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2016 Annual Results
Corporate Presentation
27 March 2017
This presentation has been prepared based on publicly available information and information provided by China Vanadium
Titano-Magnetite Mining Company Limited (the “Company”). The information contained in this presentation has not been
independently verified. No representation or warranty expressed or implied is made as to, and no reliance should be placed on,
the fairness, accuracy, completeness or correctness of the information or opinions contained herein.
The Company does not intend to provide, and you may not rely on this presentation as providing, a complete or comprehensive
analysis of the Company’s financial or trading position or prospects. The information contained herein is subject to change and
readers are cautioned not to place undue reliance on forward-looking information contained in this presentation. Such forward-
looking information reflects various assumptions of the management concerning the future performance of the Company, and
the assumptions may or may not prove to be correct. The Company is under no obligation to correct or update any such forward-
looking information.
The views contained in this presentation are based on financial, economic, market and other conditions prevailing to date. This
presentation is not intended to form the basis of any investment decision and does not constitute or form part of any advice or
any offer to sell or an invitation to subscribe for, hold or purchase any securities or any other investment, and neither this
presentation nor any of its contents shall form the basis of or be relied on in connection with any contract or commitment
whatsoever. This presentation is not, and should not be treated or relied upon as investment research or a research
recommendation under the applicable regulatory rules.
None of the Company nor any of its respective affiliates, advisors or representatives shall have any liability whatsoever (in
negligence or otherwise) for any loss howsoever arising from any use of this presentation or its contents or otherwise arising in
connection with the document. No person is authorised to give any information or to make any representation not contained in
this document and, if given or made, should not be relied upon.
1
Disclaimer
2
Business Presence and Outlook 14
Operations and Financial Overview 6
Market Review 3
Agenda
3
Market Review
0%
10%
20%
30%
40%
50%
60%
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
Steel Purchasing Managers’ Index
Source: http://www.cslpc.org/news/otherlist/1
• Overcapacity remained a serious concern
• Sluggish global economy and shift of China’s growth
model held back the recovery in steel demand
• Steel price surged due to industry consolidation and
various stimulus measures which boosted fiscal spending
in infrastructure
• Industry players remained doubtful on sustainability of
steel price rebound
50
60
70
80
90
100
110
Jan
-16
Fe
b-1
6
Ma
r-16
Ap
r-16
Ma
y-1
6
Jun
-16
Jul-1
6
Au
g-1
6
Se
p-1
6
Oct-
16
Nov-1
6
Dec-1
6
China Steel Price IndexSteel Industry
Source: China Iron & Steel Association
Supply-side Structural Reform
• Amid the nationwide supply-side structural reform,
provincial governments have strictly executed their plans
to curb excessive capacities
• Pace was slow in 1H 2016 but speeded up during August
and September 2016, mainly due to the merger of two
domestic giant steel makers
• Annual target of reducing steel production capacity by 45
Mt was completed, ahead of schedule, by the end of
October 20164
Market Review
200
400
600
800
1000
1200
1400
1600
1800
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
China Iron Ore Price Index (1)
Source: China Iron & Steel Association
Note:
(1) Based on ordinary iron ore
• Supple-side structural reform caused the
decrease in steel supply and resulted in price
hikes in iron ore
• Increase in iron ore price followed the trend of
steel price
• Certain producers failed to meet
environmental protection standards and were
forced to suspend or close down, leading to a
short supply that pushed up the price
High-grade Titanium Concentrates’ Price Trend (2)
