Lonmin Plc Morgan Stanley Basic Metals Conference 2005 • Q2 2010 – Complete feasibility study...
Transcript of Lonmin Plc Morgan Stanley Basic Metals Conference 2005 • Q2 2010 – Complete feasibility study...
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Lonmin Plc INTERIM RESULTS 2008
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Interim Results - 2008
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Today’s Presentation
• Overview
• Financial results
• Operational Excellence
• Safety
• Recent Performance
• Mining Review
• Growth
• Sustainability
• Summary
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Interim Results - 2008
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Overview
• Record financial results in a strong price environment:
• Revenue up 44% to US$907 million
• Underlying EBIT up 63% to US$371 million
• Underlying earnings per share up 63% to 132.5 cents
• Safety performance continues to improve
• Refined production of 282,650 ounces of Platinum and 536,128 ounces of total PGMs
• Production impacted by four day Eskom power outage, safety shutdowns and absenteeism
• New mining team embedded and implementing plans to optimise mining performance
• Steady progress on development projects:
• Completion of pre-feasibility studies for Limpopo phase 2 and Pandora
• Significantly increased attributable indicated resource for southern section of Akanani to 8.8 million PGM ounces (3 PGE+Au)
• Interim dividend increased by 7% to US$0.59 per share
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Interim Results - 2008
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Power
• Four day shutdown at end of January – loss of 15,000 saleable ounces of Platinum
• Operated at 90% of normal consumption for February and March
• Eskom confirmed increased limit to 95% on 24 April, which improves operational flexibility
• Implemented active energy consumption management across the operations with concentrator maintenance planned to align with peaks in power use
• Rolled out energy saving campaigns business wide
• Steep electricity price increases are likely for industry
• Investigating other longer term options for provision of power
• Eskom to review provision of power for industry growth projects in June
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Interim Results - 2008
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Markets
• Future PGM market fundamentals look sound
• Security of power and water supply will be fundamental for industry growth
• Global Emissions Legislation agenda and robust Far Eastern economic growth will drive demand
• Possible demand issues:
• Rhodium – Palladium substitution
• Thrifting and inter-PGM metal substitution
• Potential shrinkage of Platinum jewellery sector
800
900
1000
1100
1200
1300
1400
1500
1600
1700
1800
Q107 Q207 Q307 Q407 Q108 Q208
$ pe
r oz
Lonmin PGM Basket Price
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Financial Results
Alan FergusonChief Financial Officer
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Interim Results - 2008
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Summary of Results
6 months to31 March 2008
US$m
6 months to31 March 2007
US$m
Variance(%)
Revenue 907 631
229
228
36.1
132
235
36%
(2.0)
81.5
44
EBIT 368 61
Underlying EBIT 371 63
Underlying EBIT margin (%) 40.9 13
Profit before tax 396 200
Underlying profit before tax 399 70
Underlying tax rate 35% -
Basic EPS (cents) 181.1 -
Underlying EPS (cents) 132.5 63
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Interim Results - 2008
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EBIT Variances
(1)
(22)
(134) (3)
229
239
45 15
368
228
371
100
150
200
250
300
350
400
450
500
550
H107Reported
Special H107Underlying
PGM Price Base Metals PGMVolume
PGM Mix Costs H108Underlying
Special H108Reported
$mill
ion
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Interim Results - 2008
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Year on Year Cost Variance Analysis
536 16 3 87
6 10 12 402
100
150
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250
300
350
400
450
500
550
600
H107 underlyingcosts
SHEC Exploration andBusiness
Development
Shared Services ProductiveCosts
Depreciation andAmortisation
ForeignExchange
H108 underlyingcosts
$m
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Interim Results - 2008
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Cost per PGM Ounce Sold
2008 2007 Variance(Rand / oz) (Rand / oz) (%)
Group:
Mining - Marikana 3,247 2,134 52%Mining - Limpopo 6,125 4,405 39%Mining (weighted average) 3,366 2,270 48%Concentrating - Marikana 638 408 56%Concentrating - Limpopo 2,193 1,171 87%Concentrating (weighted average) 684 454 51%
Process Division 604 722 (16)%Shared Business Services 838 685 22%Stock movement (489) (83)
C1 cost per PGM ounce sold before base metal credits 5,003 4,048 24%
Base metal credits (493) (867)
C1 cost per PGM ounce sold after base metal credits 4,510 3,181 42%Amortisation 496 367 35%
C2 cost per PGM ounce sold 5,006 3,548 41%
6 months to 31 March
