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Peer comp charts

Renaissance Capital

14 January 2019

Metals & Mining

Figure 85: Companies ranked by CY18E EBITDA margins compared with their historical averages

70%		65%
60%		54%	54%
50%
40%
30%
20%
10%
0%		Polyus BHP	Alrosa

*Proportionately consolidated. **Excluding marketing business.

CY18E EBITDA margins LT average

52%	50%	46%	43%	43%	41%	41%	41%	40%	38%	36%	36%	35%	35%	33%	32%	32%	32%	30%	30%	29%	28%	28%	28%	23%	22%	21%	19%	19%	15%		13%
																									Sector average, 33%
																																7%
Norilsk	Gold Fields	Vale	Rio Tinto	Fortescue	Russian*	Polymetal	Kumba	Assore*	AngloGold	ARM*	Exxaro*	Severstal	South32	Glencore**	PhosAgro	Evraz	Anglo	Others*	Sasol	NLMK	Merafe	Harmony	MMK	Mondi	Amplats	RBPlats	Sibanye	Northam	Impala		Sappi	AMSA

Source: Company data, Renaissance Capital estimates

Figure 86: Companies ranked by CY18E FCF yield compared with their historical averages

	40%						CY18E FCF yield	LT average
		25.0% 25.0% 21.4% 20.2% 19.1% 17.5% 17.3% 16.9% 15.5% 15.1% 14.8% 13.9% 13.6% 12.2% 11.7% 11.4% 11.3% 10.3% 9.7%						9.7% 9.7% 8.7% 7.6% 7.1% 6.0% 9%.3 9%.3 3.7%
	10%
	30%
	20%
	0%

-10%

-20%

-30%

-40%

Polymetal

PhosAgro

Glencore

Polyus

AngloGold

South32

Kumba

Others*

Anglo

Impala

Fortescue

Russian*

NLMK

Norilsk

Hulamin

Exxaro

MMK

Rio Tinto

Severstal

Evraz

Vale

BHP

Assore

Sibanye

Alrosa

ARM

Merafe

AMSA

Note: Priced at market close on 7 January 2019.

Figure 87: Miners ranked by CY18E dividend yield compared with their historical averages

30%		25.3%														CY18E Dividend yield						LT average
25%			19.9%	17.6%	16.9%	13.6%	12.9%	12.0%			12.0%	11.4%	11.3%	10.7%
20%															8.8%		8.4%		7.0%	6.8%	6.3%	6.2%	5.4%	5.2%	5.2%	4.4%	4.2%	3.9%
15%
10%
5%
0%		Merafe	Evraz	Alrosa	Severstal	NLMK	MMK	Russian*			Kumba	BHP	Norilsk	ARM		Assore	Exxaro		South32	Glencore	Vale	PhosAgro	Polyus	Others*	Rio Tinto	Anglo	Polymetal	Hulamin

Note: Priced at market close on 7 January 2019.

2.5%	1.2%	Sector average, 10.2%
		Sasol -2.3%		3.1%-
Amplats	Mondi			Northam 2.5%+- Sappi Gold Fields 3.4%- RBPlats -10.0% Lonmin -14.0% Harmony-27.0%

Source: Company data, Renaissance Capital estimates

3.8%	3.4%		Sector average, 7.0%
		2.8%	1.6%	0.0%		0.0%	0.0%
Mondi
	Sasol	Sappi	Amplats	RBPlats		Sibanye	AMSA

Source: Company data, Renaissance Capital estimates

51

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Commodity price and exchange rate forecasts

Figure 88 sets out our average commodity price and exchange rate forecasts per calendar year.

