BUILDING ON FIRM FOUNDATIONS DELIVERING A SUSTAINABLE FUTURE - - PowerPoint PPT Presentation

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BUILDING ON FIRM FOUNDATIONS DELIVERING A SUSTAINABLE FUTURE - - PowerPoint PPT Presentation

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KUMBA IRON ORE LIMITED 2018 INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018 BUILDING ON FIRM FOUNDATIONS DELIVERING A SUSTAINABLE FUTURE ENHANCING OUTCOMES MEDIA Sinah Phochana sinah.phochana@angloamerican.com Tel: +27 12

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SLIDE 1

BUILDING ON FIRM FOUNDATIONS DELIVERING A SUSTAINABLE FUTURE ENHANCING OUTCOMES

KUMBA IRON ORE LIMITED

2018 INTERIM FINANCIAL RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2018

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SLIDE 2

MEDIA Sinah Phochana sinah.phochana@angloamerican.com Tel: +27 12 683 7019 Mobile: +27 76 066 0655 INVESTOR RELATIONS Penny Himlok penny.himlok@angloamerican.com Tel: +27 12 622 8324 Mobile: +27 82 781 1888

www.angloamericankumba.com

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SLIDE 3

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • DISCLAIMER
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SLIDE 4
  • Shareholder returns
  • Our value proposition

Assets Capabilities

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

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SLIDE 5

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Delivering on our strategy

Focused on delivering sustainable shareholder returns

  • Horizon 1
  • Horizon 2
  • Horizon 3
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SLIDE 6

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Solid performance across the board

HEPS

R9.31

  • EBITDA

R7bn

  • Financial

Total recordable cases

45%

1H18: 23

High potential incidents

77%

1H18: 3

Safety – Fatality free Shareholder returns

Attributable free cash flow (Rbn) DPS (R/share)

  • Production

22.4Mt

  • Operational

Total tonnes handled

140.4Mt

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SLIDE 7

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Mutually beneficial partnerships for long-term success

Local businesses

R451m

  • R5.4bn
  • Shareholders

R4.7bn

  • R1.4bn
  • Communities

R35.9m

  • Government

R1.3bn

  • R468m
  • Employees

R2.3bn

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SLIDE 8

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Stakeholder relationships – continuing to make progress

Mining Charter

  • Dingleton
  • Thabazimbi
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SLIDE 9

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

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SLIDE 10

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Platts 65 and Platts 58 (low Al) differential to Platts 62 ($/t)
  • Source: Platts

There’s a flight to quality…

  • 3.6

9.4 12.9 19.2 18.2

20 July 2018 $28 $10

  • Platts lump premium ($/dmtu)
  • 0.17

0.14 0.15 0.15 0.18

20 July 2018 $0.32/dmtu

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SLIDE 11

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • 62

62 62 69 73 77 80

  • China Steel Capacity Utilisation (%)
  • 73

85 80 73 58 56 35

  • PM2.5 Reading in Beijing
  • Source: Beijing Urban Master Plan 2030, China 13th Five Year Plan, CISA, MIIT, World Steel Association, Woodmackenzie
  • 1. Government targets

…and it’s here to stay

Tighter emission standards ~250Mt of steel capacity reduction Bigger blast furnaces

52 50 49 44 43 42 33 34 34 36 36 36 15 16 17 20 21 22 100

  • China Major Steel Mill BFs by Size (%)
  • Steel industry consolidation

39 37 34 32 37 35 60

  • Share of Top 10 Steelmakers in China (%)
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SLIDE 12

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • 1H18 Lump:Fine ratio (% lump), Peer comparison

Source: Company reports, Woodmackenzie | 1:Export sales lump:fine ratio

  • 1H18 average Fe content (%), Peer comparison

Kumba is upgrading its product portfolio…

  • Kumba
  • Kumba
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SLIDE 13

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • …resulting in a realised FOB price of US$69/tonne
  • Kumba’s 1H18 Realised Price Reconciliation

(US$/tonne, FOB)

  • 1H18 Realised Price (US$/tonne, FOB),

Peer Comparison

EU/MENA/ Americas 20% JKO 20% China 60%

Export sales geographical split 1H17

EU/MENA/ Americas 21% JKO 22% China 57%

Export sales geographical split 1H18

* In 1H18, 68% of Kumba’s export sales consisted of lump ore.

