A N N U A L R E S U LT S for the year ended 30 September 2017 - - PowerPoint PPT Presentation

a n n u a l r e s u lt s
SMART_READER_LITE
LIVE PREVIEW

A N N U A L R E S U LT S for the year ended 30 September 2017 - - PowerPoint PPT Presentation

A N N U A L R E S U LT S for the year ended 30 September 2017 DISCLAIMER These Presentation Materials are for information purposes only and must not be used or relied upon for the purpose of making any investment decision or engaging in any


slide-1
SLIDE 1

A N N U A L R E S U LT S

for the year ended 30 September 2017

slide-2
SLIDE 2

DISCLAIMER

These Presentation Materials are for information purposes only and must not be used or relied upon for the purpose of making any investment decision or engaging in any investment activity. Whilst the information contained herein has been prepared in good faith, neither Tharisa plc (the “Company”), its subsidiaries (together, the “Group”) nor any of the Group’s directors, officers, employees, agents or advisers makes any representation or warranty in respect of the fairness, accuracy or completeness of the information or opinions contained in this presentation and no responsibility or liability will be accepted in connection with the same. The information contained herein is provided as at the date of this presentation and is subject to updating, completion, revision, verification and further amendment without notice. These Presentation Materials contain forward-looking statements in relation to the Group. By its very nature, such forward-looking information requires the Company to make assumptions that may not materialise or that may not be accurate. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors beyond the control of the Company that could cause the actual performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Nothing in this presentation should be construed as a profit forecast. Past share performance cannot be relied on as a guide to future performance.

2

slide-3
SLIDE 3

HIGHLIGHTS

RECORD NPAT US$67.7 m

3

EBITDA

US$115.6m

(2016: US$43.0m)

↑168.7%

PGM PRODUCTION

143.6 koz

(2016: 132.6 koz)

↑8.3%

HEPS

US$ 22 cents

(2016: US$ 6 cent)

↑266.7%

PROPOSED DIVIDEND

US$ 5 cents

(2016: US$ 1 cent)

CHROME CONCENTRATE PRODUCTION

1.3 Mt

(2016: 1.2 Mt)

↑7.0%

REEF MINED

5.0 Mt

(2016: 4.8 Mt)

↑3.9%

SPECIALTY GRADE CHROME PRODUCTION

323.1 kt

(2016: 269.4 kt)

↑19.9%

REVENUE

US$349.4m

(2016: US$219.6m)

↑59.1% ↑400.0%

slide-4
SLIDE 4

SUSTAINABILITY

HEALTH AND SAFETY ▪ Two fatality free years ▪ LTIFR 0.07 per 200 000 hours worked ▪ Three safety awards: Best Safety Performance and Best Improved Performance awards at Mine Safe 2017, and an award from the Mine Health and Safety Council for 2 000 fatality free production shifts LABOUR RELATIONS ▪ No labour disruptions during the year ▪ Transferred ~900 employees from previous mining contractor post the financial year end ▪ Tharisa Minerals total staff compliment ~1 700 (including mining contractors) TRAINING AND DEVELOPMENT ▪ On mine training centre ▪ Learnerships, adult education and training ▪ Compliance to competency

4

LTIFR

0.07

(FY2016: 0.36)

BEST SAFETY PERFORMANCE BEST IMPROVED PERFORMANCE 2 000 FATALITY FREE PRODUCTION SHIFTS

ZERO HARM

slide-5
SLIDE 5

SUSTAINABILITY

ENVIRONMENT ▪ Subscribe to the Equator Principles ▪ Environmental monitoring plan ▪ Environmental rehabilitation provision of US$13.7 m THUSANANG WELLNESS PROGRAMME ▪ TB programme ▪ HIV/AIDS programme ▪ Cancer awareness programme ▪ Wellness days ▪ Peer educator programme COMMUNITY PROJECTS ▪ Support of community SMME – Rocasize

‒ Garden services ‒ Brick making ‒ Clothing and personal protective equipment

▪ Retief Primary school food forest

5

slide-6
SLIDE 6

PRODUCTION AND OPERATIONAL HIGHLIGHTS

6

slide-7
SLIDE 7

HIGHLIGHTS

7

REEF MINED

Mtpa

↑3.9%

3.3 3.9 4.2 4.8

5.0

FY2013 FY2014 FY2015 FY2016 FY2017

PGM PRODUCTION

kozpa

↑8.3%

57.4 78.2 118.0 132.6

143.6

FY2013 FY2014 FY2015 FY2016 FY2017

CHROME PRODUCTION

Mtpa

↑7.0%

1.2 1.1 1.1 1.2

1.3

5.2% 13.7% 10.1% 21.7%

24.3%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0% 200 400 600 800 1000 1200 1400