Renaissance Capital

14 January 2019

Metals & Mining

Figure 88: Average commodity prices and exchange rates*

Average per calendar year	2016	2017	2018	2019E	2020E	2021E	2022E	2023E	LT real
Precious commodities
Gold, $/oz	1,248	1,258	1,269	1,350	1,338	1,311	1,337	1,364	1,250
Silver, $/oz	17	17	16	17	18	19	19	20	18
Platinum, $/oz	988	950	880	870	1,070	1,153	1,177	1,200	1,100
Palladium, $/oz	614	871	1,030	1,216	1,088	1,049	1,070	1,091	1,000
Rhodium, $/oz	694	1,108	2,218	2,379	2,163	2,097	2,139	2,182	2,000
3PGM basket (57% Pt, 36% Pd, 7% Rh), $/oz	833	933	1,028	1,100	1,153	1,182	1,206	1,230	1,127
Rough diamond index, $/ct	197	198	202	202	208	215	219	224	205
Base metals
Aluminium, $/t	1,604	1,968	2,110	1,953	2,166	2,254	2,300	2,346	2,150
Bauxite, $/t	40	43	42	41	49	51	52	53	48
Copper, $/t	4,867	6,170	6,532	6,000	6,367	6,606	6,739	6,875	6,300
Copper, USc/lb	221	280	296	272	289	300	306	312	286
Nickel, $/t	9,599	10,404	13,130	11,530	14,285	14,680	14,975	15,277	14,000
Nickel, USc/lb	435	472	596	523	648	666	679	693	635
Zinc, $/t	2,091	2,891	2,923	2,543	2,732	2,831	2,888	2,946	2,700
Zinc, USc/lb	95	131	133	115	124	128	131	134	122
Lead, $/t	1,867	2,314	2,241	2,033	2,459	2,548	2,599	2,652	2,430
Cobalt (99.8%), $/lb	12	25	33	25	26	26	27	27	25
Steelmaking materials
Iron ore fines (62% Fe, CIF China), $/t	58	71	66	62	62	63	64	65	60
Iron ore fines (58% Fe, CIF China), $/t	48	52	45	47	48	49	50	51	47
Iron ore lump premium (62% Fe), $/t	10	15	20	17	13	14	14	14	13
Freight charges, $/t
- Australia to China	4.5	6.7	7.6	6.9	7.0	7.1	7.3	7.4	6.8
- Brazil to China	9.1	14.8	18.4	16.8	17.0	17.2	17.6	17.9	16.4
- South Africa to China	6.8	11.2	13.8	12.4	12.6	12.8	13.0	13.3	12.2
Hard coking coal - spot, $/t	144	188	206	178	160	157	160	164	150
Manganese ore (44%, CIF China), $/mtu	4.30	6.00	7.11	5.48	5.33	5.45	5.56	5.67	5.20
Ferrochrome (EU), $/lb	1.0	1.5	1.4	1.2	1.3	1.3	1.3	1.4	1.3
Steel
China HRC, $/t	377	508	564	471	471	484	494	504	461
China export Rebar, $/t	348	517	580	445	449	460	469	478	438
Energy
Brent crude oil, $/bl	45	55	72	65	60	63	64	65	60
WTI oil, $/bl	43	51	65	62	57	60	61	62	57
Henry Hub (US) gas, $/MMBtu	2.5	3.0	3.2	3.4	3.5	4.2	4.3	4.4	4
Thermal coal (FOB Richard's Bay), $/t	64	85	98	93	86	84	86	87	80
Uranium, $/lb	26	22	25	33	43	47	48	49	45
Chemicals
Ethane (US), $/t	146	184	244	260	374	419	428	436	400
Ethylene (US), $/t	585	613	402	548	831	944	963	982	900
Paper & packaging
Testliner, EUR/t	432	476	534	532	507	494	499	504	482
Uncoated fine paper, EUR/t	824	815	869	898	873	860	869	878	840
Fertilisers
MOP Potash Soluble FOB Saskatchewan, $/t	228	230	261	289	283	283	289	295	270
Baltic sea Urea granular, $/t	202	220	251	263	269	273	278	284	260
Baltic DAP, $/t	357	358	421	434	429	430	439	447	410
Black sea 16-16-16, $/t	324	321	318	340	347	353	360	367	337
Currency exchange rates
ZAR/$	14.70	13.31	13.24	14.31	14.14	14.17	14.45	14.74	13.00
$/AUD	0.74	0.77	0.75	0.72	0.78	0.80	0.80	0.80	0.80
$/EUR	1.11	1.13	1.18	1.17	1.21	1.22	1.22	1.22	1.20
CLP/$	676	649	642	689	674	673	687	701	630
BRL/$	3.49	3.19	3.65	3.78	3.50	3.42	3.49	3.56	3.20
COP/$	3,053	2,952	2,956	3,193	3,031	3,015	3,138	3,265	2,800
RUB/$	67	58	63	67	68	67	66	66	58
Inflation
US consumer price index	240	245	251	256	261	266	272	277
US inflation	1.3%	2.1%	2.5%	2.0%	2.0%	2.0%	2.0%	2.0%

*The above amounts represent the average per calendar year.