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SLIDE 14

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

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SLIDE 15

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Safety

40%

  • 1H18: 3

Production

15.3Mt

  • Waste

86.6Mt

  • Quality

64.6 Fe%

  • Sishen – focus on value over volume
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SLIDE 16

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Haul truck (kt/day)

Pre-strip shovel tempo (kt/h)

  • Fleet productivity (kt/day)
  • Sishen – operating model enhanced capability and improved productivity

Total tonnes handled (incl. contractors)

105.1Mt

  • 38%

19% 17%

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SLIDE 17

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Safety

100%

  • 1H18: 0

Production

7.2Mt

  • Waste

26.4Mt

  • Quality

64.3 Fe%

  • Kolomela – driving assets to full potential
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SLIDE 18

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Hydraulic shovel (kt/day)
  • DSO productivity (kt/day)

Kolomela – operating model continued productivity gains

Total tonnes handled (incl. contractors)

35.3Mt

  • Haul truck (kt/day)

6% 9% 2%

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SLIDE 19

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Challenging rail performance
  • Mitigating actions:
  • Transnet rail performance under pressure due to derailments

2.4Mt

lost sales opportunity

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SLIDE 20

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Total shipped

19.5Mt

  • Finished product inventory

6.2Mt

  • Logistics performance maintained despite rail challenges

Railed to port

20.8Mt

  • Total sales

21.2Mt

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SLIDE 21

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

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SLIDE 22

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Margin enhancement
  • R19.5bn
  • 36%

43%

Financial discipline

  • R415m
  • R1.4bn
  • Shareholder returns
  • R2.8bn
  • R14.51
  • Enhancing returns for shareholders
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SLIDE 23

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Revenue – quality premia partially offsetting stronger Rand and lower prices
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SLIDE 24

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • 5%

3%

Sishen unit cost driven by mining volumes while cost savings offset non-controllable costs

  • 1. Excluding impact of deferred stripping on unit cost 1H18: R48/t ( FY17: R30/t )
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SLIDE 25

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • (5%)

3%

Kolomela’s lower unit cost due to increased productivity and efficiencies

  • 1. Excluding impact of deferred stripping on unit cost 1H18: R25/t (FY17: R18/t )
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SLIDE 26

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • $5

$1

  • Break-even price – increase mainly driven by currency strength
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SLIDE 27

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • EBITDA – strategy of operating assets at full potential delivering

underlying value

  • 14%

(33%)

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SLIDE 28

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Medium term
  • Long term

Capital expenditure supports our strategy

  • 1H18
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SLIDE 29

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Strong balance sheet – set for long-term growth and sustainable returns
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SLIDE 30

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Disciplined capital allocation – delivering on our commitment

Revised dividend policy of 50 – 75% payout ratio takes into account: 1H18 interim dividend of R14.51 made up as follows:

  • Discretionary capital options
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SLIDE 31

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

FOCUS ON UNLOCKING FULL POTENTIAL

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SLIDE 32

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Horizon 2

Leveraging endowment

Focused delivery on our strategy

Horizon 1 Operating assets at full potential Horizon 3 Value accretive opporunities

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SLIDE 33

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • 64.5% Fe
  • Horizon 1 – drive margin expansion across value chain

R800 million

  • 20-30%
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SLIDE 34

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Ore Reserves of 676.4Mt @ 59.6% Fe
  • Exploration and research beneficiation technology

Northern Cape opportunities

  • 733.0Mt @ 54.6% Fe of exclusive Mineral Resource

Sishen – 500.8Mt @ 57.9% Fe Reserve Life 13 years Kolomela – 175.6Mt @ 64.4% Fe Reserve Life 14 years

Horizon 2 – leveraging Northern Cape opportunities,

  • ur approach to life extension

1. Exclusive Mineral Resource are additional to Ore Reserves and has not been modified. Please refer to our disclaimer as well as slide 37 and 38 for additional information, source data and assumptions. 2. Subject to rail capacity 3. Based on 1.6 revenue factor. Sishen Total 2017 exclusive Mineral Resource = 559.6Mt @ 52.0% Fe. Kolomela Total 2017 exclusive Mineral Resource = 173.4Mt @ 62.8% Fe

