2018 INTERIM RESULTS PRESENTATION 14 MAY 2018 MANAGING CONTROLLABLES MANAGING CASH

Transcription

1 2018 INTERIM RESULTS PRESENTATION 14 MAY 2018 MANAGING CONTROLLABLES MANAGING CASH

2 Executive Committee (Exco) Ben Magara Chief Executive Officer BSc Eng (Hons), ADP (LBS) Ben joined the Company and Board as Chief Executive in July Barrie van der Merwe Chief Financial Officer CA (SA) Barrie joined Lonmin and the Board as Chief Financial Officer in May 2016 Tanya Chikanza EVP: Corporate Strategy, Investor Relations and Corporate Communications CA Tanya joined Lonmin in April 2010 Khaya Ngcwembe EVP: Human Resources BA (UNISA), MBA (UCT), Khaya joined Lonmin in May 2017 Mike da Costa EVP Technical Services BSc Engineering, MBA Mike joined Lonmin in September Thandeka Ncube EVP : Stakeholder Relations and Regulatory Affairs B.Soc.Sc, MBA (Henley Business School) Thandeka joined Lonmin in August

3 Agenda 1 Overview and Key Features 2 Operational Performance 3 Marketing Update 4 Financial Performance 5 Guidance 6 Update on the Sibanye-Stillwater Transaction Con 7 Conclusion 3

4 Overview: Managing our Controllables, Managing Cash Solid operational performance Lonmin is 10 months fatality free, LTIFR improved 8.6%, S54s minimal Platinum MIC production up 5.8%, despite disruption from restructuring and Transaction anxiety Bulk Tailings Retreatment Project (BTT) commissioning on time, to scope and cost Unplanned smelter outage reduced Platinum sales by 6.3%, ~ 47,000 PGM ounces locked up All five furnaces now running, lock-up expected to unwind in H2 We continue to take decisive action with our "stand alone" business Removing high cost ounces and putting those shafts on care and maintenance 1,993 employees impacted with a net movement of ,700 jobs (part of 12,600 jobs over three years) Net cash positive, but capital constraints limiting ability to invest in the future Unit cost at R12,983 per PGM ounce 7.7% higher, driven by cost escalations and lock up of metals Rand basket price of R12,920 almost covering operating cost Resulting net cash of $17m, normalised to $64m including $47m lock-up USD m $47m cash lock up -7 Q1 FY16 Q2 FY16 Q3 FY16 Q4 FY16 Q1 FY17 Q2 FY17 Q3 FY17 Q4 FY17 Q1 FY18 Q2 FY18 Net Cash Sibanye-Stillwater Transaction on schedule Improved production notwithstanding disruptive nature of Transaction 4

5 5 OPERATIONAL PERFORMANCE BEN MAGARA CHIEF EXECUTIVE OFFICER

6 Safety Comparison of Platinum Industry - Fatality Rate 12 Month Rolling Mar-18 Feb-18 Jan-18 Dec-17 Nov-17 Oct-17 Sep-17 Aug-17 Jul-17 Jun-17 May-17 Apr-17 Mar-17 Feb-17 Jan-17 Dec-16 Nov-16 Oct-16 Sep-16 Aug-16 Jul-16 Jun-16 May-16 Apr-16 Mar-16 Feb-16 Jan-16 Dec-15 Nov-15 Oct-15 Sep-15 Aug-15 Jul-15 Jun-15 May-15 Apr-15 Mar-15 Feb-15 Jan-15 Lonmin Peer 1 Peer 2 Peer 3 Our belief is that Zero Harm is achievable Lonmin has been fatality free for the last 10 months since July 2017 All Generation 2 Shafts are currently on millionaire status (fatality free shifts), notably Saffy Shaft that is on 6.0 million fatality free shifts LTIFR improved by 8.6% to 4.13 Total Injury Frequency Rate (TIFR) improved 13% to Significant reduction in the number and impact of Section 54 stoppages In the midst of disruption caused by restructuring and Transaction anxiety Benefits of our safe, productive engagement, collaboration and relationship we have built with our stakeholders, including: the DMR, the Inspectorate, Employees and Unions 6