Source: Bloomberg, Thomson Reuters Datastream, Renaissance Capital estimates

52

53

estimates Capital Renaissance CRU, Bloomberg, Source:

				2 0
Spot	2002
	2003 (-0%)
(7	2004 (-0%)
	2005 (+67%)
January),
	2006 (-22%)
	2007 (+36%)
	2008 (+299%)
7	2009 (-61%)
	2010 (+42%)
	2011 (-21%)
	2012 (-19%)
	2013 (+10%)
	2014 (-17%)
	2015 (-31%)
	2016 (+38%)
	2017 (+40%)
	2018 (+18%)
		Spot
2019E (26% upside)
2020E (29% upside)
2021E (26% upside)
2022E (24% upside)
2023E (21% upside)
LT real (32% upside)
				0
Spot				2002
(7	2003 (+8%)
January),	2004 (+36%)
	2005 (+13%)
	2006 (+54%)
	2007 (+16%)
.15	2008	(+11%)
	2009 (-2%)
6	2010 (+40%)
	2011 (+74%)
	2012 (-12%)
	2013 (-26%)
	2014 (-21%)
	2015 (-15%)
	2016 (+9%)
	2017			(-0%)
	2018			(-8%)
				Spot
2019E (6% downside)
2020E (12% downside)
2021E (17% downside)
2022E (19% downside)
2023E (20% downside)
LT real (13% downside)
Spot				0
(7				2002
January),	2003 (+17%)
	2004 (+13%)
	2005 (+9%)
	2006		(+36%)
1,281	2007 (+15%)
	2008 (+25%)
	2009 (+12%)
	2010 (+26%)
	2011		(+28%)
	2012 (+6%)
	2013 (-15%)
	2014 (-10%)
	2015 (-8%)
	2016 (+8%)
	2017 (+1%)
	2018 (+1%)
				Spot
2019E (5% downside)
2020E (4% downside)
2021E (2% downside)
2022E (4% downside)
2023E (6% downside)
LT real (2% upside)

4			6				8				10				12			14			16						Manganese
2.0
2.0
2.0
3.3																											ore
2.6
		3.5																			14.1						(44%,
						5.4
											7.7																CIF
							6.1
3.1																											China),
					4.5
					4.9
						5.4																					$/mtu
			4.3
							6.0
							7.1
						5.56.9
						5.3
						5.5
						5.6
							5.7
						5.2
5			10				15				20			25			30				35				40		Silver,
		5
		5		7																							$/oz
				8				12
								14
										15
										15		21
																									36
															23							32
											19
											16
											17
											17
											16
											16
											17
											18
												19
												19
												20
											18
200			400			600				800		1,000			1,200			1,400			1,600				1,800
																											Gold,
				310																							$/oz
				364
						409
							445
										604
											697		872
															973					1,225				1,571
																								1,668
																							1,413
																				1,266
																		1,160
																		1,248
																		1,258
																		1,269
																		1,281
																		1,350
																		1,338
																		1,311
																		1,337
																					1,364
																		1,250

	Spot			2002
	(7	2003 (+14%)
		2004 (+33%)
	January),
		2008 (+35%)
		2005 (+45%)
		2006 (+20%)
		2007		(+10%)
	58	2009 (-37%)
		2010 (+29%)
		2011 (+39%)
		2012 (+1%)
			2013 (-3%)
			2014 (-8%)
		2015 (-46%)
		2016 (-16%)
		2017 (+21%)
		2018 (+31%)
				Spot
	2019E (11% downside)
	2020E (3% downside)
	2021E (8% downside)
	2022E (9% downside)
	2023E (11% downside)
	LT real (3% downside)
	Spot			0
			2003
	(7	2004 (+52%)
		2005 (-15%)
	January),
		2006 (+11%)
		2007	(+24%)
		2008 (+93%)
		2009 (-46%)
	98	2010 (+42%)
		2011 (+28%)
		2012 (-21%)
		2013 (-13%)
		2014	(-11%)
		2015 (-22%)
		2016 (+14%)
		2017	(+31%)
		2018 (+16%)
			Spot
	2019E (5% upside)
	2020E (14% upside)
	2021E (16% upside)
	2022E (14% upside)
	2023E (12% upside)
	LT real (22% upside)
	Spot			0
			2002
		2003 (-3%)
	(7	2004 (+16%)
	January),	2005 (+99%)
		2008 (+147%)
		2006 (+9%)
		2007 (-13%)
	222	2009 (-32%)
		2010 (+11%)
		2011 (+52%)
		2012 (-27%)
		2013 (-25%)
		2014 (-21%)
		2015 (-25%)
		2016 (+52%)
		2017 (+30%)
		2018 (+10%)
			Spot
	2019E (25% upside)
	2020E (39% upside)
	2021E (41% upside)
	2022E (38% upside)
	2023E (36% upside)
	LT real (48% upside)

