2017 INTERIM RESULTS 25 JULY 2017
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
DELIVERING ON PROMISES Safety: fatality free, material improvement on all key indicators Operations: another step change in productivity Financials: capturing benefit of price and performance Capital allocation: balance sheet strengthened, dividend reinstated Outlook: guidance revised upwards, cost pressure remains 2
CRITICAL INTERVENTIONS IMPROVE SAFETY INDICATORS High potential Total Lost time incidents recordable cases injuries 14 % 21 % 24 % 1H17 1H16 0 .73 .23 Fatality free TRCFR improvement from .83 LTIFR improvement from .27 3
ROBUST OPERATING AND FINANCIAL PERFORMANCE Sales volumes EBITDA HEPS 21.2Mt R9.1bn R14.42 1H17 1H16 23 % 5.7 % 53 % Production EBITDA margin HEPS 4
EBITDA IMPROVEMENT DRIVEN BY PRICE AND PRODUCTIVITY GAINS Rm + 13 % + 21 % 3 096 9 144 4 894 208 575 558 7 542 819 400 6 702 840 1 602 1H16 Price Currency Inflation Royalties Total Volume Opex Shipping 1H17 non-controllables Non-controllables Operational performance 5
MARKET OVERVIEW
LUMP PREMIUM RECOVERS FROM HISTORICAL LOWS Platts 62 IODEX (US$/dmt) Platts Weekly Lump Premium (US$/dmtu) 0.35 17% 180 2013 2014 2015 2016 1H17 2013 2014 2015 2016 1H17 $0.21 $0.17 $0.14 $0.15 $0.07 $135 $97 $56 $58 $74 16% 160 0.30 15% 140 Lump % of total port stocks in China 0.25 14% 120 US$/dmtu cfr Qingdao US$/dmt cfr Qingdao 0.20 13% 100 12% 80 0.15 11% 60 0.10 10% 40 0.05 9% 20 0.00 8% 0 2013 2014 2015 2016 2017 2013 2014 2015 2016 2017 Platts lump premium Lump % of total port stocks in China Source: Platts 7
HIGHER ABSOLUTE AND RELATIVE PRICES – OUTLOOK CAUTIOUS Kumba’s 1H17 Realised Price Reconciliation 1H17 Realised Price (US$/dmt, FOB), (US$/dmt, FOB) Peer Comparison 3 5 Peer 1 61 (Est) 2 22 Peer 2 68 71 55 Peer 3 67 Realised Increase in Decrease in Increase in Other pricing Realised FOB price Platts 62% Platts Lump Saldanha - impacts FOB price Peer 4 47 (Est) 1 1H16 Index premium Qingdao freight 1H17 Export sales geographical split Export sales geographical split 1H17 1H16 EU/ EU/ Kumba 71 MENA/ MENA/ Americas Americas 14% 20% China JKO China JKO 21% 60% 65% 20% Peer 1 estimated using Q1 actuals & an assumed 103% realisation of the IODEX for Q2. 1. In 1H17, 67% of Kumba’s sales consisted of lump ore. Peer 4 estimated using Q1 actuals & published monthly product discounts for Q2. 8
OPERATIONAL OVERVIEW
SISHEN DEMONSTRATING STABILITY Sishen Production and Waste (Mt) 76.6 25 80 72.2 − Production up 35% to 15.6Mt from higher plant 70 64.9 throughput and yields 20 + 35 % 60 − Waste up 18% to 76.6Mt 50 15 40 − Performance underpinned by improved productivity 10 30 16.9 15.6 20 − Strip ratio will exceed 4 in medium term 11.5 5 10 0 0 1H16 2H16 1H17 (Restructuring) (Stable and improving) Production Waste Strip ratio 3.5 3.2 4.7 10
FLEET PRODUCTIVITY IMPROVES BY 57% Sishen Fleet Productivity (kt/day) Operating Model delivering benefits + 57% More hours worked − Motivated workforce 602 593 − New shift system 549 494 − Efficient shift change 456 453 − Good attendance Heavy 383 375 Rain Improved shovel productivity − Improved planning − Wider benches − Improved blasting − Double-sided loading 3Q15 4Q15 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 New mine plan Restructuring New shift system Fleet reduced by 30% 11
KOLOMELA ACHIEVES ANOTHER SOLID PERFORMANCE Kolomela Production and Waste (Mt) 30.0 15 30 − Production up 7% to 6.3Mt 25.4 25 − Waste increased 26% to 25.4Mt 20.2 10 20 + 7 % − Rain impacted 1Q but tonnes recovered in 2Q 15 − Improved performance due to plant and 5 10 equipment efficiencies 6.8 6.3 5.9 5 0 0 1H16 2H16 1H17 Production Waste Strip ratio 3.2 4.1 3.8 12