FY2013 FY2014 FY2015 FY2016 FY2017

Percentage specialty grade

PGM RECOVERY

79.7%

(2016: 69.9%)

↑14.0%

CHROME RECOVERY

64.1%

(2016: 62.7%)

↑2.2%

DELIVERING SUSTAINABLE VALUE

slide-8
SLIDE 8

PRODUCTION

8 KEY OPERATIONAL METRICS FY2017 FY2016 Change Reef mined kt 5 025.1 4 837.2 3.9% Stripping ratio m3:m3 7.5 7.3 PGM rougher feed grade g/t 1.56 1.65 (5.5%)

Chrome grade % 17.8 18.0 (1.1%) ROM processed kt 4 916.2 4 656.3 5.6% PGM recovery % 79.7 69.9 14.0% PGM in concentrate produced koz 143.6 132.6 8.3% Chrome recovery % 64.1 62.7 2.2% Chrome concentrate produced kt 1 331.2 1 243.7 7.0% PGM basket price US$/oz 786 736 6.8% Chrome concentrate price

(42% CIF China)

US$/t 200 120 66.7% Average exchange rate ZAR:US$ 13.4 14.8 9.5%

RECORD PRODUCTION

slide-9
SLIDE 9

9

STRATEGY IMPLEMENTATION

slide-10
SLIDE 10

OWNER MINING TRANSITION

10

INHOUSE INSOURCING

effective 1 October 2017

Mining Expertise Mine management Geologists In-pit supervisors Surveyors Engineers Maintenance Plant and equipment Purchased yellow fleet, infrastructure and components Skills Transferred ~900 mining employees Drilling

Blasting is outsourced

Benefits

  • Safety culture alignment
  • Greater control over stripping rates
  • Quality and grade control
  • Unit cost reduction through efficiency
  • Preventative maintenance

Optimised primary mining fleet

  • 19 drill rigs
  • 11 excavators
  • 46 trucks
  • Capable of moving 17 Mm3 per annum
  • ~85 support vehicles

ESTIMATED FLEET REPLACEMENT VALUE

~US$145.0 m

ESTIMATED LIFE OF NEW FLEET

~8 years

slide-11
SLIDE 11

IMPROVEMENTS

▪ Compliance to mine plan ▪ During the transition to owner mining – increased management and oversight resulted in availabilities and utilisations improving ▪ Focus on:

‒ Improving availability and utilisation ‒ Drill efficiencies and effectiveness ‒ Fragmentation

11

OWNER MINING TRANSITION

INTEGRATION

▪ Implemented asset management and maintenance tool for the mining fleet and integrated into the Tharisa ERP ▪ Fully integrated with Tharisa’s SHE and HR systems with compliance reporting ▪ Commitment to technical competence and culture of continuous improvement and innovation

PRODUCTION FLEET TARGET AVAILABILITY

85.0%

PRODUCTION FLEET TARGET UTILISATION

75.0%

slide-12
SLIDE 12

VALUE ADD INITIATIVES

12

SUPPLYING TISCO JV

  • One of the largest stainless steel

producers

  • Five year strategic cooperation

agreement

  • Minimum of 240 ktpa chrome

concentrate at market prices

  • Represents ~25% of Tharisa’s

metallurgical grade chrome concentrate

  • Effective September 2017

THIRD PARTY CHROME

  • Arxo Metals entered into an

agreement with Western Platinum

  • Operates the K3 UG2 plant and

markets and sells UG2 chrome produced

  • Approximately 200 ktpa of chrome

concentrates

  • September production of 20 kt

PGM RICH ALLOY

  • Commissioning of 1 MW DC furnace

to produce PGM rich alloy on a pilot scale

  • Further beneficiation capability
  • On sale and further beneficiation of

PGM rich alloy with Lonmin under PGM research and development cooperation agreement

slide-13
SLIDE 13

COMMODITY MARKETS

13

slide-14
SLIDE 14

PLATINUM DEMAND AND SUPPLY

▪ Demand driven by the auto catalyst, jewellery, industrial and investment sectors ▪ Both primary and secondary sources of supply seen decreasing ▪ Primary supply weaker in 2017 due to supressed average prices, with lower capital investment and cost increases ▪ In 2017 platinum market expected to be close to balance ▪ WPIC forecast deficit in 2018 of 250 koz