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Interim Results - 2008
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Free Cash Generated
6 months to31 March 2008
US$m
6 months to31 March 2007
US$m
Operating Profit 368 229
Working Capital Depreciation and other items
(100)47
4449
Net cash inflow from operating activitiesNet interest, finance costs and tax paid
315(156)
322(160)
Trading cash flowCapital expenditureProceeds from disposal of assets held for saleMinority dividends paid
159(139)
1(51)
162(105)
3(21)
Free cash flow (30) 39
Closing net debt (506) (665)
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Operational Excellence
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Interim Results - 2008
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Continuing Safety Improvement
Industrial Fatalities
FY04 8
FY05 6
FY06 6
FY07 3
HY08 1
0
5
10
15
20
25
HY04 HY05 HY06 HY07 HY080
50
100
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200
250
300
350
400
450
LTIF on HY cumulative basis (per million man-hours worked) Severity Rate on HY basis (number of days lost per million man hours worked)
Lost
Tim
e In
jurie
s pe
r milli
on m
an h
ours
wor
ked
Severity Rate
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Interim Results - 2008
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Marikana – Underground Production
N.B. Excludes production from Pandora Joint Venture ground
0
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1500
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3000
3500
Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208
UG
Ton
nes
Hoi
sted
(000
's)
22.533.544.555.56
UG
Mill
ed H
ead
Gra
de (5
PGE+
Au)
g/t
Underground Tonnes Mined Underground Milled Head Grade
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Interim Results - 2008
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Mechanised Performance
0
50
100
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250
300
350
Q107 Q207 Q307 Q407 Q108 Q208
Tonn
es m
ined
(000
's)
0
2
4
6
8
10
12
14
% o
f und
ergr
ound
pro
duct
ion
Tonnes Mined % of Marikana underground prod
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Interim Results - 2008
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Marikana Concentrators
0
50
100
150
200
250
300
Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208
Sale
able
Met
al in
Con
cent
rate
(Pt o
z - 0
00's
)
60
65
70
75
80
85
Rec
over
y R
ate
(%)
Saleable Metal in Concentrate (Pt oz) Underground Recovery Rate (%)
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Interim Results - 2008
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Smelter & Refineries
Refined Metal Production• Smelter
• Number One furnace inspection and repair successfully completed
• Further upgrade planned for Q109
• Refineries
• Continuing upgrade of BMR to reach consistent throughput of 37 tonnes per day
• PMR continues to perform well
• 70,000 Pt oz stock build-up in H1 – anticipate release in H2
0
100
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400
500
600
Q106 Q206 Q306 Q406 Q107 Q207 Q307 Q407 Q108 Q208
Prod
uctio
n (o
z - 0
00's
)
Pt Pd Au Rh Ruth Iri
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Mining Review
Chris SheppardExecutive Vice President, Mining
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Interim Results - 2008
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The Right Senior Team In Place
• Frank Russo-Bello – Vice President, Conventional - joined from AngloGold Ashanti
• Dave Wright – Vice President, Mechanised - formerly Mine Manager at Rio Tinto’s Palabora mine
• Recruiting new Vice President, Mining Services
• Mark Munroe – Senior Manager, Mining - joined from DRDGold
• Christo Horn, Senior Manager, Mechanised Operations - formerly with Amplats
• Complementing existing team
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Interim Results - 2008
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SWOT Analysis
Strengths
• Relatively shallow versus peers
• Up and down dip mining method
• Experienced conventional workforce
• Leading safety performance
• New committed and experienced senior leadership team
Weaknesses
• Life of mine plan has scope for optimisation
• Planning, production control and forecasting systems
• Ore reserve development in certain areas
• Communication with workforce
• Management of labour attendance
Threats
• Interruption of utility supply
• Skills shortage and retention of critical skills
• Implementation of mechanisation
• Cost escalation
Opportunities
• Develop site specific mining extraction strategy
• Optimise ore body from half level perspective
• Increased productivity and cost reduction
• Mechanisation
• Enhance union relationship
Fundamentally high quality ore body – lots of opportunity for improvement
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Interim Results - 2008
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Optimised Mining Extraction Strategy
• Developing sustainable, site specific, mining extraction strategy
• Optimising NPV and cash flow
