Royal Bafokeng Platinum (RBPlat) said it missed the full benefits of a surging price environment as it grappled with difficulties at its two mining assets in SA during 2019.
RBPlat reported a more than doubling of revenue to R7.5bn for the year to end-December from R3.6bn the year before. The cost of sales similarly increased, to R6.8bn, as the new Styldrift mine was commercialised during the year.
That translated into a two-fold jump in headline earnings — a widely watched measure of performance that strips out one-off, non-trading items — to 50.4c per share.
Dividends are likely to be paid at the end of 2021 as both mining assets stabilise costs, said CFO Hanré Rossouw.
RBPlat is 42% held by Royal Bafokeng Holdings, which manages the commercial assets of a Setswana-speaking community with more than 100,000 members that owns vast tracts of land in one of the world’s biggest platinum deposits.
“We’ve got production records, but we did expect more,” he told Business Day, adding there were “frustrations” during the course of the year at both mining assets.
“We had a bit of a stumble at both, but we are on track to where we want to get to and that transformation is still being delivered. These results show some of the promise of this transformation,” he said.
“With our shift with the delivery of Styldrift, we are expecting significant free cash flow even excluding these high metal prices,” Rossouw said.
“We are [at] comfortable net debt levels, [and] with Styldrift and BRPM ramping up I don’t think it would be unreasonable to expect dividends for the full-year 2021. With the significant further windfall from higher metal prices at the moment, we have included a mechanism to distribute excess cash through special dividends,” he said.
RBPlat unveiled a policy to pay 10% of free cash flow before spending on growth.
A hefty increase in finance expenses to R554m from R27m the year before contributed to posttax profit falling to R64m from R256m the year before.
The finance expense was incurred in the purchase of Anglo American Platinum’s one-third stake in the Bafokeng Rasimone Platinum Mine (BRPM).
“While we achieved significant production and construction milestones at our operations, the overall volume and cost performance did not meet expectations, largely driven by the operational complexity we have faced this year,” RBPlat said.
Output of four platinum group metals (PGMs) in concentrate for the year was a record 401,000oz, but it missed the bottom end of RBPlat’s full-year guidance by 7%.
Costs overshot guidance by 6%, coming in at R14,139/oz of four metals produced.
Switching reefs
RBPlat expects to produce 450,000oz-485,000oz of the four PGMs in concentrate during 2020, with costs an ounce in the R13,300-R14,400 range.
RBPlat is confident of hitting steady-state production at Styldrift in the third quarter of 2020 and normalising operations at BRPM, where it is switching reefs at its South Shaft to mine the palladium- and rhodium-bearing upper group 2 (UG2) reef ore as the Merensky ore is depleted.
In the prevailing market, palladium and rhodium are in high demand from the makers of antipollution devices in petrol engines, and the price has reflected the inability of miners to supply the metals.
Palladium and rhodium contributed 30% and 17% to revenue. Platinum contributed 38%.
RBPlat has started a R350m expansion of its UG2-focused Maseve concentrator to lift capacity to 160,000 tonnes a month from 110,000 tonnes. The expansion, which will be completed in the first quarter of 2021, will deliver 2.6 tonnes of saleable concentrate from every 100 tonnes of ore it processes.
The Maseve concentrator will process UG2 ore from BRPM as well as the Merensky ore coming from Styldrift.
“The contribution of UG2 mining at BRPM will increase to about 35% of our overall production during 2020,” RBPlat said.
“Productivity and mining efficiencies on the UG2 reef are lower than the Merensky reef. The lower grades of the UG2 will create upward unit cost pressures at BRPM, which during 2020 will only partially be offset by the increasing scale of the business as well as operational reorganisation.”
The higher value of the metals coming from the UG2 ore would offset these costs, said Rossouw.
Correction: March 4 2020
An earlier version of this article incorrectly said RBPlat is a division of Royal Bafokeng Holdings. RBPlat is 42% held by RBH.
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