PGM MARKET

PLATINUM, PALLADIUM AND RHODIUM MARKET PRICES [US$/oz]

14

400 600 800 1 000 1 200 1 400

Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17

Platinum Palladium Rhodium Pt 55.2% Pd 16.1% Ru 14.3% Rd 9.5% Ir 4.7% Au 0.2%

THARISA PRILL SPLIT

Source: Johnson Matthey, 23 Nov ‘17

5.8 5.1 6.1 6.1 6.0 2.0 2.1 1.7 1.9 1.9 8.6 8.1 8.3 8.2 7.6 2013 2014 2015 2016 2017 (f) Primary supply Recycling Demand 6.4 6.1 6.5 6.8 6.6 2.5 2.7 2.4 2.5 2.7 9.5 10.7 9.2 9.4 10.1 2013 2014 2015 2016 2017 (f) Primary supply Recycling Demand

PLATINUM DEMAND AND SUPPLY [Moz] PALLADIUM DEMAND AND SUPPLY [Moz]

slide-15
SLIDE 15

DEMAND AND SUPPLY

▪ Demand for metallurgical grade chrome concentrate is driven by its use in the manufacture of stainless steel, the production of which is estimated to grow at between 3% to 4% in 2017 ▪ China is wholly dependent on imports of chrome ore ▪ Chrome prices were volatile during 2017, peaking at US$390 and dipping to US$130 then recovery above US$200/t ▪ Now holding between US$165/t to US$170/t ▪ Chrome stocks at Chinese ports are at 2.4 Mt – just over two month’s worth of supply to the ferrochrome and stainless steel industry

15

CHROME MARKET

METALLURGICAL GRADE CHROME PRICE / PORT STOCK

75.7% 78.3% 24.3% 21.7% FY2017 FY2016 Metallurgical grade Specialty grade

THARISA PRODUCT MIX CHEMICAL GRADE FOUNDRY GRADE Cr2O3 – 45% to 47% SiO2 - <1.2% Cr2O3 - >46% SiO2 - <1.0% Used to produce sodium dichromate used in leather tanning, pigments, plating Used in moulds for metal castings and nozzle sands

  • 500

1 000 1 500 2 000 2 500 3 000

  • 50

100 150 200 250 300 350 400 450

Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Sep-17 Oct-17 Nov-17

Stocks [kt] Price [US$/t]

42% Market price Port stocks

Source: Ferroalloynet, ICDA, 23 Nov ‘17

THARISA PROPORTION OF SOUTH AFRICAN EXPORTS TO CHINA

~10.9%

THARISA AVG MET PRICE FY2017

US$200/t

SPECIALTY CIF EQUIVALENT BASIS

+US$50/t premium

slide-16
SLIDE 16

FINANCIAL RESULTS

16

slide-17
SLIDE 17

HIGHLIGHTS

17

GROUP REVENUE

US$ millions

↑51.9%

215.5 240.7 246.8 219.6

349.4

12.0% 13.5% 17.5% 24.8%

35.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

FY2013 FY2014 FY2015 FY2016 FY2017

50 100 150 200 250 300 350 400

EBITDA

US$ millions

↑168.7%

13.9 16.5 29.0 43.0

115.6

6.5% 6.9% 11.8% 19.6%

33.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

FY2013 FY2014 FY2015 FY2016 FY2017

20 40 60 80 100 120 140

HEPS

US$ cents

↑266.7%

  • 19
  • 20

2 6

22

FY2013 FY2014 FY2015 FY2016 FY2017

  • 25
  • 20
  • 15
  • 10
  • 5
5 10 15 20 25

Gross profit margin EBITDA margin

AVERAGE PGM PRICE

US$786/oz

(2016: US$736 /oz)

42% CHROME PRICE (CIF CHINA)

US$200/t

(2016: US$120/t)

↑6.8% ↑66.7%

slide-18
SLIDE 18

INCOME STATEMENT HIGHLIGHTS

18

SUMMARY OF RESULTS

SEGMENTAL ANALYSIS

US$ millions FY2017 FY2016 Change Revenue 349.4 219.6 59.1% Gross profit 122.7 54.5 125.2% Gross profit margin 35.1% 24.8% 41.5% Results from operating activities 95.9 32.1 198.4% EBITDA 115.6 43.0 168.7% EBITDA margin 33.1% 19.6% 68.9% Net finance costs 4.9 10.2 (51.6%) Profit before tax 91.0 22.0 314.2% Tax 23.3 6.2 277.8% Profit for the year 67.7 15.8 328.5% Effective tax rate 25.6% 28.1% (8.9%) Headline earnings per share (US$ cents) 22 6 266.7% Proposed dividend per share (US$ cents) 5 1 400.0% Dividend yield 3.7% FY2017 FY2016 Segmental analysis PGMs Chrome Agency PGMs Chrome Agency Gross profit 36.2 86.2 0.3 24.2 30.3

