Strategic focus on core business strength results in significant reduction of R750 million in planned capital expenditure
2. Outcome of the strategic review
As advised at RBPlat’s interim results presentation in August 2013, the Bafokeng Rasimone Platinum Mine (“BRPM”) Joint Venture (“JV”) , after careful consideration of the various processing solutions available for the Styldrift I Merensky ore, has resolved to upgrade and expand the existing concentrator plant at BRPM. The upgrade initially increases the existing concentrator capacity from 200 000 tonnes per month (“tpm”) to 250 000tpm. The construction of a further 100 000tpm module adjacent to the existing BRPM plant will increase the nameplate capacity further to 350 000tpm. This solution supports the company’s intent of maximising the commercial strength inherent in its Merensky value chain. This strategy will also minimise the required stockpiling of ore during the Styldrift ramp-up phase.
Merensky output at BRPM is anticipated to reduce beyond 2018 owing to the depletion of Merensky reserves at South shaft. The expanded concentrator capacity allows the BRPM JV to treat all the Merensky ore from BRPM (120 000tpm) and Styldrift I (230 000tpm) together with limited quantities of UG2 ore. Excess UG2 ore will continue to be toll treated at the Anglo American Platinum Waterval concentrator plant. Sufficient flexibility is built into the processing solution to allow for further upgrades and/or expansion to also process the UG2 ore should market conditions allow.
3. Capex reductions
RBPlat announced on 21 June 2012, that it had introduced cash preservation measures in response to the difficult market conditions at the time characterised by the softening of PGM prices as a result of weaker demand for PGM’s, particularly from Europe, as well as local cost pressures. To this end, the company identified opportunities to defer expenditure in the short- to medium-term on certain non-critical items without any material negative impact on the business. These included:
- Deferment of exploration drilling at BRPM and Styldrift II (R71.7 million);
- Deferment of construction of a chairlift at BRPM’s South shaft (R90.7 million); and
- Deferment of BRPM concentrator upgrade (R300 million). The upgraded BRPM concentrator facility with a capacity increase from 200 000tpm to 230 000tpm was scheduled to come on-stream by the end of 2013 and would have enabled the treatment of ore comprising up to 30% UG2, from the current limit of 8% UG2.
The upgrade referred to in (3) above together with an additional R50 million in order to construct a UG2 blending facility was intended to increase BRPM’s concentrator facility to 230 000tpm and thereby enable the treatment of greater quantities of UG2. This is now replaced by the aforementioned BRPM upgrade to 350 000tpm to process ore from BRPM and Styldrift.
The cost of the upgrade and expansion of the existing concentrator plant at BRPM is estimated at R2 billion. This represents a capex reduction of approximately R750 million on the JV’s combined original capex plan of R2.4 billion for the development of a concentrator plant at Styldrift plus the R300 million plant upgrade at BRPM to treat the UG2 and the additional R50 million provided for UG2 blending. As a result, the BRPM JV has revised its overall capex budget for the Styldrift I project from R11.4 billion to R11.0 billion and reduced the BRPM capex budget by R350 million resulting in a combined reduction of R750 million.
4. Skills development and ramp-up at Styldrift
The company’s long-term objective (beyond ramp-up of the Styldrift project) is to be an owner-operated operation. In recognition of this long-term objective, the development of local skills at an early stage is considered of strategic importance to the success of the mine. Styldrift is located and will be operating on the doorstep of four communities namely, Chaneng, Mafenya, Robega and Rasimone. RBPlat therefore intends recruiting from these communities and, in doing so, help to alleviate the existing high levels of unemployment.
Styldrift has already commenced with its local skills development programme in partnership with the Sandvik training academy in Rustenburg to develop 360 local community members in operator and maintenance skills.
During ramp-up Management anticipates that there will be significant pressure to rapidly deploy a large number of skilled and experienced teams due to the mechanised nature of the mine and the aggressive ramp-up schedule. Management believes that contract mining during ramp-up will provide a higher degree of certainty with regards to performance and costs, and an improvement on the efficiencies of the project.
Consequently, the Board of RBPlat has elected to employ a contractor-operated model for mining and construction activities during the ramp-up phase at Styldrift. The use of contractors in the mine development and stoping environment is expected to not only afford the mine the best opportunity to meet its ramp-up schedule, but also to develop its own long-term skills and systems while still meeting the ramp-up requirements.
It is important to note that Styldrift will include, as a condition of contract, a requirement for the selected contractor to employ in accordance with agreed targets, skills from the local communities. In addition, the mine will, during the ramp-up period, employ teams in accordance with an owner’s team build-up program. The objective is that such teams will comprise largely local employees and will be developed through the owner’s training program.
5. Appointment of mining contractor at Styldrift
After a thorough and comprehensive adjudication process the company has selected Aveng Mining Shafts and Underground, a division of Aveng Africa Limited, as preferred mining contractor for the Styldrift project for a contract duration of 36 months.
Final contract negotiations and conclusion of legal agreements are expected to be completed by the end of the first quarter of 2014, with ongoing project optimisation prior to mining operations commencing in July 2015.
Management and the Board of RBPlat remain confident of the long-term prospects of its operations and believe that considered cash preservation, combined with sensible expansion, will continue to serve the company and its stakeholders well into the future.
For further enquiries, please contact:
Investor Relations Manager
Tel: +27 (0)10 590 4517
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