0		20			40		60			80					100			Brent 120
					25															,oil
					28
					38			55			66									$/bl
											73					98
										62
														80					111
																			112
																			109
									54							100
							4555				72
									58
										65
									60
										63
										64
										65
									60
		40			60						100				120			140
20		4		35			80													Thermal
						54														$/tcoal,
						51	63
					45
							65											120
													92
																	118
										81			93
					57				72
							64				85 98
														98
											93
											86
											84
											86
											87
										80
		100			150		200				250				300			350
50		8																		Hard
		54																		coking
		47
					108															coal,
					118
					103										253
									172											$/t
									191						289
							159 211
					95 126

144188

206

222

178

160

157

160

164

150

	Spot					2002
	(7
		2003 (+42%)
	January),
		2007 (+54%)
		2004 (+44%)
		2005				(+7%)
		2006			(+64%)
	11,081	2008 (-43%)
		2009 (-31%)
		2010 (+49%)
		2011 (+5%)
		2012 (-23%)
		2013 (-14%)
		2014 (+12%)
		2015 (-30%)
		2016 (-19%)
		2017 (+8%)
		2018 (+26%)
						Spot
	2019E (4% downside)
	2020E (22% downside)
	2021E (25% downside)
	2022E (26% downside)
	2023E (27% downside)
	LT real (21% downside)
	Spot					500
	(7				2002
		2003 (+6%)
	January),
		2007 (-1%)
		2004 (+27%)
		2005 (+32%)
		2006 (+137%)
	2,575	2008 (-42%)
		2009 (-12%)
		2010 (+31%)
		2011 (+1%)
		2012 (-11%)
		2013 (-2%)
		2014 (+13%)
		2015 (-11%)
		2016 (+8%)
		2017 (+38%)
		2018 (+1%)
					Spot
	2019E (1% upside)
	2020E (6% downside)
	2021E (9% downside)
	2022E (11% downside)
	2023E (13% downside)
	LT real (5% downside)
	Spot					400
	(7			2002
		2003 (+28%)
	January),
		2007 (+14%)
		2004 (+22%)
		2005 (+6%)
		2006	(+27%)
	821	2008 (+21%)
		2009 (-23%)
		2010 (+34%)
		2011		(+7%)
		2012 (-10%)
		2013 (-4%)
		2014 (-7%)
		2015 (-24%)
		2016 (-6%)
		2017 (-4%)
		2018 (-7%)
					Spot
	2019E (6% downside)
	2020E (23% downside)
	2021E (29% downside)
	2022E (30% downside)
	2023E (32% downside)
	LT real (25% downside)

5,000	10,000		15,000		20,000	25,000	30,000		35,000		40,000	Nickel,
	6											$/t
	,778
		9,635
5
40				13,834
					14,74124,249					37,229
						21,115
					14,653
						21,833
						22,842
					17,525
					15,033
					16,868
				11,864
		9,599
			10,404
				13,130
				11,081
				11,530
					14,285
					14,680
					14,975
					15,277
					14,000
1,000		1,500			2,000	2,500		3,000			3,500	Zinc,
778												$/t
	828
	1,048
				1,380							3,275
					1,876						3,243
					1,654
						2,160
						2,190
					1,947
					1,909
						2,162
					1,932
						2,091			2,891
									2,923
								2,575
								2,543
								2,732
									2,831
									2,888
									2,946
								2,700				Platinum,
600	800			1,200 1,000			1,400		1,600		1,800
	691											$/oz
				845
					897	1,139
							1,3021,572
						1,203					1,612
											1,720
									1,551
									1,488
					1,056			1,385
					988
					950
					880
				821
					870 1,070
						1,153
						1,177
						1,200
						1,100