• Provide foundation for complementary concentrator and processing strategy
• Fully optimised plan to be completed by end of Q209
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Interim Results - 2008
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Increase Productivity and Reduce Costs
• Optimisation of half levels
• Conventional “recipe” completed and half levels mapped
• Optimisation fully completed over next 24 months
• Re-focussing on development
• K3 will deploy HPE drill rigs in May
• MME drill rigs in place at Rowland
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Interim Results - 2008
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• Project Bokamoso at K3 implemented to determine best practice completes end FY08
• Best practice rolled out mine wide end FY09
• New short term planning protocol being rolled out across the operations
Upgrade Management Operating System
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Interim Results - 2008
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• Introduction of critical skills crews to provide flexibility
• Communication campaign
• Enforcement of disciplinary action
• Already seeing favourable trends in attendance and production
Address Non-Attendance
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Interim Results - 2008
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Mechanisation
• Focus on improvement opportunities in H2
• Better planning and forecasting of ramp up schedule per suite
• Optimisation of mechanised half levels
• Match of operator availability to arrival of suites
• Enhanced training to develop new operators in house
• Equipment availability and maintenance
• Continuous operations
• Creation of Mechanisation Centre of Excellence to develop best practice and ensure implementation of lessons learned
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Interim Results - 2008
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Mining Review - Summary
• Substantial upside potential from Marikana and Limpopo ore bodies
• Aligned and committed senior team in place
• Clear process and plan in place to deliver productivity and cost improvements
• Mechanisation is the future for Lonmin
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Growth
Brad MillsChief Executive Officer
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Interim Results - 2008
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The Future of Lonmin in South Africa
Limpopo
Marikana
Akanani
N 0 100 km
Northern Operations
• Continued progress with Akanani and Limpopo
• Developing plans for smelting and refining complex to service Akanani and Limpopo
Marikana Operations
• Starting to transition from shallower to deep shafts
• Options for optimisation of smelting, refining & concentrating capacity
Pandora
Akanani Resources
Resources 22.0
All Resources & Reserves figures are on a Total Attributable basis in million PGM ounces (3PGE + Au)
44.5Reserves
102.3Resources
Marikana Resources & Reserves
44.5Reserves
102.3Resources
Marikana Resources & Reserves
0.04Reserves
7.9Resources
Pandora Resources & Reserves
0.04Reserves
7.9Resources
Pandora Resources & Reserves
6.7Reserves
24.1Resources
Limpopo Resources & Reserves
6.7Reserves
24.1Resources
Limpopo Resources & Reserves
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Interim Results - 2008
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Progress Update and Key Milestones
Marikana• K3 UG2 sub-decline project approved by Board• May 2008 – Complete shaft equipping at K4, to be followed by ore reserve development• Hossy and Saffy ramp-up continues• Q4 2008 – BMR expansion to 37 tonnes per day to be completed
Limpopo Expansion• April 2008 – Completed pre-feasibility study • May 2008 – MOA signing for provision of water to the project • Q2 2010 – Complete feasibility study looking at mine producing 360,000 tonnes per month• Timing of project dependant on feed required for optimised smelting and refining capacity
Akanani• May 2008 – MOA signing for provision of water to the project • Q4 2008 – Pre-feasibility study to be completed
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Sustainability
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Interim Results - 2008
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Sustainability Strategy
Lonmin and communities uniting to liberate the potential of current and future generations to experience quality of life
• Focusing on:
• alleviating poverty
• creating flexible housing
• improving the wellness of our employees
• building an education system
• empowering a flourishing local economy
• creating respect for the natural environment
• empowering communities to solve problems through self-governance
• supporting the development of art & culture
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Interim Results - 2008
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H1 Progress
• Education• Sanitation systems in 3 schools benefiting 1,500 learners
• Supporting nutrition programme in 15 schools
• Health• Over 8,000 employees tested for HIV through the VCT