7 Operational Performance - Mining Tonnes Tonnes Mined Mined - Core - Generation 2 2 Shafts (excl 4B) Tonnes mined from Generation 2 shafts up 6.4% Generation 1 shafts tonnes down 19.4% as planned Continue to reduce high cost production in a low price environment IAOR at 17.8 months above industry benchmark Rowland IAOR of 10.9 months a concern Ongoing engagement with potential financiers for partial funding Immediately Available Ore Reserves (months) Tonnes Mined - Generation 1 Shafts K3 Rowland Saffy E HY Industry Benchmark 7

8 Strong Operational Performance in Processing Continues Successful Commissioning of BTT Within Budget Concentrator PGM recoveries up from 86.8% to 87.5% Underground milled head grade was marginally higher at 4.57 grammes per tonne from 4.56 grammes per tonne No release of Platinum ounces from the smelter clean-up project (expect circa 13,000 PGM ounces in H2 2018) Furnace Number One recommissioned Furnace Number Two was on planned shut down and is now operating The BTT project successfully hot commissioned on 14 February Expected to ramp-up and reach full throughput in H Once at steady-state, the project is expected to deliver amongst the lowest cost ounces in the Lonmin portfolio Expected to produce some 55,000 ounces of PGM and 360,000 tonnes of chrome, for a very attractive marketrelated chrome contract 8

9 Capital Constraints are Driving Job Losses Lonmin s Stand Alone" Business Without Consolidation Shaft Lifecycle of Marikana Mines Potential retrenchment of approximately 12,600 employees over the next three years primarily as a result of Generation 1 Shafts reaching the end of their economic reserves The employees from depleting and closing shafts cannot be redeployed to K4 due to lack of capital to restart K4 E2, Newman and IB shafts placed on care and maintenance Impacts 1,993, with net headcount reduction of 1,504 - on schedule for the 3,700 for this year Consolidation has the potential to save 20,000 jobs As at 30 September 2017 Actual Cumulative Total employees and contractors 32,512 28,812 23,512 19,912 Planned head count reduction ,600-12,600 Progress to date Impacts 1,993 - net reduction of 1,504 9

10 MARKETING UPDATE

11 Marketing Update Relative Contribution to Basket of Each Metal between 2017 and 2018 Ruthenium Iridium 3% 2% Rhodium 14% Gold 2% Palladium 27% 2018 Ruthenium Iridium 2% 1% Rhodium 9% Gold 2% Palladium 21% 2017 Platinum 53% Platinum 65% Platinum s contribution to Lonmin s PGM basket revenues reduced from 65% to 53%, while Palladium improved by 6 points to 27% and Rhodium increased from 9% to 14% of the total revenue basket Metal Prices PGMs Platinum price recovery lags palladium and rhodium prices Palladium trading at a premium to platinum since September 2017 Reverse substitution may technically benefit platinum prices Rhodium recovery benefits Lonmin Basket Price - it contributes 8% to production but at current prices it contributes 14% to the basket price Chrome The legacy chrome contract is not aligned to the current market pricing, is extremely prejudicial to Lonmin and is not sustainable This contract constitutes 80% of our chrome production Lonmin working with its partner to find an equitable solution 11

12 FINANCIAL PERFORMANCE BARRIE VAN DER MERWE CHIEF FINANCIAL OFFICER

13 Key Focus Areas A 1 Cash position and liquidity 2 Costs and capital expenditure 3 Overall financial performance A 4 Conclusion 13

14 Cash Position FY18 Q1 = Net Outflow = (c$40m) FY17 Q1 = Net Outflow = (c$124m) FY18 Q2 = Net Outflow (excl. $47m inventory lockup) = (c$46m) FY17 Q2 = Net Intflow = (c$26m) USDm Sales: 147koz Pt 292 koz PGM Basket Price = $968/oz 296 (336) Sales: 141koz Pt 262 koz PGM Basket Price = $1,058/oz 283 (329) incl $47m $47m Inventory lockup 0 Opening Net Cash Cash inflows from Sales Cash outflows Net Cash Q1 Cash inflows from Sales Cash outflows Net Cash Q2 31 March

15 Liquidity Liquidity ($m) Net cash as at 31 March 2018 was $17m consisting of $167m gross cash and drawn term loan of $150m Normalised cash after accounting for the inventory lock-up of $47m would have been $64m in-line with December Includes $27m payment for restructuring costs Mar'17 Jun'17 Sep'17 Dec'17 Mar'18 47 Covenant waiver reported on at the 2017 year-end remain in place until 28 February 2019 conditions apply Lonmin continues efforts to find alternative funding to bridge any liquidity requirement Gross Cash Undrawn Facilities Inventory Lockup 15