OPERATIONAL GUIDANCE Sishen Kolomela Production 28 – 29Mt in 2017 Production 13 – 14Mt in 2017 Waste 155 – 165Mt in 2017 Waste 50Mt – 55Mt in 2017 Strip ratio to exceed 4 over the medium term, LoM ~4 Strip ratio at ~3.9 over the medium term, LoM ~3.8 Total sales 41 – 43Mt in 2017 13
LOGISTICS REFLECT HIGHER PRODUCTION 1H17 1H16 % change 2H16 % change Mt Railed to port (incl. Saldanha Steel) 20.8 18.3 14 21.5 (3) 14.4 11.7 23 15.1 (5) Sishen mine (incl. Saldanha Steel) Kolomela mine 6.4 6.6 (3) 6.4 - Total sales 21.2 20.2 5 22.3 (5) 19.5 18.1 8 21.0 (7) Export Domestic 1.7 2.1 (16) 1.3 38 Sishen mine 1.7 1.4 24 1.3 38 Thabazimbi mine - 0.7 (100) - - Total ore shipped 19.5 18.1 8 20.6 (5) 12.7 12.7 0 14.6 (13) CFR (shipped by Kumba) FOB (shipped by customers) 6.8 5.4 26 6 13 Finished product inventory 4.4 2.3 91 3.5 26 14
SUPPORTING TRANSFORMATION, CHALLENGING MCIII Delivery beyond compliance − Kumba fully committed to meaningful and − Effective 29% BEE shareholding sustainable transformation of the mining industry − R28bn economic value to BEE shareholders − Charter needs to promote investment and (incl. 1H17 dividend) employment growth; and be practical − >R2.7bn on 3 401 houses − Kumba supports the CoM course of action and welcomes the suspension of implementation − R57.4bn procurement with BEE suppliers − Our rights are secure − 73% HDSA on Board and 64% in management; 21% of employees are women − 5% payroll on skills development p.a. − R980m on community development 15
STAKEHOLDER RELATIONSHIPS Dingleton Thabazimbi Labour − Consolidated Sishen mining right − Closure application submitted − Continue to enjoy a stable (Section 102) granted to the DMR labour environment − Waste management licence granted − Engagements with DMR on − Wage negotiations in progress Section 11 ongoing − Negotiations with lawyers of remaining households initiated − Waste mining continues 16
FINANCIAL OVERVIEW
FINANCIAL HIGHLIGHTS Operating Profit (Rbn) − Revenue increased 18% to R21.5bn 10.1 7.6 − EBITDA margin increased 6% to 43% 5.2 − Headline earnings of R4.6bn up 53% 1H16 2H16 1H17 − Capex of R1.1bn down 17% HEPS (R/share) 17.9 − Net cash position of R13.5bn 14.4 − Dividend reinstated – R15.97 per share 9.4 1H16 2H16 1H17 18
BREAKEVEN - CONTROLLABLE COSTS CONTAINED Platts 62% Breakeven Price ($/t) + 3 % + 45 % 4 1 3 2 3 1 43 29 FY16 Controllable costs Lump premium Price impact Freight Royalties Currency 1H17 Controllables Non-controllables − Breakeven price up US$14/t from FY16 average − Non-controllable costs up US$8/t − Controllable costs up US$1/t − Freight rates up US$3/t on FY16 − Higher royalties of US$1/t − On-mine costs up US$2/t, driven by: − higher mining volumes and cost escalation − Stronger currency adding US$4/t − offset by improved efficiencies and higher production − Lump and market premium down US$5/t − Overheads and SIB reduced by US$1/t due to continued optimisation 19
REVENUE GROWTH FROM HIGHER VOLUMES AND STRONG PRICES Rm 21 500 652 4 894 1 694 3 047 819 18 182 1 042 19 806 17 140 1H16 Volume Currency Price Shipping 1H17 Mining operations Shipping − Revenue increased by 18% − Total sales 21.2Mt: export sales up by 1.4Mt, domestic sales 0.4Mt lower − 14% stronger average R/US$ exchange rate of R13.21 (1H16: R15.40) − Realised average FOB export price rose by 29% to US$71/t (1H16: US$55/t) 20
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