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SLIDE 35

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Guidance for 2018

Sishen Kolomela

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SLIDE 36

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Shareholder returns
  • Our value proposition

Assets Capabilities

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SLIDE 37

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

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SLIDE 38

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

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SLIDE 39

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Annexure 1:

Life extension2 under investigation

510Mt of 733Mt

  • 2017 Ore Reserves

Mineral Resource1 (under investigation)

  • 500.8Mt
  • 75.6Mt

Kolomela

P1: 70Mt

Mineral Resource1 In situ Fe Grade Conversion Factor Yield Phase 1 – Optimisation

  • Phase 2 – Optimisation
  • Phase 3 – Optimisation
  • Phase 1
  • Sishen

P1: 80Mt P2: 210Mt P3: 150Mt

  • 2017 Yield

2017 Reserve Life Sishen

  • Kolomela
  • 1.

Exclusive Mineral Resource are additional to Ore Reserves and has not been modified. Please refer to our disclaimer as well as slide 38 for source data and assumptions. 2. Subject to rail capacity 3. Based on 1.6 revenue factor. Sishen Total 2017 exclusive Mineral Resource = 559.6Mt @ 52.0% Fe. Kolomela Total 2017 exclusive Mineral Resource = 173.4Mt @ 62.8% Fe

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SLIDE 40

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Source data
  • Annexure 1a:

Kumba 2017 Exclusive Mineral Resource

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SLIDE 41

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Mt

1H18 1H17 % change 2H17 % change

  • 20.8
  • 13.7
  • 7.1
  • 21.2
  • 19.5
  • 1.7
  • 19.5
  • 12.8
  • 6.7
  • 6.2
  • Annexure 2:

Logistics performance maintained

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SLIDE 42

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Rm

1H18 1H17 % change 2H171 % change

  • 19 474

21 500

  • 24 879
  • (14 390)

(13 853)

  • (11 205)
  • 5 084

7 647

  • 13 674
  • 26

36

  • 36
  • 3 853

5 998

  • 10 135
  • 2 943

4 586

  • 7 749
  • 910

1 412

  • 2 386
  • 27

23 27

  • 6 874

11 726

  • 10 706
  • 1. Including Thabazimbi mine
  • 2. Excluding the impairment reversal in 2H17

Annexure 3: Operating margin driven by lower revenue, expense growth well controlled

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SLIDE 43

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • 1H18

1H17 % change

2H17

% change

  • 16 388
  • 19.5
  • 69
  • 840
  • 1 233
  • 1 853
  • Total revenue

19 474

  • 12.30
  • Annexure 4:

Revenue sector analysis

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SLIDE 44

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • 1. Excluding the mineral royalty

Annexure 5: Operating expenditure driven by volume growth

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SLIDE 45

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Annexure 6:

Operating expenditure analysis

Rm

1H18 1H17 % change 2H17 % change

  • 8 984
  • 8 731
  • 9 004
  • 6 282
  • 2 499
  • 44
  • 179
  • (273)
  • (992)
  • 719
  • (380)
  • 580
  • 53
  • 532
  • —
  • 3 006
  • 1 868
  • Operating expenses

14 390 13 853

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SLIDE 46

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Annexure 7:

Sishen and Kolomela mines’ unit cash cost structure (R/t)

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SLIDE 47

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Annexure 8:

Sishen and Kolomela mines’ unit cash cost structure (%)

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SLIDE 48

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Rm

1H18 FY171 FY18

  • 155

575

  • 905

1 194

  • 723

942

  • 182

252

  • 210

793

  • 159

507

  • Total capital expenditure

1 429 3 069 3 700 – 3 900

Annexure 9: Capital expenditure analysis

All guidance based on current forecast exchange rates

  • 1. FY17 excludes ~R5m of Thabazimbi capital expenditure
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SLIDE 49

Kumba Iron Ore Limited Interim results for the six months ended 30 June 2018

NOTES

  • Change per unit of key operational drivers, each tested independently

Sensitivity analysis Unit change EBITDA impact

  • Breakeven price impact
  • Source: WSA, Kumba market intelligence, GTIS

Based on 4M16 data

Annexure 10: Sensitivity analysis 1H18

1% change to key operational drivers, each tested independently