  • Gross profit margin

39.8% 34.1% 5.4% 29.7% 21.9%

  • Sales volume

143.5 koz 1.3 Mt

  • 132.9 koz

1.2 Mt

  • Shared cost allocation

35.0% 65.0%

  • 50.0%

50.0%

  • Average transport cost per tonne of

chrome concentrate

(CIF main ports China)

  • 52.0
  • 42.0
  • EXCHANGE RATE

ZAR:US$ STRENGTHENED 9.5%

PROPOSED DIVIDEND

US$ 5 cents per share

slide-19
SLIDE 19

PGM REVENUE AND GROSS PROFIT MARGIN

19

SEGMENTAL ANALYSIS

CHROME REVENUE AND GROSS PROFIT MARGIN

54.3 70.4 83.1 81.5

90.9

7.0% 24.0% 23.1% 29.7%

39.8%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

10 20 30 40 50 60 70 80 90 100

FY2013 FY2014 FY2015 FY2016 FY2017

US$ millions

161.2 170.4 163.7 138.1

252.9

13.7% 10.0% 14.6% 21.9%

34.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

50 100 150 200 250 300

FY2013 FY2014 FY2015 FY2016 FY2017

US$ millions

56.9 80.4 119.9 132.9

143.5

1132 1103 885 736

786

2000 4000 6000 8000 10000

20 40 60 80 100 120 140 160

FY2013 FY2014 FY2015 FY2016 FY2017 1.0 1.2 1.1 1.2

1.3

165 158 158 120

200

500 1000 1500 2000 2500

200 400 600 800 1000 1200 1400

FY2013 FY2014 FY2015 FY2016 FY2017

PGM basket price [US$/oz] 42% chrome price [US$/tonne]

PGM SALES VOLUME

koz

CHROME CONCENTRATE SALES VOLUME

Mt

PGM SHARED COSTS

35.0%

(2016: 50.0%)

CHROME SHARED COSTS

65.0%

(2016: 50.0%)

slide-20
SLIDE 20

FUNDING

20

BALANCE SHEET

OWNER MINING FUNDING

US$ millions FY2017 Pro forma FY2017 FY2016 Total interest bearing debt 54.2 74.8 67.1 Long term 4.4 19.0 24.0 Short term* 49.8 55.8 43.1 Debt service reserve account 4.5 4.5 9.8 Adjusted interest bearing debt 49.6 70.2 57.3 Adjusted debt to total equity ratio 18.2% 25.8% 28.4% Cash and cash equivalents 49.7 49.7 15.8 Net debt (0.1) 20.6 41.4 Net debt to total equity ratio 0.0% 7.6% 20.5% Net current assets 63.3 57.1 0.5 Return on equity 19.4% 19.4% 5.8%

Bridge facility of US$14.4 m Refinancing term sheet signed OEM finance of US$6.2 m CASH CONSIDERATION OF US$20.6 m US$6.6 m EQUIPMENT RENTALS

*Includes certain amounts in accounts payable relating mainly to accrued dividends payable by a subsidiary

slide-21
SLIDE 21

SUMMARISED CASH FLOW STATEMENT

21

CASH FLOW

OPERATIONALLY CASH GENERATIVE

US$ millions FY2017 FY2016 Cash flow from operating activities 73.2 22.2 Investing cash flows (26.6) (12.0) Financing cash flows (12.5) (18.2) Net increase / (decrease) in cash 34.1 (8.0) Cash at the end of the period 49.7 15.8 Depreciation 16.9 10.3 Free cash flow per share (US$ cents) 18.2 0.1 Price/free cash flow per share 7.9 24.5

  • 3.0

22.4 41.4 22.2 73.2 FY2013 FY2014 FY2015 FY2016 FY2017

US$ millions

INVESTMENT IN MINING FLEET

US$7.1 m

(2016:US$0.3 m)

FREE CASH FLOW PER SHARE

US$ 18.2 cents

(2016:US$ 0.1 cent)

13.5% 13.2% 9.5% 7.3% 6.5% 4.6% 3.0%

  • 3.8%
  • 7.0%
  • 7.0%
  • 16.9%
  • 21.0%

South 32 Tharisa Rio Tinto Amplats Antofagasta Randgold Polymetal Northam Implats Pan African Lonmin Royal Bafokeng

