DELMAS MILLING PLANT 25 MARCH 2014 - SepHold...DELMAS MILLING PLANT SITE VISIT PRESENTATION 25 MARCH 2014. 25 March 2014 2 ... The acquisition of Métier Mixed Concrete in 2013 started

125 March 2014

DELMAS MILLING PLANT

SITE VISIT PRESENTATION

25 MARCH 2014

225 March 2014

DISCLAIMER

This presentation includes certain forward-looking information. All statements other than statements of historical fact are, or may

be deemed to be, forward-looking statements, including, without limitation those concerning: Sephaku Holdings’ strategy; the

economic outlook for the industry; production; cash costs and other operating results; growth prospects and outlook for Sephaku

Holdings’ operations, individually or in the aggregate; liquidity and capital resources and expenditure; and the outcome and

consequences of any pending litigation proceedings. These forward-looking statements are not based on historical facts, but

rather reflect Sephaku Holdings’ current expectations concerning future results and events and generally may be identified by

the use of forward-looking words or phrases such as “believe”, “aim”, “expect”, “anticipate”, “intend”, “foresee”, “forecast”, “likely”,

“should”, “planned”, “may”, “estimated”, “potential” or similar words and phrases. Similarly, statements that Sephaku Holdings’

objectives, plans or goals are or may be forward-looking statements. These forward-looking statements involve known and

unknown risks, uncertainties and other factors that may cause Sephaku Holdings’ actual results, performance or achievements

expressed or implied by these forward-looking statements. Although Sephaku Holdings believes that the expectations reflected

in these forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been

correct.

www.sephakuholdings.co.za

325 March 2014

AGENDA

1. Our strategic intent

Overview Lelau Mohuba

Neil Crafford Lazarus

2. Our view of the cement industry

Industry analysis Pieter Fourie

SA market insights Duncan Leith

SepCem’s approach

SepCem value proposition Pieter Fourie

3. Our brand-new plants

Plant technology & efficiencies Duan Claassen

4. Conclusion

Investment case Lelau Mohuba


425 March 2014

OUR STRATEGIC INTENT


525 March 2014

THE SEPHAKU STORY

EXPLORATION

Sephaku commenced business in 2006 as an HDSA-owned, mineral exploration company seeking opportunities brought about

by changes in the MPRDA. Limestone and Fluorspar resources were quickly identified and proven as the most viable reserves in

Sephaku's portfolio. This resulted in Sephaku unbundling all its non-core exploration assets into Incubex Ltd in 2010.

DEVELOPMENT

The development of Limestone into an integrated cement business developed faster than the Fluorspar project and a decision

was made to unbundle the Fluorspar business in order to create a focused cement business which would develop into a unique

income-generating opportunity for its shareholders. The development phase consisted of recruiting an experienced leadership

team, proving the viability, obtaining statutory approvals, raising the funding for the project and constructing the most efficient

cement plant in South Africa. This development phase will come to an end during 2014 when the cement plants come into

operation.

INCOME

The acquisition of Métier Mixed Concrete in 2013 started the new era for Sephaku in which focus is moving from development to

income generation. Maximising income from Sephaku's core investments in Cement and Ready-Mixed Concrete will be the sole

focus over the next few years to ensure repayment of development debt as well as a dividend stream to its shareholders.

GROWTH

Southern Africa is set to enter an exciting new growth cycle, strongly underpinned by infrastructure development. The core

investments of Sephaku will form the strong foundation for growth, focused on primary construction materials.


625 March 2014

EXECUTION TIME LINE – STRATEGIC REFOCUS

enhancing shareholder value Growth2005 2009 2010 2011 2012 2013 2014

• SepHold obtains

first prospecting

rights

• Listing on the JSE

• 155 805 362

shares issued

• Acquisition of

Métier Mixed

Concrete

• Unbundling

of Incubex

• Sephaku Gold

Holdings sold

• African Nickel

Holdings

26% sold

• Unbundling of

Sephaku Flouride

• Production

of cement

• Growth in

concrete

market share


725 March 2014

THE SEPHAKU HOLDINGS STRUCTURE

Aganang

Cement Plant

Delmas

Milling Plant

Sephaku

Ash

Limestone

Exploration

36%

100%

64%


825 March 2014

• 100% ownership; acquired in February 2013 for R365 million

• Specialist in the manufacture, distribution and marketing of high-value ready mixed concrete

• Fleet size, pumping division and advanced production technology enhances efficiency