										350
						8				,
(7 Spot		20			60 40								200 180 160 140 120 100 80																	ore Iron
		2002				2
January),	2003 (+4%)					29															122									(CIF fines
	2007 (+106%)					32
	2004 (+11%)
	2005 (+41%)									45
	2006 (+33%)												59
74	2008 (+25%)																								152					China),
	2009 (-44%)															85
	2010 (+79%)																								152
	2011 (+15%)																									175
	2012 (-24%)																					132								$/t
	2013 (+3%)																						136
	2014 (-29%)																97
	2015 (-43%)									56
	2016 (+5%)												58
	2017 (+22%)													71
	2018 (-7%)													66
		Spot				,559								74
2019E (20% upside)													62
2020E (20% upside)													62
2021E (18% upside)													63
2022E (16% upside)													64
2023E (14% upside)													65
LT real (24% upside)													60
Spot		1,000												5,000			6,000		7,000				8,000			9,000		10,000		Copper,
					2,000	3,000				4,000
(7		2002			1																									$/t
	2003 (+14%)						1,779
January),
	2004 (+61%)											2,865
	2005 (+28%)												3,679
	2006 (+83%)																			6,723
5,904	2007 (+6%)																						7,121
	2008 (-2%)																						6,961
	2009	(-26%)																5,148
	2010 (+46%)																						7,536
	2011 (+17%)																												8,811
	2012 (-10%)																									7,950
	2013 (-8%)																						7,328
	2014 (-6%)																					6,861
	2015 (-20%)																	5,512
	2016 (-12%)																	4,867
	2017 (+27%)																		6,170
	2018 (+6%)																		6,532
		Spot																	5,904
2019E (2% downside)																			6,000
2020E (7% downside)																			6,367
2021E (11% downside)																			6,606
2022E (12% downside)																			6,739
2023E (14% downside)																						6,875
LT real (6% downside)																			6,300
(7Spot		1,200 1,000				2,000 1,800 1,600 1,400													2,800 2,600 2,400 2,200											,Aluminium
													1
		2002
	2003 (+6%)												1,432
January),	2004 (+20%)													1,716															2,573
	2008 (-2%)																1,899
	2005 (+11%)																													$/t
	2006	(+35%)																											2,570
	2007 (+3%)																												2,639
1,866	2009 (-35%)													1,664
	2010 (+31%)																							2,173
	2011	(+10%)																									2,398
	2012 (-16%)																		2,018
	2013 (-8%)																1,847
	2014 (+1%)																1,866
	2015 (-11%)													1,664
	2016 (-4%)													1,604
	2017 (+23%)																		1,968
	2018 (+7%)																		2,110
		Spot															1,866
2019E (4% downside)																			1,953
2020E (14% downside)																						2,166
2021E (17% downside)																							2,254
2022E (19% downside)																							2,300
2023E (20% downside)																							2,346
LT real (13% downside)																						2,150

