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Reporting trends: 2H18E vs 2H17

We forecast the following sector trends compared with 2H17:

▪Production to remain flat as miners continue to favour value over volume.

▪Growth in underlying earnings, as margins recover owing to higher commodity prices, weaker producer currencies and continued cost-containment efforts.

▪Capex to increase by 32% ($6.1bn which excludes BHP’s and Rio Tinto’s proceeds on asset disposals) as miners start to spend on replacement projects.

▪Net debt to decline by 17% ($18.8bn) due to strong FCF generation.

▪Dividends declared to increase by 50% ($8bn) now that balance sheets are comfortable and cash generation remains strong.

Renaissance Capital

6 February 2019

Metals & Mining

Figure 6: 2H18E vs 2H17, $mn

	Underlying earnings, $mn			Dividends, $mn			Cu. Eq production, kt			Capex, $mn			Net debt, $mn
	2H18E	2H17	% ch	2H18E	2H17	% ch	2H18E	2H17	% ch	2H18E	2H17	% ch	2H18E	2H17	% ch
Diversified miners
African Rainbow Minerals	193	146	33%	94	36	165%	142	151	-6%	117	94	25%	-121	82	-247%
Alrosa	657	512	28%	1,247	0	-	676	661	2%	299	237	26%	727	1,466	-50%
Anglo American	1,754	1,736	1%	702	689	2%	1,391	1,492	-7%	1,048	1,419	-26%	3,090	4,501	-31%
Assore	197	181	9%	138	104	32%	112	110	1%	10	12	-22%	-705	-492	-43%
BHP	3,926	4,097	-4%	8,113	2,928	177%	2,940	3,101	-5%	3,972	2,583	54%	10,316	15,411	-33%
Exxaro	318	-92	447%	106	310	-66%	249	277	-10%	333	-260	228%	288	293	-1%
Fortescue	544	681	-20%	308	267	15%	814	832	-2%	270	413	-35%	2,921	3,289	-11%
Glencore	3,024	3,161	-4%	4,148	2,853	45%	2,628	2,281	15%	5,624	2,555	120%	36,203	32,898	10%
Kumba Iron Ore	472	382	23%	520	360	44%	182	195	-7%	167	149	12%	-954	-1,035	8%
Norilsk Nickel	1,728	1,211	43%	1,857	674	176%	767	751	2%	1,114	1,291	-14%	7,466	8,201	-9%
Rio Tinto	4,263	4,686	-9%	2,502	3,158	-21%	3,090	3,149	-2%	3,566	2,938	21%	1,151	3,845	-70%
Rusal	965	752	28%	396	299	33%	741	773	-4%	353	521	-32%	7,093	7,648	-7%
South32	611	544	12%	485	378	28%	598	591	1%	1,741	199	775%	-1,101	-1,431	23%
Vale	4,264	4,141	3%	0	1,469	-100%	2,824	2,765	2%	1,886	2,001	-6%	8,778	18,161	-52%
Total – diversifieds	22,915	22,139	4%	20,617	13,525	52%	17,153	17,127	0%	20,501	14,152	45%	75,152	92,837	-19%
Platinum miners
Anglo American Platinum	342	234	46%	103	70	47%	303	296	3%	254	229	11%	-57	137	-142%
Impala	75	-11	771%	0	0	-	201	197	2%	165	160	3%	246	382	-36%
Northam	-1	-21	95%	0	0	-	75	41	85%	65	190	-66%	884	785	13%
Royal Bafokeng Platinum	4	10	-63%	0	0	-	26	28	-8%	126	98	28%	71	-30	339%
Total – platinum	420	212	98%	103	70	47%	605	562	8%	610	677	-10%	1,144	1,273	-10%
Gold miners
AngloGold Ashanti	140	102	37%	31	21	46%	351	398	-12%	436	499	-13%	1,759	2,001	-12%
Gold Fields	73	63	16%	22	30	-28%	190	221	-14%	402	447	-10%	1,523	1,303	17%
Harmony	91	74	23%	12	12	7%	143	109	32%	180	191	-6%	317	113	181%
Polymetal	289	259	12%	150	129	16%	191	179	7%	180	261	-31%	1,418	1,420	0%
Polyus	634	540	17%	262	183	43%	262	242	8%	414	484	-15%	3,275	3,077	6%
Sibanye-Stillwater	41	40	3%	0	0	-	278	303	-8%	280	270	3%	1,424	1,908	-25%
Total – gold	1,268	1,077	18%	478	375	27%	1,415	1,452	-3%	1,892	2,152	-12%	9,716	9,822	-1%
Total precious metals	1,688	1,290	31%	580	445	30%	2,020	2,014	0%	2,502	2,829	-12%	10,860	11,095	-2%
Steel companies
ArcelorMittal	-45	-80	43%	0	0	-	170	164	3%	30	54	-45%	161	253	-36%
Evraz	881	646	36%	705	428	65%	766	745	3%	332	308	8%	3,645	3,925	-7%
MMK	650	654	-1%	665	377	76%	525	537	-2%	404	380	6%	-302	-12	-2418%
NLMK	1,148	788	46%	1,133	851	33%	809	831	-3%	370	397	-7%	1,015	923	10%
Total – steel	2,635	2,008	31%	2,504	1,656	51%	2,269	2,277	0%	1,136	1,139	0%	4,519	5,089	-11%
Fertiliser companies
Acron	208	188	11%	24	157	-85%	145	152	-5%	126	95	32%	1,129	1,026	10%
PhosAgro	363	161	125%	76	33	130%	253	242	4%	280	358	-22%	1,817	2,044	-11%
Total – fertilisers	571	349	64%	100	190	-47%	397	394	1%	406	454	-11%	2,946	3,071	-4%
Total metals & mining	27,809	25,786	8%	23,801	15,817	50%	21,840	21,812	0%	24,544	18,574	32%	93,476	112,091	-17%

Source: Company data, Renaissance Capital estimates

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Renaissance Capital

6 February 2019

Metals & Mining

Figure 7: Commodity price and currency moves, YoY
-20%		-15%					-10%				-5%								0%		5%				10%		15%		20%		25%		30%
Brent crude
																																	27%
Freight charges																															23%
RUB/$																											13%
Nickel																											12%
Thermal coal																											11%
Palladium																											11%
Manganese ore																											10%
AUD/$																									8%
$/ZAR																									6%
Hard coking coal																									5%
Diamonds																									5%
Aluminium														-2%
Iron ore														-3%
Gold											-4%
Copper									-7%
Platinum		-				13%
Lead		-16%
Zinc	-17%
																																	Source: Bloomberg
Figure 8: Commodity price moves, HoH
-25%		-20%					-15%				-10%								-5%		0%				5%		10%		15%		20%		25%
Freight charges
																																	22%
$/ZAR																															15%
RUB/$																													11%
AUD/$																											6%
Palladium																										5%
Diamonds																									3%
Thermal coal																									3%
Brent crude																									2%
Hard coking coal																					-1%
Iron ore																					-1%
Manganese ore														-6%
Gold														-7%
Aluminium											-9%
Nickel									-11%
Copper									-11%
Platinum							-		13%
Lead						-17%
Zinc		-21%

Source: Bloomberg

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