16 Cost 6 months to 31 Mar Units % Change Like-for-like Gross costs Rm (7.7)% Concentrate purchases - not in prior year Rm 173 BTT plant - new operation Rm 75 Restructuring costs Rm 230 Chrome costs Rm 91 Gross costs (16.1)% Exchange rate on gross costs 2 R/$ (6.0)% Gross costs - PGM Operations 1 $m (23.5)% Exchange translation impact $m 37 - n/a Unit cost of production 3 R/oz (7.7)% 1 Excludes inventory movement, group charges and FX 2 Average FX for the period 3 Cost of production of PGM operations per PGM ounce excluding ore cncentrate and other purchases, Limpopo mining, special costs, shared based payments, inventory movements, FX and group charges 16

17 Capital Expenditure (Rm) Full Year Guidance Reduced 1, ZARm FY17 H1 Mining Concentrating BTT S&R Other FY18 (H1) H2 Spend to Achieve Guidance FY18 Original Guidance Planned reduction Revised guidance Revised Capital Guidance of between R1.2 billion and R1.3 billion 17

18 Summary of Financial Results - Lonmin Consolidated 6 months to 31 March Variance Units Abs % Platinum sales koz (19) (6.3)% $ Basket Price $/oz 1, % R Basket Price R/oz 12,920 10,852 2, % Revenue $m % EBITDA $m (26) 0 (26) - Depreciation and amortisation $m (6) (35) % Impairment $m 0 (146) % Operating Loss $m (32) (181) % Basic LPS Cents (23.3) (64.4) % 18

19 Financial Conclusion Key Focus Areas Cash and Liquidity Cost Management Lenders Transaction Closure 19

20 GUIDANCE

21 FY 2018 Guidance 1 2 Sales guidance of 650,000 to 680,000 Platinum ounces maintained - reversal of metal lock-up and release of smelter clean-up Unit cost guidance maintained at R12,000 to R12,500 per PGM ounce - expected to be at the upper end of the range 3 Capital expenditure guidance range revised to R1,2 billion to R1,3 billion - from our original guidance of between R1,4 billion and R1,5 billion 21

22 UPDATE ON LONMIN SIBANYE-STILLWATER TRANSACTION

23 Sibanye-Stillwater Transaction Progressing Long lead time to close examples of steps between announcement and closure: Competition Commission approval Filing submitted to Competition Commission of South Africa on 13 March 2018 Follow up meetings held with the Commission and further information may be provided Pre-filing with the Competition and Markets Authority in the UK took place in April 2018 Extensive Joint Stakeholder Engagement, including Employees, Unions, Communities, BEE Partners, Ministries of Mineral Resources, Economic Planning and Development, Finance, Trade and Industry Benefits of this deal for investors and SA Inc Benefits of approving deal earlier is that synergies can be realised earlier, with potential to mitigate some of the 12,600 job losses in Lonmin s "stand alone" business The longer the transaction approval takes, the longer the Company will strive to maintain its operational performance notwithstanding the headwinds of employee anxiety and the continuing challenging operating environment 23

24 Benefits of Consolidation: Sibanye-Stillwater and Lonmin Pre-tax synergies as quantified by Sibanye-Stillwater of circa R1,5bn per annum by 2021 *slide 33 in appendix The consolidation of Sibanye-Stillwater and Lonmin will increase utilisation of Lonmin s under-utilised processing capacity. The consolidation of Rustenburg Platinum Mines, Aquarius South Africa and Marikana is the most rational geographic and strategic fit due to the geographical proximity of mines and it will facilitate the rationalisation of the K3/Siphumelele mines boundary. The combination will unlock quantified and unquantified operational synergies and will enable Sibanye-Stillwater to become a fully integrated PGM producer in South Africa. Synergies boosting operational viability 24