• Ten plants in KwaZulu-Natal and Gauteng – strategically positioned to capitalise

on numerous opportunities in the next 12 months

• 36% interest in Sephaku Cement with 64% owned by Dangote Cement PLC, the largest cement producer

in Africa

• Comprises three components: Aganang – integrated cement and clinker plant, Delmas – grinding plant,

and Sephaku Ash – a fly ash beneficiation plant

• Production of cement at Delmas commenced in January this year

• Aganang to produce a minimum of 6 000t clinker per day

• Latest cement plant technology – higher efficiency than incumbents

• Lowest cost producer

BUILDING AND CONSTRUCTION MATERIALS

COMPANY


925 March 2014

LOCATION OF ASSETS

Operations

Aganang Cement Plant

Delmas Milling Plant

Sephaku Ash (Kendal)

Dwaalboom project

Métier Mixed Concrete

Johannesburg

Pretoria

Durban

Cape Town


1025 March 2014

Initial reporting period of revenue

Metier sales constitute 100% of the revenue

Positive earnings : group profit

Sephaku Cement to contribute profit in CY 2014

Metier concrete sales increased by 35%

High value concrete sales contributed 5%

Delmas cement grinding plant completed

Entered the market in mid January 2014


OPERATIONAL HIGHLIGHTS FOR THE INTERIM

PERIOD FY 2014

1125 March 2014

FINANCIAL HIGHLIGHTS FOR THE INTERIM

PERIOD FY 2014

Operating profit of R33,8 million compared to the operating loss of R10,1 million for 2012

Earnings before interest, taxation, depreciation and amortisation (“EBITDA”) of R40,3

million compared to the loss before interest, taxation, depreciation and amortisation of

R9,8 million for 2012

Headline earnings per share of 2,78 cents compared to headline loss per share of 5,69

cents for 2012

Earnings of R6,3 million compared to the loss of R9,8 million for 2012


1225 March 2014

SHARE PRICE PERFORMANCE

• Share price on an upward

trend

› Approximately 40%

one-year increase in

share price

• *Recognised as 8th top

performing JSE company

out of 50 for one year to

the end of September

2013

› Compound share value

growth of 109,64%

• Share price re-rating

anticipated as multiples

improve

• Production at Delmas

has reduced the

commissioning risk factor

Source: Company, Sharedata March 2013

* Sunday Times; November 2013 based on I-NET BRIDGE statistics

Share ticker: JSE SEP

Sector Construction and Materials

Outstanding shares 189 872 979

Price @ 24 March 2014 (1300HS) R6.68

Market capitalisation as @ 24 March 2014 R1.2 billion


1325 March 2014

OUR VIEW ON THE CEMENT INDUSTRY


1425 March 2014

MACRO – ECONOMIC INDICATORS

• GDP growth is relatively less than for the region which is ~6%

• Forecasts do not take the government infrastructure programme into account .


Indicator 2012 2013 2014 2015 2016 2017 2018

Consumer Price Inflation 5.7 5.9 5.7 5.6 5.5 5.6 5.5

Producer Price Inflation 6.2 6.0 6.0 5.3 5.1 5.5 5.5

GDP 2.5 2.0 3.3 3.5 3.8 4.0 4.5

GCFC as a % of GDP 20.0 21.0 21.0 21.0 22.0 22.0 23.0

ZAR / USD 8.20 9.50 9.53 9.80 10.20 10.53 10.90

ZAR / EUR 10.54 12.39 11.81 11.96 12.44 12.84 12.93

Repo rate 5.0 5.0 5.0 5.7 6.3

Prime rate 8.5 8.5 8.5 9.2 9.8

Source: Investec 30 Oct 2013

1525 March 2014

SA* CEMENT INDUSTRY TRENDS

GDP growth forecast

at 3,2%¹ in 2014

Cement sales forecast

at 4,8 – 5,0% to GDP:

multiplier of 1,5

Cement demand

growth was at 6% in

2013

Growth at 3% per

annum 2010 – 2012

Residential plans YOY

growth at 14,6%

and 19,7% for

non-residential plans²

Long-term cement

growth trend projected

at 4,5%³

Source: Sephaku Cement research and analysis

1: Econometrix – Macro Economic Forecaster, October 2013 ,2: Econometrix – Building, October 2013

3: Econometrix – Outlook for cement demand in South Africa, May 2012

* South African

0

1

2

3

4

5

6

7

2009 2010 2011 2012 2013 2014 2015 2016 2017 2018

Rat

e %

Projected long-term demand growthRecorded average cement demand growth


1625 March 2014

SA CEMENT CAPACITY vs DEMAND: 2006 – 2020

0

5

10

15

20

2002 2004 2006 2008 2010 2012 2014 2016 2018 2020

Mill

ion

s

Cement tonnes actual sales Cement tonnes forecast Cement capacity

Capacities are based on

SepCem research, using

the maximum estimated

clinker capacity of each

producer, combined with

the estimated extender

ratios to produce finished

cement

Demand forecast is

based on an average

estimate of several

leading economic

forecasts

Capacities exclude the

possible entrance of new

players

Excludes the effect of

seasonality on capacity

to meet demandNote: These figures include volumes to the BLNS countries, Namibia factored to 30%