FREE CASH FLOW YIELD (29 NOVEMBER 2017)

Source: Bloomberg

slide-22
SLIDE 22

UNIT COSTS

22

COST ANALYSIS

OPERATING COST ANALYSIS – EX WORKS

Mining** 43.7% Utilities 7.0% Reagents 2.5% Steelballs 4.7% Labour 10.6% Diesel 12.4% Overheads 19.2%

**Includes contractor mining labour By product basis FY2017 FY2016 All in cost per Pt ounce sold US$/oz (296.1) 437.8 All in cost per 42% chrome tonne sold US$/t 114.0 85.2

38.2 37.7 31.9 34.9 16.4 12.7 8.4 10.6 5 10 15 20 10 20 30 40 50 60 FY2014 FY2015 FY2016 FY2017 Cash cost excluding logistics Logistics Stripping ratio Exchange rate

CONSOLIDATED CASH COST PER TONNE MILLED

US$/tonne milled

54.6 50.4 40.3 45.5

STRIPPING RATIO

7.5 m3:m3

(2016: 7.3 m3:m3)

AVERAGE EXCHANGE RATE

ZAR:US$13.4

(2016:ZAR:US$14.8) All in cost includes operating costs, administration costs and capital

Mining 23.0% Utilities 7.5% Reagents 2.3% Steelballs 4.1% Labour 25.5% Diesel 18.1% Overheads 19.5%

FY2018 FORECAST

FY2017

Mining costs FY2017 FY2017 at LOM stripping* Mining cost per reef tonne US$/t 18.8 22.2 Mining cost per cube US$/m3 7.8 8.2 *LOM stripping ratio of 9.7

slide-23
SLIDE 23

23

INVESTMENT CASE AND OUTLOOK

slide-24
SLIDE 24

INVESTMENT CASE

24

3.1 6.2 8.4 11.3 12.0 20.1 31.8

Tharisa Sibanye-Stillwater Implats Amplats Lonmin Northam Royal Bafokeng

EV/EBITDA

US$ millions Tharisa Sibanye Implats Amplats Lonmin Northam Royal Bafokeng EV 352.5 4 459.9 2 277.6 7 394.3 147.7 1 876.5 731.6 EBITDA 2017E 115.6 716.7 272.7 654.6 12.3 93.4 23.0 Source: Company filings and consensus views

DIVIDEND YIELD (2016A)

LOW COST CO- PRODUCER UPSIDE VALUE GROWTH POTENTIAL

0.8% 0.9% 1.1% 1.5% 3.5% 3.7% 3.9% 4.1% 4.1% 4.5% 4.5% 4.7% 5.2%

Glencore Hochschild Randgold Antofagasta Pan African Tharisa (2017) Rio Tinto Polymetal South32 Acacia Mining Anglo Pacific BHP Biliton Vedanta

Source: Company filings, FactSet, Bloomberg

62.1 37.9 37.7 31.6 31.2 16.4 14.7 13.7 10.7 10.4 8.2 6.6 5.8

Amplats Antofagasta Hochschild Glencore Randgold BHP Biliton Polymetal Rio Tinto South32 Pan African Anglo Pacific Tharisa Acacia Mining

PE RATIO (30 NOVEMBER 2017)

slide-25
SLIDE 25

DELIVERING ON OUR STRATEGY

LEADING NATURAL RESOURCES GROUP

Globally significant diversified low cost operations

INNOVATION

Growth through innovative research and development

OPTIMISATION INITIATIVES

Maximise value extraction

LEVERAGING MARKETING AND LOGISTICS PLATFORM

Marketing, sales and logistics platform Expansion into multi- commodities Geographic diversity

CAPITAL DISCIPLINE

Dividend policy of minimum 10% NPAT Capital allocation to low risk projects

Record financial and

  • perational year

Organic growth and R&D Vision 2020 Proposed dividend of US$ 5 cents per share Increased dividend policy to at least 15%

  • f NPAT

Improved recoveries Initiated third party agency and logistics

25

FY2018 GUIDANCE: PGMS OF 150 kozpa & CHROME CONCENTRATES OF 1.4 Mtpa

slide-26
SLIDE 26

VISION 2020

ROM of 5.0 Mtpa PGMs of 143.6 kozpa Chrome concentrates

  • f 1.3 Mtpa

2017

ROM of 5.9 Mtpa PGMs of 200 kozpa Chrome concentrates

  • f 2.0 Mtpa

2020

PGM flotation upgrade UG1 plant Vulcan plant

26

QUESTIONS