COVER AMANGO IN- DE PT H ANAL YSIS RE PORT Pre se nte d b y: - - PowerPoint PPT Presentation

COVER

AMANGO IN- DE PT H ANAL YSIS RE PORT

Pre se nte d b y: Cindy T andiani, F e lic ia Nasse ri, Mic hae l Musto po , Vinso n Budiman

Issue s Pr ior itization

Cor por ate Re c onstr uc tion and Re or ganization

Pillar s of Value

Risk Pro file : At the limit

Re c omme ndations

Diamond PGM Coppe r Ir

• n Or

e Coal

Niobium & Phosphate s

Nic ke l L ar ge E BIT Contr ibutor , Signific ant PGM marke t shar e & High Gr

• wth

Ra te Signific ant E BIT Contributor & Soc io Politic al Pr e ssur e Insignific ant e ar nings c ontr ibutor & High unc e r tainty 25.72% 6.06% 16.57% 33.68% 14.44% 3.91%

• 0.28%

Contr ibution to E BIT

KE E P WAIT DIVE ST

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Imple me ntation T ime line

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

2017 2018 2019 2020 2021

Ma r Jun Se p De c Ma r Jun Se p De c Ma r Jun Se p De c Ma r Jun Se p De c Ma r Jun Se p De c

Ke e p

Diamond PGMs Coppe r

Wait

Coal Iron Ore

Dive st

Nic ke l Niobium & Phosphate s

Imple me ntation Re c omme ndation

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Evaluate worth of segments to be divested ‐ Nickel 1 Find potential buyers while focusing on current segments 2



Se a rc h fo r most be ne fic ial syne r

gy while str e ngthe ning

its c oal, ir

• n or

e , diamond, PGM, c oppe r

Re‐evaluate decisions every 3 years, in line with 3‐year‐ viability statement evaluation ‐ to stay competitive 3

Ope r ational Risk and Industr ial Ac tion in Austr alia

Pillar s of Value

Risk Pro file : At the limit

Situational Analysis – Australia Ope ratio nal Risk

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Curre nt sha ft c o sts US$130

million, b ut fa ile d in 1st we e k F atal inc ide nt due to sa fe ty

sta nda rds we re no t he ld

Contr

• lle d shutdown of 1

c oppe r mine in Austr alia

Alte r native : Re plac e with ne w mine shaft Pre ta x CF

• f US$30.34million e a c h ye a r fo r 9 ye ar

s,

re c la ma tio n o f US$5million b y F

e br uar y 2027 (Co sts US$130m in 2017 and US$5m o f c lo sure c o st)

Ope ra tio na l b y Mar

c h 1, 2018

CE O:

Re sume at c ur r e nt shaft

E valuation of Str ate gic Options

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Risks

L ic e nse r e voke d, bad public ity, and wor kfor c e str ike

Ope ra tio na l I mpa c t

Safe ty hazar ds as ac c ide nts may c ontinue to happe n

F ina nc ia l I mpa c t

No fur the r c ost inc ur r e d

Continue to use c ur r e nt shaft 1 2 Constr uc t a ne w mine shaft

Risks

F aulty de sign and c ontinue d pr e se nc e of safe ty hazar ds

Ope ra tio na l I mpa c t

Inc r e ase safe ty and e ffic ie nc y

F ina nc ia l I mpa c t

NPV = $48.73million

(I nitial c o st o f $135 millio n in 2017)

Ke y: Ope r ational Safe ty & He alth Manage me nt

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

T r affic Manage me nt Infor mation Syste m Pr

• c e dur

e s, T r aining, & Auditing

Re duc e Safe ty Hazar ds & E nsur e E me r ge nc y Pr e par e dne ss

1 2 3

Ke y: Produc tion?

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Option 1: Re sume with c ur r e nt shaft with highe r

• pe r

ational safe ty standards



Sho uld de te c t and addr

e ss issue with the c urre nt sha ft



Ge ne r ate r e ve nue to maintain ma rke t sha re



E nsure e mployme nt Option 2: Stop pr

• duc tion



No r e ve nue a nd lose ma rke t sha re



Une mployme nt  wo rkfo rc e strike



Se c ure safe ty stanc e Option 3: Par tne r ship with loc al mining c ompany



Ge ne r ate r e ve nue to maintain ma rke t sha re



Une mployme nt  wo rkfo rc e strike

Re c omme ndation & Imple me ntation

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Conduct extensive research 1 Communicate with involved parties 2



Public Re lations – inve sto rs, c o mmunitie s, a nd re g ula to rs



Human Re sour c e Manage me nt – tra ining a nd la b o r

re la tio ns

Address problem with current shaft: Resume production for the moment 3 Improve evaluation policies & engage in frequent maintenance routine 4