Source: Sephaku Cement research – November 2013

Sephaku's entry

and ramp-up

Industry operating at

90% of realistic capacity,

with no further kiln

retirements


1725 March 2014

SA PLANT CAPACITY ANALYSIS – 2014


Number of operating kilns

Average operating kiln age

Estimated cement tonnes per annum (000')

Producer A 3 27 3,200

Producer B 3 37 3,900

Producer C 9 38 5,600

Producer D 2 19 1,800

TOTAL 17 37 14,500

Production capacity determined by kiln instead of milling capacity

Current capacity at approximately 14,5 million

1825 March 2014

CONSTRUCTION DEMAND DRIVERS 1/4

Public and private sector building and construction

Bulk water infrastructure : in 2011 government stated plans to spend R14.2 billion on

dams and water distribution systems

o Construction of the Polihali Dam on the Senqu river in Lesotho, phase 2 of the LHWP

starts in 2016 – 2,3 million m3 concrete translating to 0.7 million tons cement

Roads : Sanral in 2012 indicated that maintenance and upgrading backlog of

R149 billion

Power generation : Eskom capacity expansion programme funding requirement at

R300 billion and to date have secured R241billion²

Education institutions : In 2010 Basic Education Minister highlighted R140 billion

backlog in school infrastructure. Currently implementing ASIDI¹

¹ Accelerated Schools Infrastructure Delivery Initiative

² Eskom website : http://www.eskom.co.za/Whatweredoing/NewBuild/Pages/Funding_Update.aspx


1925 March 2014


Residential demand in line with improved incomes

Entry-level housing market with a shortfall of c2.1 million houses*

Resultant 50% increase in demand for related infrastructure

Backlog in infrastructural projects coupled with the government’s NDP 18 defined strategic

infrastructure projects (SIPs). Targeted cement-intensive projects include;

SIP 1 – Unlocking the Northern Mineral Belt

o Waterberg investment in rail, water, pipelines, energy generation and transmission

infrastructure

SIP 2: Durban ,Free State & Gauteng Logistics and Industrial Corridor

o Strengthening the logistics and transport corridor between SA’s main industrial hubs

o Improving access to Durban’s export and import facilities

Source:* Human Settlements Minister – Tokyo Sexwale, 7 June 2013


2025 March 2014


SIP 4: Unlocking the economic opportunities in North West Province

o Acceleration of identified investments in roads, rail, bulk water and water treatment

and transmission infrastructure

SIP 6 : Integrated Municipal Infrastructure Project Development

o To address all the maintenance backlogs and upgrades in 23 least resourced districts

with 17 million inhabitants

SIP 18: Water and Sanitation infrastructure

o 10 year plan to address the estimated backlog of adequate water supply to 1.4

million households and basic sanitation to 2.1 million households


2125 March 2014


Building plans trends¹

Building plans completed increased by 20.1 % for non-residential , 12.2% for residential

and 20 % for additions & alterations

Passed plans have steadily increased by an average of 30.9 % for non-residential ,

15.9% for residential and 8.3 % for additions & alterations

Building confidence index

The FNB/BER² index moved up from 48 points in the fourth quarter of 2013 to 52 points

in the first quarter of 2014

First time above 50 points since 2007


¹Actual values 2013 vs 2012 constant prices reported by large municipalities : rural development not included

² First National Bank/Bureau for Economic Research (FNB/BER)

2225 March 2014

SA CEMENT MARKET OVERVIEW


2325 March 2014

-

2 000 000

4 000 000

6 000 000

8 000 000

10 000 000

12 000 000

14 000 000

16 000 000

18 000 000

20 000 000

Cement tonsactual sales

Cement tonsforecasted

Entry of SepCem capacity.


Source: Sephaku Cement research (2012)

Projected trend indicates a growth of 100% in cement sales volumes in the period between

2002 to 2020.

Cement sales volumes in line with the projected trend at 9.1 million tonnes by 3rd quarter

2013.

INDUSTRY CEMENT SALES AND FORECAST

2002 - 2020

2425 March 2014

CUSTOMER CHANNELS : RELATIVE DEMAND

Resellers are the largest volume customer category

Key driver of the bag market which constitutes 55 to 60% of sales volumes

SepCem mainly targeting all channels


ResellersReadymixProducers

Precast(C.P.M.)

