20120209 aqp h1 2012 presentation final
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Transcript of 20120209 aqp h1 2012 presentation final
Interim Results For the six months
ended 31 December 2011
Stuart Murray 9 February 2012
Disclaimer
Certain forward looking statements may be contained in the presentation which include, without limitation, expectations regarding metal prices, estimates of production, operating expenditure, capital expenditure and projections regarding the completion of capital projects as well as the financial position of the company. Such statements are only predictions and are subject to inherent risks and uncertainties which could cause actual values, results, performance or achievements to differ materially from those expressed, implied or projected in any forward looking statements as a result of, among other factors, changes in economic and market conditions, changes in the regulatory environment and other business and operational risks. No representation or warranty, express or implied, is made by Aquarius that the material contained in this presentation will be achieved or prove to be correct. Except for statutory liability which cannot be excluded, each of Aquarius, its officers, employees and advisers expressly disclaims any responsibility for the accuracy or completeness of the material contained in this presentation and excludes all liability whatsoever (including in negligence) for any loss or damage which may be suffered by any person as a consequence of any information in this presentation or any error or omission there from. Aquarius accepts no responsibility to update any person regarding any inaccuracy, omission or change in information in this presentation or any other information made available to a person nor any obligation to furnish the person with any further information.
February 2012 Interim Results for the six months ended 31 December 2011 2
Financial Highlights
• Revenue decreased by 25% to US$252.4 million; volumes, prices, sales adjustments
• Mine EBITDA decreased by 69% to US$29.0 million; lower revenues, higher costs
• Reported net income impacted by US$91.2 million non-cash foreign exchange loss
• Arising substantially from the revaluation of intercompany loans within the Group
• Resulting in:
• Net loss of US$113.5 million
• Loss per share of 24.31 US cents
• Group cash balance at half-year end of $230.1 million
February 2012 Interim Results for the six months ended 31 December 2011 3
(Six months to 31 December 2011)
Operational Highlights
• Group attributable production decreased by 14% to 215,453 PGM ounces
• US Dollar PGM prices stable over period, but weakened during Q2
• Due to deteriorating macroeconomic conditions
• Resulting in negative sales adjustments and return of pipeline advances
• The Rand weakened by 7% on average against the US Dollar
• Stable average US Dollar PGM Basket Price, while average Rand Basket Price increased by 5%
• Production in SA down due to (industry-wide) increase in ‘Section 54’ safety stoppages
• Production at P&SAs further impeded by implementation issues relating to new support installation
• Everest suffered a two week strike and ongoing poor industrial relations
• Ground conditions remain an issue
• On-mine unit cash costs in SA rose by 35% in Rand terms, largely due to lower production
• Mimosa performed strongly again, continuing to produce at capacity
• Operations at Blue Ridge remained suspended for the entire six month period
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(Six months to 31 December 2011)
February 2012 Interim Results for the six months ended 31 December 2011
Production – Impact Analysis by Operation
5
4E oz production variance y-o-y
February 2012 Interim Results for the six months ended 31 December 2011
250,972
215,453
100,000
120,000
140,000
160,000
180,000
200,000
220,000
240,000
260,000
H1 2011 Kroondal Marikana Everest Blue Ridge Mimosa CTRP Platinum Mile H1 2012
New support installation, section 54s Strike, poor
ground conditions, section 54s
Operations suspended
Strong performance
Increased ownership
Production Profile
6
SA issues take toll
February 2012
-
50,000
100,000
150,000
200,000
250,000
300,000
Dec-09 Jun-10 Dec-10 Jun-11 Dec-11
Everest Blue Ridge Platinum Mile CTRP Mimosa Marikana Kroondal
Interim Results for the six months ended 31 December 2011
Dollar Pricing
7
Volatile and falling
February 2012
400