Source: http://www.100ppi.com/
Note:
(2) Dry base packaging, TiO2 46%, not including VAT
(RMB/t)
Ordinary Iron Ore
Titanium
100
120
140
160
180
200
220
240
260
280
300
Jan-16
Feb-16
Mar-16
Apr-16
May-16
Jun-16
Jul-16
Aug-16
Sep-16
Oct-16
Nov-16
Dec-16
5
Market Review (Cont’d)
6
Operations and Financial Overview
Products
Annual
capacity
(ktpa)
(wet basis)
Production volume
in FY 2016
(kt)
(dry basis)
Capacity
utilisation
(%)
Vanadium-bearing iron
concentrates2,600 290.9 12.4
- Baicao processing plant 700 0 0
- Xiushuihe processing plant 800 207.2 28.8
- Heigutian processing plant 800 0 0
- Hailong processing plant 300 83.7 31.0
High-grade titanium
concentrates280 71.4 28.3
- Baicao processing plant 60 22.7(1) 42.0
- Xiushuihe processing plant 100 48.7 54.1
- Heigutian processing plant 120 0 0
• Unfavourable market conditions
persevered
• Capacity utilisation of the group’s
plants was still low and below
optimal levels
• The group actively sought for
business diversification to
increase revenue (see pages 8
and 12)
• Classified the Heigutian
processing plant as assets held
for sale as there has been no
outputs since 2015 (see page
10)
Note:(1) This figure represented the production volume of medium-grade titanium concentrates
7
Continual Low Utilisation Rate of
Processing Plants
Sales Volume by Product and Nature
FY 2015
(kt)
FY 2016
(kt)
Trading
- Steels and coals 95.0 929.9
- Iron products 110.9 128.6
Self-produced products
- Vanadium-bearing and ordinary
iron concentrates880.2 530.9
- High-grade titanium concentrates 33.1 48.9
Others
- Rendering of processing services
for an independent third party*- 724.8
- Sale of raw ore to an independent
third party*- 3,387.6
8
• Trading of steels and coals as part of
the diversification plans despite thin
margins amidst market condition
• Commenced to sell raw ore together
with rendering of processing services
for an independent third party
Business Diversification
* During the year, the group sold raw ore to an independent third party and processed vanadium-bearing iron concentrates for an independent third party.
For accounting purpose, the sale of raw ore and processing of vanadium-bearing iron concentrates for this same independent third party were treated as
“Sale of self-produced products – vanadium-bearing iron concentrates”.
Mancala Holdings Acquisition
The group has been proactively looking for ways to
improve production efficiency and assets utilisation
On 30 December 2016, the group entered into a sale
and purchase agreement with Sapphire Corporation to
purchase 49% equity interest in Mancala Holdings at an
aggregate consideration of HK$38.2 million, which
included:
Benefits of the transaction:
Enable the group to gain access to the technical
expertise, experience and knowledge in
internationally recognised standards
Develop into a new but related business outside
China and explore opportunities for strategic
collaborations, joint mine development and
innovative mining methods
The acquisition was completed on 28 February 2017
9
Cash consideration
HK$3.2 million
Consideration shares
in aggregate value of
HK$35 million at issue
price of HK$0.365 per
share
Shareholding Structure
MHPL
(Australia)
32%
100%
49%
Other InvestorThe CompanySapphire
Corporation
19%
100%
Mancala Holdings
(Cayman Islands)
MMP
(Australia)
MMS
(Australia)
Spectrum
Resources
(Australia)
MCL*
(Vietnam)
100%
MPL
(Australia)
100% 100%
MAL
(HK)
100%
49%
Exchangeable Notes
Investment in Indonesian MineExchangeable notes of US$30 million
25 Nov 2014Original maturity date
2 Dec 20141st time default of exchangeable notes
31 Dec 2014
Maturity date postponed to 25 Mar 2015
25 Mar 2015
Maturity date (extended)
1 Apr 20152nd time default of exchangeable notes
28 Jul 2015
Maturity date postponed to 25 Aug 2015
25 Aug 2015
Maturity date (further extended)
2 Sep 2015
3rd time default of exchangeable notes
• Carrying value for exchangeable notes was
approximately RMB109.6 million as at 31
December 2016
• Fair value loss on the exchangeable notes was
approximately RMB111.6 million for FY 2016
10
• Management has permanently ceased the
production of the Heigutian processing plant:
