FY 2013 results
Royal Bafokeng Platinum (RBPlat; JSE: RBP) today announced its results for the year ended 31 December 2013. RBPlat reported a 66% increase (173 cents) in headline earnings per share (HEPS) compared to 104 cents in the previous year and a 24% increase in cash generated by operating activities to R907.8 million (2012: R732.6 million). Headline earnings increased from R170.3 million in 2012 to R283.9 million in the year under review.
Our 4E PGM ounce production increased by 4% to 280koz (2012: 269koz), with an 8% increase in built-up head grade to 4.38g/t 4E (2012: 4.07g/t 4E), offsetting a 3% drop in total tonnes milled. The balance sheet at year end remained ungeared with net cash and near cash investments of R772.9 million. The RBPlat revolving credit facility with Nedbank was increased by R500 million to R1 billion and the working capital facility was increased by R200 million to R458 million to provide an interim guarantee for the employee housing project. Phase I of this project – to build 400 houses to facilitate home ownership by third party funding – was well underway by the end of 2013.
In another challenging year for the mining industry, which saw the platinum price dip below US$1 300/oz in June 2013, RBPlat was fortunate to enjoy labour stability and was able to restructure the workforce and end the year with a stable operating environment. In July 2013 the company entered the last year of a three year wage agreement that included the commitment to begin building homes for employees. Negotiations for the period beginning July 2014 will begin in the near future.
Key features for the period include:
- The company’s emphasis on health and safety strategies resulted in further improvements in key safety measures during the period under review. Since 2010, the BRPM JV has reduced its overall serious injury rate by 50% and lost time injuries by 36%. In 2013, the serious injury rate at BRPM was reduced by 37% and the lost time injuries by 9%;
- Two fatalities were recorded at BRPM in 2013, despite the overall improvements in safety performance;
- Styldrift I enjoyed a third fatality-free year;
- Progress at Styldrift I was 1.7% higher than planned at 39.2% and included 2 304m of lateral development;
- There was a 5% increase in immediately stopable reserves to 6 000m (2012: 5 710m) and an 8% improvement in built-up head grade to 4.38g/t 4E (2012: 4.07g/t);
- 6% improvement in productivity to 31.6 tonnes milled per employee (2012: 29.8t/emp)
- Cash operating costs increased by a mere 2% to R2 093 million and the unit per tonne milled by 6% to R920;
- Cash operating costs per platinum/oz decreased by 2% to R11 592/Pt oz;
- Capex decreased by 11% to R1 058.8 million due to lower SIB capex and lesser expenditure on the replacement projects;
- Expansion capex increased by 14% to R737 million in line with the Styldrift I programme;
- Replacement capital for the Merensky Phases II and III extension projects was reduced to R184 million (2012: R308 million) due to Phase II being completed in 2012;
- SIB capital was 42% down at R138 million (2012: R239 million) due to the completion of various once off projects and, at 7% of operating costs, was within the target range of 6% to 8%;
- EBITDA as a percentage of revenue increased from 22.1% the previous year to 31% in the period under review as a result of increased revenue and improved cost management performance;
- Revenue of R3 251.1 million was 13.5% higher than that for 2012 due to an increase in the rand basket price and a 4% increase in production volumes;
- Revenue from production through the BRPM concentrator increased by 8.2% to R2 944.7 million (2012: R2 720.9) including R11.9 million generation from Styldrift on-reef development ore;
- Gross profit margin improved significantly from 11.9% in 2012 to 18.5% in the year under review. This was due to a 13.5% increase in revenue and a marginal increase in cost of sales due to focus on cost management;
- Current income tax reduced by 11% due to the reduction in taxable interest income while deferred tax increased by 119% from R68.1 million in 2012 to R149.1 million in 2013 due to increased BRPM JV profits;
- A 6.6% improvement in carbon intensities; and
- R268 million in the past three years on CSI and labour plan projects.
RBPlat Chief Executive Officer, Steve Phiri said that much had been achieved in 2013 despite certain challenges. “We sincerely regret the loss of two of our colleagues at BRPM during the year just ended. These are two deaths too many and our thoughts remain with the families and friends of these workers,” he said. “We remain focused on safety and will continue to work ceaselessly towards a target of zero harm.” Overall safety performance for the year yielded significant improvements as it has each year since 2010, indicating that on the whole the company is making progress with its safety strategies.
“I am pleased that we managed to achieve our long-term strategic objectives in 2013. This was largely due to the commitment of our employees and the unions, as well as the support of the communities in which we operate. I am grateful to our people for focusing on the task at hand and not becoming distracted by industry events. This commitment ensured that our operations enjoyed labour stability in a period that was characterised by considerable upheaval,” said Phiri.
RBPlat also achieved operational flexibility during the 2013 financial year and unit costs on a rand per tonne basis were contained in line with inflation. “Overall our projects are progressing well and are almost all on, or ahead of, schedule,” commented Phiri.
The trends in PGM basket prices and the escalation in operational costs required RBPlat to revise its ore processing strategy in 2013 to ensure the long-term sustainability of the company. The role of UG2, especially the General Faces at South Shaft, was reviewed in the light of current market conditions. RBPlat collaborated with its neighbours to explore synergies for the most efficient and commercially viable solution for their joint and separate processing requirements. The co-operation received from Anglo American Platinum, Impala Platinum and Wesizwe exceeded expectations, resulting in a decision to upgrade the BRPM concentrator in two phases to treat all future Merensky production from both BRPM and Styldrift I. RBPlat will augment performance in the current environment without compromising future UG2 treatment requirements once market conditions improve. This resulted in a net capital saving of R750 million compared to the construction of a standalone concentrator for Styldrift.
Performance at Styldrift I was strong in 2013 and the project is 1.7% ahead of schedule and on budget. The main and services shafts reached shaft loading level and, together with the progress on lateral development and raise boring for the ore passes and silos, RBPlat will be well positioned to begin stoping ramp-up in July 2015 and steady state three years later. The budget for this project has been reduced by R787 million due to a board-approved change of scope and a revised concentrator strategy. At year end, cumulative expenditure was R2 511 million (2013: R681 million) and reflects a saving of R194 million on work to date.
There was a marginal increase in demand for platinum, and a net 2% drop in supply, in 2013. Supply is expected to remain flat in 2014, with increased demand as auto sales in Europe and demand in the jewellery industry in India appear to be on the rise. RBPlat’s focus in the remainder of the current year will be to maintain flexibility in the business, to finalise the funding for Styldrift I, to successfully negotiate a wage agreement and to commit to those enterprises that ensure the safety of the workforce and the licence to operate.
“Our strategies are informed by the longer term and not by a short term recovery in the PGM market,” explained Phiri. “This means that during the remainder of the year we will focus on optimising volumes while retaining the flexibility we have already achieved. Grades, operating costs and ensuring there are no disruptions caused by the BRPM concentrator upgrade will also be under scrutiny. Given our successes in 2013, we have every reason to believe that we will deliver another strong performance in a year’s time.”
For further enquiries, please contact:
Royal Bafokeng Platinum Limited
Investor Relations Manager
Tel: +27 (0)10 590 4517
Mobile: +27 (0)82 920 7803
Russell and Associates
Tel: + 27 0(11) 880 3924