Blenders Civil Building Other Mining

% per channel 48.2% 18.3% 14.7% 5.8% 5.4% 4.4% 1.8% 1.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

50.0%

2525 March 2014

SEPCEM’S APPROACH TO THE MARKET

Target to attain 20 - 25% of the inland market share

Resultant national market share of 13 - 17%

To produce three cement strengths : 32.5R , 42.5R and 52.5N

Essentially 32.5 R and 42.5 R will be produced for the bag

market

Bulk market to be supplied with the 42.5 R and 52.5 N and

supported through a sophisticated customer laboratory, and

concrete experts

Determined not to engage in a price war

Strategy to initially secure sales with the major resellers

In addition to secure accounts with the next tier


2625 March 2014

SEPHAKU CEMENT’S VALUE PROPOSITION


2725 March 2014

COMPETITIVE EDGE TO INDUSTRY AVERAGE

Energy utilisation efficiency: 95 kWh per

tonne as compared to 145 kWh per tonne

Consistent cement quality: single 6 000tpd kiln

for clinker

Logistical advantage: proximity of Delmas to

extender source, coal supply and the market

Environmental impact: lowest particle

emissions of 30 mg/Nm³ compared to up to 200

mg/Nm³ for older plants

Minimal maintenance costs – brand-new

plants compared to 36 years

Inland price structures higher – better margins

because coastal prices impacted by imports

Delmas plant – December 2013

Aganang plant – October 2013


2825 March 2014

LOGISTICS OVERVIEW

SepCem owned extender source ,Sephaku Ash, located 34km from Delmas

Extender constitutes 40% content of the 32.5R cement targeted for the bag market

Five major contractors have been selected as main transporters

Three of the contractors transporting the bulk consignments from Aganang and/ or

Delmas

Back – haul logistics advantage between Delmas and Aganang

Several systems and plans have been developed to increase loading efficiency at the

plants, which will contribute significantly in ensuring a superior service promise


2925 March 2014

COMPLEMENTARY OPERATIONS OVERVIEW

North West limestone mine

Situated right next to the Aganang plant with an expected life of mine at 30 years

Limestone to be mined opencast at a rate of 1.64 million tonnes for 1.0 million tonnes of

clinker

Extensive quality control will be done on drilling of reserves, and real-time QC on run-of-

mine material as it passes through the crushing circuit

Dwaalboom limestone project

Situated 80 km west of Thabazimbi, 10 km south of Dwaalboom

Non-samrec resource estimation at 85 million tonnes

Strategically located in close proximity to northern inland market

Sephaku Ash

Situated within the Kendal power station premises

Process approximately 800ktpa of fly ash


3025 March 2014

OUR BRAND NEW PLANTS


3125 March 2014

INTEGRATED CEMENT PLANT CONFIGURATION


3225 March 2014

DELMAS CEMENT PLANT CONFIGURATION


3325 March 2014

UNIQUE FEATURES OF OUR PLANTS 1 / 2

Latest generation primary impact-crusher

Supplier : Hazemag – Germany

Latest limestone roller-screening technology for beneficiation

Supplier : Wobbler/Hazemag – Germany

Latest pyro-processing technology :air-separate pre-calciner kiln with 5-stage preheater

Latest generation high-impulse multi-channel main burner

Supplier : Pillard – France

Latest generation pendulum-grate cooler

Supplier : IKN – Germany


3425 March 2014

Best-in-class vertical roller milling across the board for raw milling, coal grinding and cement

milling

Supplier : Loesche – Germany

Main process fans all from European supply

Supplier : Vente-Oelde – Germany

Rotary packer / palletisers

Supplier : FLS Ventomatic – Italy

Control systems supplied

Supplier : Siemens

High-voltage electrical motors

Supplier : ABB and Siemens


UNIQUE FEATURES OF OUR PLANTS 2 / 2

3525 March 2014

CONCLUSION


3625 March 2014

SEPHOLD INVESTMENT CASE


Key management ~ 250 years combined experience in cement

manufacturing and technology

Technologically advanced plants

Profitable concrete asset providing solid earnings and cash flow

Focused strategy on the lucrative cement manufacturing sector

Potential share price re- rating

3725 March 2014 3725 March 2014

CONTACT

Sakhile Ndlovu

Investor Relations Officer

Tel : + 27 12 622 9400

Email : [email protected]

Documents

DELMAS MILLING PLANT 25 MARCH 2014 - SepHold...DELMAS MILLING PLANT SITE VISIT PRESENTATION 25 MARCH 2014. 25 March 2014 2 ... The acquisition of Métier Mixed Concrete in 2013 started