4 Team FIS Consulting PowerPoint Presentation

COVER

AMANGO IN-DEPTH ANALYSIS REPORT

Presented by: Cindy Tandiani, Felicia Nasseri, Michael Mustopo, Vinson Budiman

Issues Prioritization

Corporate Reconstruction and

ReorganizationPillars of Value

Risk Profile: At the limit

Recommendations

Diamond

PGM

Copper

Iron Ore

Coal

Niobium & Phosphates

Nickel

Large EBIT Contributor, Significant PGM market

share & High Growth Rate

Significant EBIT Contributor & Socio

Political Pressure

Insignificant earnings contributor & High

uncertainty

25.72%

6.06%

16.57%

33.68%

14.44%

3.91%

-0.28%

Contribution to EBIT

KEEP

WA

ITDI

VEST

Corporate Reconstruction

Australia Operational Risk

Brazil Strategic Disposal

De‐leverage or Share Buy‐back JV in Canada Divisional

Performance

Implementation Timeline





Performance

2017 2018 2019 2020 2021

Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec

Keep

Diamond

PGMsCopper

WaitCoal

Iron Ore

Divest

Nickel

Niobium & Phosphates

Implementation Recommendation





Performance

Evaluate worth of segments to be divested ‐ Nickel 1

Find potential buyers while focusing on current segments2

Search for most beneficial synergy while strengtheningits coal, iron ore, diamond, PGM, copper

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

3

Operational Risk and Industrial Action in

AustraliaPillars of Value


Situational Analysis – Australia Operational Risk





Performance

Current shaft costs US$130 million, but failed in 1st week

Fatal incident due to safety standards were not held

Controlled shutdown of 1 copper mine in Australia

Alternative: Replace with new mine shaft

Pretax CF of US$30.34million each year for 9 years, reclamation of US$5million by February 2027(Costs US$130m in 2017 and US$5m of closure cost)

Operational by March 1, 2018 CEO:Resume at

current shaft

Evaluation of Strategic Options





Performance

Risks

License revoked, bad publicity, and

workforce strike

Operational Impact

Safety hazards as accidents may

continue to happen

Financial Impact

No further cost incurred

Continue to use current shaft1 2 Construct a new

mine shaft

Risks

Faulty design and continued presence of

safety hazards

Operational Impact

Increase safety and efficiency

Financial Impact

NPV = $48.73million(Initial cost of $135 million

in 2017)

Key: Operational Safety & Health Management





Performance

Traffic Management

Information System

Procedures, Training, & Auditing

Reduce Safety Hazards & Ensure Emergency Preparedness

1 2 3

Key: Production?





Performance

Option 1: Resume with current shaft with higher operational safety standards Should detect and address issue with the current shaft Generate revenue to maintain market share Ensure employment

Option 2: Stop production No revenue and lose market share Unemployment workforce strike Secure safety stance

Option 3: Partnership with local mining company Generate revenue to maintain market share Unemployment workforce strike

Recommendation & Implementation





Performance

Conduct extensive research1

Communicate with involved parties2 Public Relations – investors, communities, and regulators Human Resource Management – training and labor

relations

Address problem with current shaft: Resume production for the moment

3

Improve evaluation policies & engage in frequent maintenance routine

4

Strategic Disposal in Brazil

Pillars of Value

Risk Profile: Within the limit

Situational Analysis – Strategic Disposal in Brazil





Performance

CMOC offered US$ 1,500 million to buy AMANGO’s Niobium and Phosphates segment


Financial Impact

Generate operating income from the segment

ACCEPTFORGO

Risks

1. Segment might continue to under-perform

2. Net debt remains high

Financial Impact

1. Decrease in Net Debt of US$ 450.12 mio

2. Increase AMANGO’s credit ratingRisks

1. Miss out on rising Niobium and Phosphates demand

2. Scrutiny from shareholders

Recommendation





Performance

Offer from CMOC US$ 1,500 million

*Figures are expressed in millions

ACCEPTDespite being

offered than market value, we

recommend AMANGO to acceptbecause the offer is inline with their KPIs:

1. Decrease net debt2. Divest unfavorable

mining segments

Implementation





Performance

Conduct due diligence1

Accept offer from CMOC2

Communicate with all stakeholders3

Inform all stakeholders, especially AMANGO’s stakeholders regarding the benefits and drawbacks of the acquisition