Str ate gic Disposal in Br azil

Pillar s of Value

Risk Pro file : Within the limit

Situational Analysis – Strate g ic Dispo sal in Brazil

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

CMOC o ffe re d US$ 1,500 million to b uy AMANGO’s Niobium and Phosphate s se g me nt E valuation of Str ate gic Options

F inanc ial I mpac t

Ge ne r ate ope r ating inc ome fro m the se g me nt

ACCE PT F ORGO

Risks

• 1. Se g me nt mig ht c o ntinue

to unde r- pe rform

• 2. Ne t de bt r

e mains high

F inanc ial I mpac t

• 1. De c r

e ase in Ne t De bt o f US$ 450.12 mio

• 2. Inc r

e ase AMANGO’ s c r e dit r ating

Risks

• 1. Miss out on r

ising Nio b ium

a nd Pho spha te s de mand

• 2. Sc r

utiny fro m sha re ho lde rs

Re c omme ndation

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Offe r fro m CMOC US$ 1,500 million

*F ig ure s are e xpre sse d in millio ns

ACCE PT

De spite b e ing

• ffe re d tha n ma rke t

va lue , we re c o mme nd AMANGO to ac c e pt b e c a use the o ffe r is

inline with the ir KPIs:

• 1. De c r

e ase ne t de bt

• 2. Dive st unfa vo ra b le

mining se g me nts

Imple me ntation

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Conduct due diligence 1 Accept offer from CMOC 2 Communicate with all stakeholders 3



Infor m all stake holde r s, e spe c ia lly AMANGO’ s

sta ke ho lde rs re g a rding the be ne fits and dr

awbac ks of the ac quisition

Balanc e She e t De - le ve rage or Shar e Buy- bac k

Pillar s of Value

Risk Pro file : At the limit

Situational Analysis

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Shr inkage o f E

mplo ye e s 160,000 to 60,000

Unutilize d Re side ntial

va lue d US$8.184b illio n

Unde r go a Shar e Buy- bac k Sc he me Paybac k De bt and De - le ve r age Balanc e She e t

Available Options Bo o k va lue o f US$6.4billion, g e ne ra te CF

• f 14% fro m BV

Ope ra tio na l Co st re duc tio n o f

US$736million

E valuation of Str ate gic Options

Risks

Cr e dit r ating worse n

Sha re ho lde r I mpa c t

Inc r e ase stoc k pric e

Ra tio I mpa c t

Inc r e ase E PS Inc r e ase DE R

2 Paybac k De bt & De - le ve r age

Risks

Miss out the pr

• bability
• f inc r

e asing stoc k pr ic e

F ina nc ia l I mpa c t

Inc r e ase Cr e dit Rating ( re duc e c re dit spre a d 30 b a sis po ints)

F ina nc ia l I mpa c t

De c r e ase Ne t De bt

(do wn to b e lo w US$10b illio n inline with K PI

)

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Shar e Buy- bac k Sc he me Shar e Buy- bac k Sc he me 1

Ke y: Soc io- Politic al South Afr ic an Gove r nme nt & BE E P

Comply with 26% Blac k Owne d Polic y Re ne gotiate with South Afr ic an Gove r nme nt

De sign and Imple me nt Community De ve lopme nt Pr

• gr

ams

Gain Public and L

• c al Wor

kfor c e T r ust, Str e ngthe n Re lation with South Afr ic an Gove r nme nt 1 2 3

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Joint Ve ntur e with Ce phas Canada

(Quinta)

Pillar s of Value

Risk Pro file : Within the limit

Situation – JV in Canada

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

T he c o mme nc e me nt o f 1st c oal mining proje c t in Ca na da with Ce pha s Re q uire s 2 ye ar

s o f le ng thy a nd c ostly c o nstruc tio n 3 available c onstr uc tion de sign with diffe re nt risks a nd

b e ne fits pro file L

• c a l c o mmunity “ Idle no Mor

e ”

AMANGO’ s inade quate e nvir

• nme ntal ac c ounting

Assumptio ns : Supply = De ma nd (7.5 millio n to nne s), All so ld in 2 ye a rs

E valuation of De sign Options

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Coal De mand Small De mand 5 Million T

• ns

Me dium de mand 7.5 Million tons L ar ge De mand 10 Million tons E xpe c te d De mand F ixe d Cost E xpe c te d Inc ome

De sig n 1 85% 10% 5% 1,312,300 750,000 56,230,000 De sig n 2 25% 50% 25% 1,789,500 875,000 91,450,000 De sig n 3 20% 50% 30% 1,849,150 1,000,000 84,915,000