450
500
550
600
650
700
750
800
850
900
1,000
1,200
1,400
1,600
1,800
2,000
2,200
2,400
Jan 11 Apr 11 Jul 11 Sep 11 Dec 11
Platinum Gold Rhodium Palladium
Pt, Ru & Au ($/oz) Pd ($/oz)
Interim Results for the six months ended 31 December 2011
1,173 1,338
H1 '11 H1 '12
1,378 1,373
H1 '11 H1 '12
US Dollar Basket Prices
8
Stable period-on-period average prices (but negative price adjustments in Q2)
SOUTH AFRICA ZIMBABWE
Ir/Ru Ni/Cu Cr2O3 Ir/Ru Ni/Cu/Co
February 2012
60% 51%
29% 38%
10% 7%
South Africa Zimbabwe
Platinum Palladium Rhodium Gold
By-products
Primary products
14% (0%)
Interim Results for the six months ended 31 December 2011
Rand exchange rate
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Finally some currency relief ……. but temporary………
February 2012
6.50
7.00
7.50
8.00
8.50
Jan 11 Apr 11 Jul 11 Sep 11 Dec 11
R/$
Interim Results for the six months ended 31 December 2011
Rand revenues falling despite exchange rate
10
ZAR and US$ SA Baskets and ZAR/US$ rebased to 100
February 2012
70
80
90
100
110
120
130
140
Jan 11 Mar 11 May 11 Jul 11 Sep 11 Nov 11
SA 4E Basket Price ($) SA 4E Basket Price (R) Rand
Interim Results for the six months ended 31 December 2011
9,000
9,500
10,000
10,500
11,000
11,500
12,000
1,050
1,150
1,250
1,350
1,450
1,550
1,650
1,750
Jan 11 Apr 11 Jul 11 Sep 11 Dec 11
SA $ Basket Zim $ Basket SA R Basket
$/oz R/oz$/oz R/oz
Price volatility hampers investment decisions
11
ZAR and SA and ZIM US$ Baskets
February 2012 Interim Results for the six months ended 31 December 2011
Kroondal
• Kroondal produced below capacity during H1 2012 • Partly due to manual installation of new hangingwall support, leading to delays in the blasting cycle
• Now largely resolved - phased approach and locally-made rock drills for hangingwall support installation • Exacerbated by unsatisfactory contractor arrangements – exaggerates fixed costs to detriment of unit costs
• Renegotiating contractor arrangements • Only remaining threat to production is industry-wide increase in ‘section 54’ stoppages
• Dialogue ongoing with Inspectorate of Mines regarding this situation
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(P&SA1 - AQP 50%)
1 Mine EBITDA is attributable, i.e. 50% of total. All other numbers are on a 100% basis 2 Capex figures are total capex, i.e. both stay-in-business and expansion capex included
230,019 175,704
H1 '11 H1 '12 Production (4E oz)
2,056 1,409
H1 '11 H1 '12
Revenue (Rm)
5,757 8,459
H1 '11 H1 '12
Cash Costs (R/oz)
37.6 7.9
H1 '11 H1 '12
Mine EBITDA ($m)1
36% -6%
H1 '11 H1 '12
Cash Margin (%)
678 1,346
H1 '11 H1 '12
Capex (R/oz)2
(24%)
(32%)
47%
(79%)
(116%)
99%
February 2012 Interim Results for the six months ended 31 December 2011
3,000
4,000
5,000
6,000
7,000
8,000
9,000
FY11 - H1 Volume Grade Recoveries Mining Processing Utilities Admin FY12 - H1
Cash cost analysis – an example
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Kroondal – increases in costs by category
February 2012
Reversible
Interim Results for the six months ended 31 December 2011
Marikana
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(P&SA1 - AQP 50%)
1 Mine EBITDA is attributable, i.e. 50% of total. All other numbers are on a 100% basis 2 Capex figures are total capex, i.e. both stay-in-business and expansion capex included
60,587 54,802
H1 '11 H1 '12 Production (4E oz)
561 451
H1 '11 H1 '12
Revenue (Rm)
8,026 9,800
H1 '11 H1 '12
Cash Costs (R/oz)
1.6 -2.3
H1 '11 H1 '12
Mine EBITDA ($m)1
13% -19%
H1 '11 H1 '12
Cash Margin (%)
1,561 1,557
H1 '11 H1 '12
Capex (R/oz)2
(10%)
(20%)
22%
(244%)
(244%)
(0%)
February 2012
• Marikana also produced below capacity during H1 2012, and ramp-up slowed • Largely due to the same issues faced by Kroondal
• Same mitigants now in place • As with Kroondal, only remaining threat to production is industry-wide increase in ‘section 54’ stoppages
• Dialogue ongoing with Inspectorate of Mines regarding this situation • Two shafts at Marikana are in ramp-up, and as such are uneconomic at current prices
Interim Results for the six months ended 31 December 2011
Everest
• Ramp-up slowed by thicker-than-anticipated oxide zone first encountered in Q4 ‘11 • Everest now being optimised to produce at a lower level for the next 12-18 months
• While shallower mining, poor ground conditions and challenging economic environment persist • While Hoogland open pit mining authorisation and s102 consent for Booysendal South remain outstanding