Balance Sheet De-leverage or Share Buy-back

Pillars of Value


Situational Analysis





Performance

Shrinkage of Employees160,000 to 60,000

Unutilized Residentialvalued US$8.184billion

Undergo a Share Buy-back Scheme

Payback Debt and De-leverage

Balance Sheet

Available Options

Book value of US$6.4billion, generate CF of 14% from BV

Operational Cost reduction of US$736million


Risks

Credit rating worsen

Shareholder Impact

Increase stock price

Ratio Impact

Increase EPSIncrease DER

2 Payback Debt & De-leverage

Risks

Miss out the probability of increasing stock

price

Financial Impact

Increase Credit Rating( reduce credit spread 30

basis points)

Financial Impact

Decrease Net Debt(down to below US$10billion

inline with KPI)





Performance

Share Buy-backScheme

Share Buy-back Scheme1

Key: Socio-Political South African Government & BEEP

Comply with 26% Black Owned Policy

Renegotiate with South African Government

Design and Implement Community

Development Programs

Gain Public and Local Workforce Trust, Strengthen Relation with South African Government

1 2 3





Performance

Joint Venture with Cephas Canada

(Quinta)Pillars of Value


Situation – JV in Canada





Performance

The commencement of 1st coal mining project in Canada with Cephas

Requires 2 years of lengthy and costly construction

3 available construction design with different risks and benefits profile

Local community “ Idle no More ”

AMANGO’s inadequate environmental accounting

Assumptions : Supply = Demand (7.5 million tonnes), All sold in 2 years

Evaluation of Design Options





Performance

Coal Demand

Small Demand 5 Million

Tons

Medium demand

7.5 Million tons

Large Demand 10 Million tons

Expected Demand Fixed Cost Expected

Income

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

WACC NPV Assumptions

Design 1 32,009,676.37Construction of mine would take 2 years until 2019

Design 2 8.54% 58,422,285.97Depletion of the mine would take 2 years

Design 3 50,786,362.16(Production Capacity of 3 - 5 millions tons per year)

*Figures are expressed in USD millions

Impact of Decision





Performance

Expected Income

91,450,000 USDNPV

58,422,285 USD

Avoid conflict with local community and boost its reputation in the eyes of the public

SHALLOW MEDIUM DEEP

Environmental Change Risk for Workers

Implementation





Performance

Reevaluate legal agreements of JV 1

Conduct extensive research on location to minimize negative impact

2

Construct mine with Design 23

Ensure safety standards4

Design and execute CSR5

Other Recommendations





Performance

AMANGO should also design, develop and implement effective sustainability reporting Include targets to enhance efficiency Publish annually

Environmental costs to include :

FIS recommends life cycle costing system to produce a sustainable business

Prevention costs Environmental detection costs Environmental internal failure costs Environmental external failure costs

Managing Divisional PerformanceGroup-Wide

Pillars of Value


Situational Analysis – Divisional Performance





Performance

Divisions cutting expenditure on training and postponing

service on safety equipments

Production is ramped up to build closing stock towards

year-end

Some divisions use competitor’s refineries due

to excessive internal charges

Cost saving

- Declining safety & health standards

- Hazardous working environment

Declining employee morale

Cost efficiency

Machinery turns obsolete in time

Recommendations

ESOP(Employee Stock Option)

1

Change internal managerial accounting from absorption costing

to variable costing

2





Performance

Shutdown of refinery division and

outsource refinery needs

3

1. Shift employee focus to long-term company value

2. Higher dedication of workforce3. Tax benefits for company

More accurate financial statements to depict cost & provide

management with decision-making insights

1. Workforce reduction, thus reduce supervising cost and increase

efficiency2. Reduce fixed cost

3. Higher operational flexibility

Solvency Analysis

NET DEBT

US$ 16.92B

US$8.16B

DEBT EQUITY RATIO

1.08x 0.43x

CASH

US$ 6.9B

US$6.3B

CASH RATIO

1.18x 1.45x

Solvency 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

End of year2016

Operationalrisk in

Australia

Startegicdisposal in

Brazil

After Sale ofAssets

Afterdeleverage

Strategic JVin Canada

Repaymentof short term

liabilities

Solvency analysis

Cash and cash equivalents Debt to equity ratio Cash ratio

Conclusion





Performance

Restructure the Group1

Construct new mine shaft in Australia2

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

THANK YOU

Documents

4 Team FIS Consulting PowerPoint Presentation