WACC NPV Assumptions

De sig n 1 32,009,676.37 Co nstruc tio n o f mine wo uld ta ke 2 ye a rs until 2019

De sign 2 8.54% 58,422,285.97 De ple tio n o f the mine wo uld ta ke 2 ye a rs

De sig n 3 50,786,362.16 (Pro duc tio n Ca pa c ity o f 3 - 5 millio ns to ns pe r ye a r)

*F ig ure s are e xpre sse d in USD millio ns

Impac t of De c ision

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

E xpe c te d I nc o me

91,450,000 USD

NPV

58,422,285 USD

Avoid c onflic t with lo c a l c o mmunity a nd boost its re putation in the e ye s o f the pub lic SHAL L OW ME DIUM DE E P

E nvir

• nme ntal Change

Risk for Worke rs

Imple me ntation

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Reevaluate legal agreements of JV 1 Conduct extensive research on location to minimize negative impact 2 Construct mine with Design 2 3 Ensure safety standards 4 Design and execute CSR 5

Othe r Re c omme ndations

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

AMANGO sho uld a lso de sig n, de ve lo p a nd imple me nt e ffe c tive

sustainability r e por ting



I nc lude tar

ge ts to e nhanc e e ffic ie nc y



Pub lish annually E nvir

• nme ntal c osts to inc lude :

F I S re c o mme nds life c yc le c osting syste m to pro duc e a susta ina b le b usine ss



Pre ve ntio n c o sts



E nviro nme nta l de te c tio n c o sts



E nviro nme nta l inte rna l fa ilure c o sts



E nviro nme nta l e xte rna l fa ilure c o sts

Managing Divisional Pe r for manc e Gr

• up- Wide

Pillar s of Value

Risk Pro file : Within the limit

Situational Analysis – Divisio nal Pe rfo rmanc e

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Divisio ns c utting e xpe nditur

e

• n tr

aining a nd postponing se r vic e o n sa fe ty

e q uipme nts

Pr

• duc tion is r

ampe d up to

b uild c lo sing sto c k to wa rds ye a r-e nd So me divisio ns use

c ompe titor ’s r e fine r ie s due

to e xc e ssive inte rna l c ha rg e s

Cost saving

• De c lining safe ty & he alth

standar ds

• Hazar

dous wor king e nvir

• nme nt

De c lining e mploye e mor ale Cost e ffic ie nc y

Mac hine r y tur ns obsole te in time

Re c omme ndations

E SOP

(E mplo ye e Sto c k Optio n)

1

Cha ng e inte rna l ma na g e ria l a c c o unting fro m a b so rptio n c o sting to var

iable c osting

2

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Shutdown o f re fine ry

divisio n a nd

• utsour

c e re fine ry

ne e ds

3

1. Shift e mplo ye e fo c us to long- te r

m c ompany value 2. Highe r de dic ation o f wo rkfo rc e 3. T ax be ne fits fo r c o mpa ny Mor e ac c ur ate financ ial state me nts

to de pic t c o st & pro vide ma na g e me nt with de c ision- making

insights

1. Wo rkfo rc e re duc tio n, thus r

e duc e supe r vising c ost a nd inc r e ase e ffic ie nc y 2. Re duc e fixe d c ost

3. Hig he r ope r

ational fle xibility

Solve nc y Analysis

NE T DE BT

US$

16.92B

US$

8.16B

DE BT E QUIT Y RAT IO

1.08x 0.43x

CASH

US$

6.9B

US$

6.3B

CASH RAT IO

1.18x 1.45x

Solve nc y Analysis

1.08 0.43

1.18 2.74

1.45

• 0.50

1.00 1.50 2.00 2.50 3.00

• 2,000

4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 E nd o f ye a r 2016 Ope ra tio na l risk in Austra lia Sta rte g ic dispo sa l in Bra zil Afte r Sa le o f Asse ts Afte r de le ve ra g e Stra te g ic JV in Ca na da Re pa yme nt

• f sho rt te rm

lia b ilitie s

Solve nc y analysis

Ca sh a nd c a sh e q uiva le nts De b t to e q uity ra tio Ca sh ra tio

Conc lusion

Corporate Reconstruction Australia Operational Risk Brazil Strategic Disposal De‐leverage or Share Buy‐back JV in Canada Divisional Performance

Restructure the Group 1 Construct new mine shaft in Australia 2 3 Accept CMOC’s offer in Brazil 4 Deleverage balance sheet 5 Construct design 2 in Canada; better sustainability report 6 ESOP; change to variable costing; outsource refinery needs

COVER

T HANK YOU