• Additional negative impacts on production caused by: • Section 54 stoppages and maintenance problems in Q1 ‘12 – 36 shifts lost • Dispute between union and contractor in Q2 ‘12 – two and a half weeks lost to resulting strike
• Contractor and industrial relations issues are temporary and are being resolved
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(AQP 100%)
1 Capex figures are total capex, i.e. both stay-in-business and expansion capex included
45,561 41,787
H1 '11 H1 '12 Production (4E oz)
457 353
H1 '11 H1 '12
Revenue (Rm)
7,879 10,311
H1 '11 H1 '12
Cash Costs (R/oz)
11.6 -8.3
H1 '11 H1 '12
Mine EBITDA ($m)
21% -22%
H1 '11 H1 '12
Cash Margin (%)
2,975 1,501
H1 '11 H1 '12
Capex (R/oz)1
(8%)
(23%)
31%
(172%)
(202%)
(50%)
February 2012 Interim Results for the six months ended 31 December 2011
Mimosa
• Mimosa continues to produce at or above capacity, and cost control initiatives have contained cost increases • Political and regulatory issues intensifying
• Royalties on gold and PGMs doubled – now highest globally • Ground rents increased by 50,000% from January 2012 - now material cost • Community Trust formed, to form indivisible part of full indigenisation solution • Negotiations with Zimbabwe government relating to Indigenisation Plan continues
• Electricity supply interruptions increasing significantly
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(AQP 50%)
1 Mine EBITDA is attributable, i.e. 50% of total. All other numbers are on a 100% basis 2 Capex figures are total capex, i.e. both stay-in-business and expansion capex included
101,156 104,254
H1 '11 H1 '12 Production (4E oz)
145 146
H1 '11 H1 '12
Revenue (Rm)
623 726
H1 '11 H1 '12
Cash Costs (R/oz)
40.6 34.3
H1 '11 H1 '12
Mine EBITDA ($m)1
56% 52%
H1 '11 H1 '12
Cash Margin (%)
295 315
H1 '11 H1 '12
Capex (R/oz)2
3%
1%
18%
(16%)
(7%)
7%
February 2012 Interim Results for the six months ended 31 December 2011
Tailings Operations
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CTRP (AQP 50%)
• Production of 1,769 PGM ounces; 885 PGM ounces attributable to Aquarius
• Plant EBITDA of ($0.8m) loss
• Cash margin for the period of (168%), down from 20% in H1 ‘11
• Unit costs were up 128% at R13,087 per PGM ounce
• Plant modifications and upgrades were completed in the second quarter of FY ‘12 and throughput and recoveries showed a steady increase in the final months of the period under review
• It is expected that the operation will again operate profitably from the third quarter of FY2012 onwards
Platinum Mile (AQP 100%1)
• Production of 6,415 PGM ounces, 5,402 attributable to Aquarius1
• Plant EBITDA of ($0.2m) loss
• Cash margin for the period of 16%, down from 31% in H1 ‘11
• Unit costs were up 23% at R7,019 per PGM ounce
• Volumes, grades and recoveries remained fairly constant year-on-year
• Lower basket prices impacted negatively on cash margins but the operation is running profitably
• Feasibility study to evaluate the viability of pumping Kroondal tailings to be treated at the operation has commenced
February 2012 Interim Results for the six months ended 31 December 2011
1 AQP now indirectly owns 91.7% of Platinum Mile, and as a result it was consolidated in the AQP accounts from September 2011
Contribution
• Mine EBITDA = Revenue - Interest Income - Cash Costs + FX Gain (Loss) on Sales
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By operation
February 2012 Interim Results for the six months ended 31 December 2011
Kroondal 41%
Marikana 13%
Everest 19%
Mimosa 24%
Tailings 3%
H1 ‘12 attributable production: 215,453 PGM ounces
0
5
10
15
20
25
30
35
40
45
Mimosa Kroondal Everest Marikana Tailings Total
H1 ‘12 Mine EBITDA: US$29.0m
P&L analysis and breakdown
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($m) 31-Dec-11 31-Dec-10 Change Revenue 252.4 336.2 (83.8) Cost of sales (273.0) (241.3) (31.7) Administrative costs (7.4) (8.1) 0.7 Financing costs (17.6) (15.4) (2.2) Foreign exchange (loss)/gain (91.3) 66.2 (157.5) Settlement of contractor dispute - (7.8) 7.8 Other 1.1 0.3 0.8 Income tax benefit/(expense) 22.2 (35.8) 58.0 Net (loss)/profit after tax (113.5) 94.3 (207.8) Headline (Loss)/Earnings (113.8) 94.2 (208.0) Mine EBITDA 29.0 93.1 (64.1)
February 2012 Interim Results for the six months ended 31 December 2011
P&L analysis and breakdown
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Revenue
($m) 31-Dec-11 31-Dec-10 Change