due to limited opportunity to optimise the
plant’s capacity utilisation; and
decided to either dispose of the plant and
equipment on a piecemeal basis or the
Heigutian processing plant in its entirety
• The group remains committed to the existing
disposal plans on the Heigutian processing
plant
• As at 31 December 2016, the classification of
the Heigutian processing plant as assets held
for sale remained unchanged and continued
to be recorded at fair value less cost to sell,
amounting to RMB300 million
Assets Held for Sale – Heigutian Processing Plant
Updates on Exchangeable Notes and
Assets Held for Sale
FY 2015
(RMB mm)
FY 2016
(RMB mm)
Revenue 516.4 1,833.3
Gross profit/(loss) (23.2) 42.4
Gross profit/(loss) margin (4.5%) 2.3%
Impairment losses (551.8) (528.4)
Fair value loss on financial assets at fair value through profit or loss (69.0) (111.6)
LBIT (948.3) (745.2)
LBITDA (839.6) (654.5)
Loss before tax (1,010.5) (802.4)
Income tax credit/(expense) (102.7) 2.9
Loss and total comprehensive loss attributable to owners of the
Company (“net loss”)(1,105.5) (773.7)
(RMB) (RMB)
Basic and diluted loss per share (1) (0.53) (0.37)
Note:(1) Weighted average number of shares of 2,075,000,000 in issue
11
Financial Performance Overview
274.3
432.9
72.2
33.1
240.9
169.9
1,126.4
FY 2015 FY 2016
Self-produced products
Trading of iron products
Trading of coals
Trading of steels
1,833.3
Gross Profit/(Loss)
(RMB mm)
(23.2)
42.4
FY 2015 FY 2016
Major Revenue - Trading of Steels and Coals
(RMB mm)
516.4
12
Major Revenue Contribution from
Trading of Steels and Coals
(RMB mm)
Loss and Total Comprehensive Loss Attributable to
Owners of the Company
(RMB mm)
(102.7)
2.9
FY 2015 FY 2016
(RMB mm)
1,105.5
773.7
FY 2015 FY 2016
Income Tax Credit/(Expense)
Selling & Distribution and Administrative Expenses
111.0%
6.7%
13
258.3185.2
35.7 200.015.3
181.9 64.9
60.6
78.3
FY 2015 FY 2016
Assets held for sale
Trade receivables
Goodwill
Intangible assets
Property, plant andequipment
528.4
(RMB mm)
Impairment Losses
53.8 76.3
197.7
72.0
FY 2015 FY 2016
Selling & distribution expenses Administrative expenses
Total SD&A expenses as % of revenue%
Lower Expenses and Net Loss
551.848.7%
8.1%
Business Presence and Outlook
14
11
Heigutian processing plant
Xiushuihe processing plant
Maoling processing plant
Maoling-Yanglongshan mine
Xiushuihe mine
Iron pelletising plant
Hailong processing plant
Baicao processing plant
Baicao mine
Yangqueqing mine
Cizhuqing mine
Haibaodang mine
Shigou gypsum mine
15
Business Presence in China
1
2
3
4
5
6
7
8
9
12
13
11
10
• “Three-Year Action Plan of
Major Construction Projects
in Transportation
Infrastructure” published in
May 2016 to enhance
infrastructure investments
• Encourages domestic steel
producers to “go global” and
ride on opportunities of the
Belt and Road Initiative to
boost demand and reduce
excessive supply
• Carried out in the Central
Economic Work Conference
in 2015 and the reform will
continue unabated in 2017
• Aim to rebalance the supply
and demand discrepancy
• Target to reduce
approximately 50 Mt steel
production capacity in 2017
Supply-side Structural
Reform
State Council of the PRC
• Adhere to the national
policies and further
implement measures to
phase out excessive steel
capacities
• Proactively carry out
preferential policies and
administrative measures to
handle zombie enterprises
properly
Sichuan Government
Government Policies to Facilitate Healthy Development of the Steel Industry
16
Measures to Narrow Loss and Achieve Sustainable Development
17
Mancala Holdings acquisition:
(i) Enable the group to gain access to expertise and
knowledge at internationally recognised levels
(ii) Jointly explore opportunities for strategic
collaborations, mine development and
innovative mining methods
Scale back
capacities
Streamline
loss-making
operations
Keep cost control
discipline
Further improve production
efficiency to cut down
segmental losses
Rationalise
under-utilised assets and
improve assets utilisation
Adopt asset-light
strategies and
optimise
resources
Contact
Cornerstones Communications Limited
Kylie Yeung / Sara Qian
Tel: 2903 9293 / 2903 9282
Fax: 2887 1712
E-mail: [email protected]
Thank you!
18