1. Non controllable costs: logistics, freight costs, royalties. 6
STRONG COMMITMENT TO CAPITAL PRESERVATION De-leveraging balance sheet a key priority Rand billion 42% 7.9 6.1 4.6 Dec-14 Jun-15 Dec-15 Net debt • Debt reduced by 42% due to cost focus, capital preservation and dividend suspended • Debt position anticipated to improve should current market conditions prevail • Focus remains on: • Protecting margin and cash • Lowering net debt and improving covenant headroom 7
RESULTS OVERVIEW
SAFETY FOCUS REMAINS ON CRITICAL CONTROLS Committed to zero harm Safety Fatalities • No loss of life in 2015 3 • Improved safety performance – less injuries and reduced severity 2 • Thabazimbi major slope failure – effective critical control monitoring 1 triggered life-saving response 0 0 0 2010 2011 2012 2013 2014 2015 Health 50 0.60 LTIs and LTIFR • Voluntary HIV testing at 91% 45 0.50 44 40 • Reduction in TB and noise induced 41 35 0.40 hearing loss cases 30 33 0.30 25 20 Environment 21 20 0.20 0.23 0.23 15 17 0.18 10 • Encouraging improvements in footprint 0.10 0.12 5 0.10 0.08 management – targets achieved for 0 0.00 2010 2011 2012 2013 2014 2015 energy and water savings LTIs LTIFR 9
MARKET OVERVIEW
FURTHER PRESSURE ON IRON ORE PRICES No recovery to historical averages in the near term • Iron ore prices (62% Fe Platts CFR China) averaged US$56/t in 2015, down 42% • Prices declined to historical lows as a result of: • Increased supply from Australia and Brazil • Lower crude steel production in China and elsewhere • Seasonal strengthening of lump premium largely absent in late 2015 • Quality differentials favourable for Kumba Platts IODEX monthly average Platts lump premium monthly average 170 0.35 2013 2013 Average 150 0.30 Average $135/t $0.21 130 0.25 US$/dmtu CFR Qingdao 2014 US$/dmt CFR Qingdao 2014 2015 Average Average 110 0.20 Average $0.17 $97/t $0.15 90 0.15 2015 Average 70 0.10 $56/t 50 0.05 30 0.00 Source: Platts. 11
GLOBAL CRUDE STEEL PRODUCTION DECLINED Down in all major regions Global crude steel production (Mt) 1.3% (2.9%) • Global crude steel production declined 1,626 1,647 1,599 2.9% in 2015 450 439 433 • China’s crude steel production declined 205 199 196 166 169 166 notwithstanding record steel exports 823 822 804 • JKT’s crude steel production moderated on weak domestic demand and increased 2013 2014 2015e competition in export markets • Rising steel imports and capacity closures Crude steel production H-O-H (Mt) impacted Europe (4.0%) 817 784 • US steel output declined 10.5% on soft 224 (4.5%) 214 domestic demand and cheap imports 103 (4.9%) 98 82 78 (4.9%) • Global contraction gathered pace in 408 394 (3.4%) second half of the year 2H14 2H15e China EU-27 JKT RoW Source: WSA, GTIS. 12
CHINA CRUDE STEEL PRODUCTION HAS PEAKED Down despite record high finished steel exports China crude steel production and net exports (Mt) • Chinese crude steel contracted 2.3% 900 20 0.1% 12.4% (2.3%) (3.2%) in 2015 800 4.1% 15 49 76 97 94 12 12 42 700 10 33 • Finished steel exports up 19% to 111Mt 9 600 5 6 6 5 • Steel export growth especially to 669 689 773 747 707 684 500 0 emerging markets in SE Asia and 2011 2012 2013 2014 2015e 2016f MENA Apparent demand Net exports Net exports % of total China finished steel exports (Mt) • Anti-dumping measures expected to have limited impact on Chinese steel 120 111 exports 20 93 90 16 49% 34 45% 61 26 60 10 44% 17 30 57 51 34 0 2013 2014 2015e Others South East Asia MENA Source: WSA, GTIS. 13
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