Revenue from concentrate sales 273.5 311.8 (38.3)
PGM sales adjustments (24.7) 16.5 (41.2)
Interest income 3.6 7.8 (4.2)
Revenue 252.4 336.2 (83.8)
February 2012 Interim Results for the six months ended 31 December 2011
P&L analysis and breakdown
21
Cost of Sales
* MPRDA royalties (SA) included in taxation
($m) 31-Dec-11 31-Dec-10 Change
Amortisation & depreciation 31.5 22.1 (9.4)
Fair Value Uplift 4.9 5.7 0.8
Cost of production 233.3 210.9 (22.4)
Royalties: Zimbabwe (attributable 50%) 3.2 2.6 (0.6)
Royalties: SA Commercial * 0.1 - (0.1)
Total cost of sales 273.0 241.3 (31.7)
February 2012 Interim Results for the six months ended 31 December 2011
P&L analysis and breakdown
22
Financing Costs
($m) 31-Dec-11 31-Dec-10 Change
Interest paid on borrowings (coupon on convert, etc) 9.5 7.1 2.4
Accretion of interest on convertible bond 5.0 4.8 0.2
Accretion of mine-site rehab liability (unwinding of AQPSA’s provision) 2.6 3.1 (0.5)
Pipeline finance 0.5 0.4 (0.1)
Financing costs 17.6 15.4 2.2
February 2012 Interim Results for the six months ended 31 December 2011
-140
-120
-100
-80
-60
-40
-20
0
FX loss on AQP Group loans
FX loss on cash assets
FX loss on pipeline FX loss - other FX gain on sales Total FX loss
P&L analysis and breakdown
23
Foreign Exchange ($m)
Non cash Cash
February 2012 Interim Results for the six months ended 31 December 2011
P&L analysis and breakdown
24
Income Tax Expense
($m) 31-Dec-11 31-Dec-10 Change
South African Corporate tax (credit) – income tax 1.0 (0.8) 1.8
South African Corporate tax (credit) – MPRDA royalty (0.6) 2.4 (3.0)
Zimbabwe Corporate tax 7.0 8.8 (1.8)
Movement in Zimbabwe deferred tax 3.1 3.0 0.1
Movement in South African deferred tax (incl. Ridge) (32.7) 22.4 (55.1)
Income tax expense/(credit) (22.2) 35.8 (58.0)
February 2012 Interim Results for the six months ended 31 December 2011
Balance sheet analysis and breakdown
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($m) 31-Dec-11 31-Dec-10 Change Total non-current assets 886.8 1,009.5 (122.7) Total current assets 370.4 546.4 (176.0) Total assets 1,257.3 1,555.9 (298.6) Total non-current liabilities 442.6 500.6 (58.0) Total current liabilities 105.6 110.0 (4.4) Total liabilities 548.2 610.2 (62.0) Net assets 709.0 945.7 (236.7) Shareholders equity 709.0 945.7 (236.7)
Cash & cash equivalents – decrease in cash balance resulting from investing activities and dividends paid
Non-current liabilities – decrease due to $52m decrease in deferred tax liability, $19m decrease in mine closure rehab provision, offset by $13m increase in finance leases
Non-current assets – decrease due to impairment of Ridge assets, foreign exchange movements and amortisation charged
February 2012 Interim Results for the six months ended 31 December 2011
Cash flow statement analysis and breakdown
26
($m) 31-Dec-11 31-Dec-10 Change
Net operating cash flow 24.9 53.6 (28.7)
Net investing cash flow (69.2) (59.4) (9.8)
Net financing cash flow (34.3) (32.3) (2.0)
Net financing cash flow includes:
• Interest paid of $9m
• Dividends paid of $19m
Net operating cash flow includes:
• Net inflow from operations of $27m
• Income tax paid of $7m
Net investing cash flow includes:
• Payments for mine development and property, plant and equipment of $42m
• Acquisition of Platinum Mile Resources of $12m
• Deposit for Booysendal mineral acquisition of $15m
February 2012 Interim Results for the six months ended 31 December 2011
Outlook
• Supply • supply is constrained as cost, capital and regulatory pressures are mounting • overproduction relative to fundamental demand since GFC remains • but limited supply-side response possible to any increase in demand
• Demand • light vehicle manufacturing still recovering in US and Japan, slowing in Europe • shifting to Asian focus • heavy duty vehicle market is growing
• Tighter regulation • more vehicles, new countries
• Aquarius • overcome challenges relating to new safety support methodologies • fixing problems with contractors • focus on efficiency and cash conservation until environment improves • No interim dividend declared
27
Fundamentals are good – but all bets are off until
macroeconomic certainty returns
February 2012 Interim Results for the six months ended 31 December 2011
For more information please contact:
• Gavin Mackay
• Tel: +44 (0) 7909 547 042 • Email: [email protected]
February 2012 Interim Results for the six months ended 31 December 2011