25 CONCLUSION

26 Conclusion: Manage Cash and Close Transaction Maintain focus on safe and profitable production Continued mining delivery Release of metal lock-up BTT ramp-up Smelter clean-up Control costs and continue with restructuring to preserve the business Closing of Sibanye-Stillwater transaction Whilst the tough operating environment continues, Lonmin maintains its focus on safe production while continuing with decisive action to preserve the business, restructuring and containing costs. Notwithstanding the challenges, we remain net cash positive at the end of the period (since 2015 Rights Issue), but capital constraints are limiting our ability to invest in the future, with our Rand Basket Price barely covering our operating costs. Consolidation of the Platinum industry provides for sustainability. Urgency is required to close this transaction and provide organisational certainty, so we can start benefitting from the synergies, generate savings and protect 20,000 jobs and deal successfully with the tougher operating environment in a stronger and more diversified Group. 26

27 QUESTIONS

28 APPENDICES

29 Shaft Head Cost per Tonne 3,000 2,500 2,000 R/tonne 1,500 1, K3 Row Saf E3 Comb Gen 2 4B Hos W1 E1 E2 Gen 1 H ,000 1, ,181 1,014 1,008 1, ,641 1,137 1,047 H , , Underground 29

30 Consolidated Income Statement for the Year Ended 31 March 6 months to 31 March 2018 Total 6 months to 31 March 2017 Total $m $m Revenue (LBITDA) / EBITDA (26) - Depreciation and amortisation (6) (35) Impairment - (146) Operating loss (32) (181) Foreign exchange arising on stepped acquisition of Pandora (24) - Finance income Finance expenses (47) (34) Share of loss of equity accounted investment - (3) Loss before taxation (51) (199) Income tax (charge) / credit (16) (15) Loss for the period (67) (214) Attributable to: - Equity shareholders of Lonmin Plc (66) (182) - Non-controlling interests (1) (32) Basic and diluted loss per share (23.3)c (64.4)c 30

31 Consolidated Statement of Financial Position at 31 March Non-current assets As at As at 31 March March 2018 $m $m Intangible assets Property, plant and equipment 265 1,033 Equity accounted investment - 21 Royalty prepayment Other financial assets Deferred tax assets - - Current assets 362 1,184 Inventories Trade and other receivables Other financial assets - 61 Cash and cash equivalents Current liabilities Trade and other payables (186) (153) Interest bearing loans and borrowings (150) - Deferred revenue (13) - Tax payable (15) - (364) (153) Net current assets Non-current liabilities Interest bearing loans and borrowings - (154) Deferred tax liabilities (1) (45) Deferred royalty payment - (1) Deferred revenue (34) (33) Contingent consideration (21) - Provisions (159) (134) (215) (367) Net assets 326 1,289 Capital and reserves Share capital Share premium 1,816 1,816 Other reserves Accumulated loss (1,843) (1,002) Attributable to equity shareholders of Lonmin Plc 647 1,488 Attributable to non-controlling interests (321) (199) Total equity 326 1,289 31

32 Consolidated Statement of Cash Flow 6 months to 6 months to 31 March 31 March $m $m Loss for the period (67) (214) Taxation Share of loss of equity accounted investment - 3 Finance income (52) (19) Finance expenses Impairment of available for sale financial assets - - Profit on disposal of joint venture 24 - Non-cash movement on deferred revenue - (2) Depreciation and amortisation 6 35 Impairment Change in inventories (87) (31) Change in trade and other receivables 29 8 Change in trade and other payables 8 (40) Change in provisions 19 2 Deferred revenue received 7 26 Share-based payments 1 - (Profit) / Loss on disposal of property, plant and equipment - - Prepaid royalties - - Other movements 1 (1) Cash (outflow) / inflow from operations (48) (38) Interest received 2 3 Interest and bank fees paid (8) (9) Tax paid (8) (4) Cash (outflow) / inflow from operating activities (62) (48) Cash flow from investing activities Contribution to joint venture (4) (1) Proceeds on disposal of joint venture - - Additions to other financial assets (3) (8) Purchase of property, plant and equipment (32) (44) Purchase of intangible assets (1) (1) Cash used in investing activities (40) (54) Cash flow from financing activities Proceeds from non-current borrowings - 4 Cash inflow from financing activities - 4 Decrease in cash and cash equivalents (102) (98) Opening cash and cash equivalents Effect of foreign exchange rate changes 16 4 Closing cash and cash equivalents

33 Synergies from Sibanye 33

34 Marikana Mines Overview 34

35 Disclaimer This presentation, which is personal to the recipient, 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 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 forwardlooking 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. Information supplied by host presenters may not be used, referenced or published without the prior written consent of the author of the presentations. 35