Royal Bafokeng Platinum (RBPlat) has revived cash flows for major projects after the shock force majeure announcement by Anglo American Platinum early in March halted the refining of its output.
Amplats, which is the world number two platinum group metals (PGMs) supplier, triggered the clause in its contracts with customers and clients that allowed it to breach the terms because of an event beyond its control.
Amplats had an explosion in February at one of its two converter plants, which treat matte originating from the smelter, removing iron and preparing it for base metals and precious metal refining.
It immediately started its spare converter, but this plant had an inexplicable ingress of water, posing the risk of a life-endangering explosion in the high-temperature system. This plant should be returned to production in 80 days from the March 10 declaration of force majeure, warning of the loss of 900,000oz of five PGMs and gold, or 20% of its annual output.
RBPlat, which has an agreement to supply PGM-bearing concentrate to Amplats to process through its smelter, converter and refineries, said on Wednesday it is finalising an agreement with its peer to receive a “significant majority” of payments for concentrate deliveries, which it had pegged at between 450,000oz and 480,000oz of platinum, palladium, rhodium and gold for 2020.
“The board sees this as an acceptable arrangement during the period of the event and is pleased with the commitment demonstrated by Amplats ... to the partnership with RBPlat and to mitigate the impact of the claimed force majeure,” RBPlat said in a statement.
Refine and sell
RBPlat is 40.2% owned by Royal Bafokeng Holdings, the investment arm of the Bafokeng community on whose land the company operates its new Styldrift and Bafokeng Rasimone Platinum Mine (BRPM) and concentrators.
For Amplats, which had R17bn in cash on its balance sheet at end-December, this would mean paying for metal without being able to refine and sell it.
RBPlat is in the final stages of completing its new R13.8bn Styldrift mine, with capital of R800m for 2020, R300m to expand its Maseve concentrator, R100m for an overland conveyor belt linking its two mines and R300m to upgrade its tailings storage facilities.
Ideally, it would like no disruption to cash flows, but under the agreement with Amplats it would continue concentrate deliveries to the latter’s smelter, which will stockpile matte in front of the converter plant as it is repaired. It will receive partial payment in line with deliveries and the balance once the converter is in operation again.
All outstanding payments would have to be paid by Amplats in full before the end of April 2021.
Sibanye-Stillwater, the world’s largest source of mined PGMs, was also affected by the force majeure, having a toll treatment agreement in place with Amplats for the smelting and refining of its metals for a fee. These metals are then returned to Sibanye to market and sell, unlike the purchase of concentrate type of agreement with RBPlat.
Sibanye has its own smelting and refining plants, but after buying the deep-level, labour intensive Rustenburg mines from Amplats it has opted to pay the latter to continue treating metals through its furnaces and refineries as a way to reduce risk and exposure to the erratic Eskom electricity supply.
Sent to refineries
Sibanye has agreed to Amplats smelting concentrate from Rustenburg, the small quantities coming from tailings operation Platinum Mile and half of the concentrate coming from the Kroondal pool-and-share assets held with Amplats.
The resultant matte would be sent to Marikana refineries.
Marikana will be operating at full capacity of 1.1-million ounces of platinum, more than double the 500,000oz it is processing now. This metal did not feature in Amplats’ warning of 900,000oz of five PGMs and gold being removed from the market.
When Sibanye bought Lonmin, CEO Neal Froneman spoke of the need to build a R1bn furnace to give Marikana the capacity to smelt all Sibanye’s concentrate, an option that the management is still studying.
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