programme
• 885 employees now receiving ART treatment
• 34 workplace and 56 community based HIV/Aids peer educators now trained
• Housing• Hostel conversions continue – 12% now converted
• Final planning permission to build 500 new homes in Marikana
• Community• Supplier development – 13 contracts awarded to date with
value of US$25 million
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Interim Results - 2008
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Summary
Creating a culture of operational excellence: • High quality ore bodies in existing operations – abundant opportunities for improvement
• Remain focussed on improving operational performance
• Continued implementation of mechanisation strategy
Capturing and building growth: • Continuing to shape the future of Lonmin in South Africa
• Optimising mining performance at Marikana
• Developing significant Northern Bushveld presence in longer term
• Determining size of processing capacity to match mine growth
• Future PGM market fundamentals look sound and will support significant additional growth
Building long term sustainability: • Progress made in education, health, housing and supplier development
FY2008 sales guidance of 775,000 Platinum ounces
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Questions
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Appendix
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Interim Results - 2008
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Unit Cost and EBIT Reconcilliation
Total revenue $m 907
Absorbed operating costs:
Normal operations ("C1") PGMs sold K oz 524Cost per ounce (gross) R/oz (5,003)Cost Rm (2,624)
Other operations PGMs sold K oz 33(Toll-refined and joint venture) Cost per ounce (gross) R/oz (9,892)
Cost Rm (325)
Total Total PGMs sold K oz 557Avg Cost per ounce (gross) R/oz (5,291)Total absorbed cost Rm (2,949)
FX R:$ 7.04Total absorbed cost $m (419)
Unabsorbed costs:Operating overheads $m (19)Corporate $m (36)Exploration $m (16)Total unabsorbed costs $m (71)
Operating amortisation $m (46)
EBIT (underlying) $m 371
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Interim Results - 2008
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Disclaimer
• This presentation, which is personal to the recipient and has been issued by Lonmin.
• This presentation includes forward-looking statements. All statements other than statements of historical fact included in this announcement, including without limitation those regarding Lonmin's plans, objectives and expected performance, are forward-looking statements. Lonmin has based these forward-looking statements on its current expectations and projections about future events, including numerous assumptions regarding its present and future business strategies, operations, and the environment in which it will operate in the future.
• Forward-looking statements generally can be identified by the use of forward-looking terminology such as 'ambition', 'may', 'will', 'could', 'would', 'expect', 'intend', 'estimate', 'anticipate', 'believe', 'plan', 'seek' or 'continue', or negative forms or variations of similar terminology. Such forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors related to Lonmin, including, among other factors: (1) material adverse changes in economic conditions generally or in relevant markets or industries in particular; (2) fluctuations in demand and pricing in the mineral resource industry and fluctuations in exchange rates; (3) future regulatory and legislative actions and conditions affecting Lonmin's operating areas; (4) obtaining and retaining skilled workers and key executives; and (5) acts of war and terrorism.
• By their nature, forward-looking statements involve risks, uncertainties and assumptions and many relate to factors which are beyond Lonmin's control, such as future market conditions and the behaviour of other market participants. Actual results may differ materially from those expressed in forward-looking statements. Given these risks, uncertainties, and assumptions, you are cautioned not to put undue reliance on any forward-looking statements. In addition, the inclusion of such forward-looking statements should under no circumstances be regarded as a representation by Lonmin that Lonmin will achieve any results set out in such statements or that the underlying assumptions used will in fact be the case.
• Other than as required by applicable law or the applicable rules of any exchange on which Lonmin's securities may be listed, Lonmin has no intention or obligation to update or revise any forward-looking statements included in this presentation after the publication of this presentation.
• This presentation is for information only and does not constitute or form part of any offer or invitation to sell, or any solicitation of any offer to purchase, any shares in Lonmin or any other securities, nor shall it or any part of it nor the fact of its distribution form the basis of, or be relied upon in connection with, any contract or investment decision related thereto.