spot with compared forecasts price Commodity 89: Figure

com/id446425943.vk

Mining & Metals	Capital Renaissance 2019 January 14

vk.com/id446425943

Important publications

Renaissance Capital

14 January 2019

Metals & Mining

10-Jan-2019	Global: Gold – Downgrades despite TP increases
10-Jan-2019	Global: Platinum Group Metals – Momentum could fade
03-Dec-2018	EMEA: Steel companies – Lower input costs could support margin
26-Nov-2018	Global: Chinese fuel cell demand – Clearing the fog
13-Nov-2018	South Africa: Chinese platinum jewellery demand – Down, but definitely not out
08-Nov-2018	South Africa: Platinum Western Limb - Structural headwinds to creating value
24-Oct-2018	South Africa: Exxaro and South32’s SAEC - A match made in heaven?
18-Oct-2018	South Africa/Russia: Gold - Safe-haven appeal back in vogue?
11-Oct-2018	Russia: Acron Group – Quality and growth priced in – HOLD
6-Sep-2018	South Africa: Precious metal miners – Who’s most sensitive to weaker rand?
4-Sep-2018	EMEA Steel: Momentum and yield
27-Aug-2018	South Africa: Mondi Ltd - Tailwinds may dissipate
23-Aug-2018	South Africa: Sasol Ltd – Positive momentum, but can it crack?
16-Aug-2018	Global: Russian Metals & Mining – Victims of their own success?
15-Aug-2018	Russia: Alrosa – Incorporating new dividend policy
13-Aug-2018	South Africa: Impala Platinum – Finally, a plan with defined milestones
10-Aug-2018	Russian Metals & Mining: Proposed tax increases
23-July-2018	Global: Metals & Mining – ESG: Decoding the bigger picture
13-July-2018	Global: Metals & Mining – Results book – 1H18
13-July-2018	EEMEA: Steel companies – Commodity revisions
11-July-2018	Global: Precious metal miners – Commodity revisions and rating cuts
27-June-2018	Russia: PJSC PhosAgro – Elements for improving yield
18-June-2018	Global: Draft SA Mining Charter – Unlikely to grow value
8-June-2018	Mondi & Sappi – Near-term margin and CF pressure
14-May-2018	Global: Metals & Mining – Not reflecting improved fundamentals
14-May-2018	EEMEA: Steel companies – We still see value
14-May-2018	Alrosa – Tailwinds dissipating –Transfer of coverage
23-Apr-18	Global: Metals & Mining – Evolving nature of the PGM industry
12-Apr-18	Global: Metals & Mining– Unpacking iron ore margins
8-Feb-18	Russia/South Africa: Gold mining – Optionality vs long-term value
5-Feb-18	Russia: PJSC Polyus – Best quality assets – BUY
5-Feb-18	Russia: Polymetal International – Yield underpin, attractive growth – BUY
17-Jan-18	Global: Metals & Mining – The transformers
2-Nov-17	South Africa: ArcelorMittal South Africa – Not a ‘steel’ yet – SELL
21-Sep-17	Global: Metals & Mining – Offering superior IRR
12-Sep-17	South Africa: Sasol Ltd – Unpacking LCCP guidance and market dynamics
10-Jul-17	South Africa: Sappi – Repositioning for growth
16-Jun-17	South Africa: Metals & Mining: SA Mining Charter – Negative for the industry
13-Jun-17	South Africa: Metals & Mining: SA Mining Charter – Measuring exposure and compliance
7-Jun-17	Global: Metals & Mining sensitivities – Yield potential through the cycle
20-Mar-17	Global: Metals & Mining: Copper – Running hard to stand still
23-Jan-17	Global: Metals & Mining – Panning for value: growth vs value
5-Dec-16	Global: Metals & Mining – Less is more
9-Sep-16	Global: Metals & Mining – Wheel of fortune
23-Aug-16	South Africa: Cracking the surface of the gold rally
4-Jul-16	South Africa: Mondi – Boxing clever – BUY
24-Jun-16	South Africa: Sasol Ltd – Growth at the expense of value – HOLD
20-Jan-16	Global: Metals & Mining – The long (term value) and short (term risks) of it
9-Dec-15	Global: Metals & Mining – Quantifying capacity closures
23-Nov-15	Global: Metals & Mining – Efficiency: Survival of the fittest
14-Sep-15	CIS Metals & Mining: Seeing value in challenging times
14-Sep-15	Global: Metals & Mining – Searching for survivors
3-Jul-15	Global: Metals & Mining – Panning for value
23-Mar-15	Global: Metals & Mining – Commodity bear provides long-term value
19-Jan-15	Global: Metals & Mining – Value sector
4-Dec-14	Global: Metals & Mining – Approaching trough margins, but P/Es could de-rate
13-Oct-14	Global: Productivity & efficiency benchmarking – Focus on the platinum sector
11-Sep-14	South Africa: Metals & Mining – Falling iron ore prices outweigh self-help
20-Jun-14	Global: Commodities: Iron ore – Cost support falls to $90/t by 2016E
20-Jun-14	Global: Mining: Tide going out for iron ore – Stick with quality as cash flow evaporates
24-Mar-14	Global: Mining: Harvest time – Cash flowing back to shareholders
20-Jan-14	Global: Nine reasons to be more bullish on miners
11-Nov-13	Global: Mining – Not a growth sector – Struggling to find value

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