RBPLat acts to protect balance sheet
In the wake of sustained depressed PGM market conditions, and in order to protect the group’s balance sheet, the RBPlat Board of directors (the Board) has made a strategic decision to materially reduce construction activities and related capital expenditure at the Styldrift I project.
“Our safety and operational performances, which were below expectations, accounted for the lower production volumes and ounce output, against the backdrop of significant softening in commodity prices.
“Despite the ongoing improvements in our serious injury frequency rate (SIFR) and lost time injury frequency rate (LTIFR) safety metrics, tragically we lost two of our colleagues in mining-related accidents during the period. After the reporting period a further accident claimed the loss of another employee.
“On behalf of the board I extend my condolences to the loved ones of Messrs Amelio Paquete, Alberto Jose Muchanga and Kayalethu Sidumo, who lost their lives at our operations,” said Phiri.
The Board believes that it is imperative to maintain a strong and healthy balance sheet and to prepare the organization to maximize the uplift in the cycle that will inevitably follow.
At Styldrift I the intent is to reduce the level of activities to such an extent that expenditure could be serviced from excess cash flows generated from operations at RBPlat’s existing BRPM operations as well as from revenue generated from on-reef development at Styldrift I. The Board will continuously monitor the situation and necessary adaptive decisions will be taken as market conditions change or improve,” said Phiri.
Production of both platinum and 4E ounces declined to 78.8koz and 122koz respectively, a year-on-year decline of 9%. This disappointing result reflects the drop of 5.2% in the built-up head grade, combined with lower tonnages milled.
The 3% drop in mill throughput was the result of a failure in the June month of the primary mill drive gearboxes and the discharge trunnion at the concentrator plant. This was a disappointing occurrence, given that the tonnes delivered to the plant were 1.6% higher in the period. This has however, resulted in a stockpile of 10koz (4E) which will be treated during the second half of the year.
Safety stoppages accounted for the loss of 14koz (4E).
The reduction in milled tonnes combined with a 10.7% increase in total cash operating costs resulted in the unit cost per tonne milled increasing by 13.8% year on year.
The built-up head grade of 4.03g/t (4E) achieved for the reporting period is 5% lower than the comparable period. This is owing mainly to:
· significantly increased contributions of lower-grade on-reef Merensky development in the first quarter and the impact of safety stoppages on stoping production;
· higher volumes of UG2 production to mitigate the impact of the stoppages.
During the second quarter the built-up head grade improved to 4.18g/t (4E). With the normalisation of Merensky stoping production, the built up grade should remain at levels ranging between 4.15g/t (4E) and 4.20g/t (4E).
Given the current Eskom power generation constraints, power management has been a key operational focus to minimise the impact of load curtailment on production. Our operational strategy involves load reduction by restricting metallurgical operations, specifically crushing, to enable underground operations to continue unaffected as and when load curtailment is implemented.
To date this strategy has proven effective in managing the intermittent stage 1 and 2 load curtailments, with the direct impact being 312 hours of crusher plant downtime being successfully absorbed without negatively impacting on output. Stage 3 load curtailments however, did impact on production with the milling section and crushing operations being stopped in order to meet the associated 20% power consumption reduction requirement from Eskom.
A total of 34 hours of milling time was lost owing to stage 3 load curtailments, equating to approximately 13kt of production losses.
The indirect impacts of the Eskom curtailments include reduced recovery, increased maintenance and repairs due to unscheduled stopping and starting of the BRPM concentrator plant and other mine equipment designed to run continuously.
BRPM project overview (Phase III)
The Phase III project extends the North shaft Merensky decline system and associated infrastructure from 10 level to the mine boundary at 15 level. The project is due to be completed two months ahead of schedule in 2017 and project expenditure remains within budget.
By the end of June 2015 the project was 55.8% completed. Capex for the period under review amounted to R980 million bringing the total project expenditure to R 4.793 billion to date. First rock was hoisted from the newly commissioned main shaft on 29 June 2015. Surface silos, offices, change houses and the lamp room have been commissioned and are operational.
Construction activities during the second half of the year, as stated earlier, will be limited to activities which can be funded from excess operational cash flows from BRPM.
The headline loss of 60.4 cents per share reflects the effect of the decline in the basket price (including the revaluation of the pipeline) from R21 148/Pt oz to R18 062/Pt oz.
The lower grades and mill throughput had an adverse effect on costs. This, as well as the front-end loading of the wage increases and above inflation utility increases accounted for cash operating costs per platinum ounce and per 4E ounce being 21.2% and 21.6% higher at R15 615 and R10 080 respectively (H1 2014: R12 881 and R8 288 respectively). Total cash operating costs were 10.7% higher at R1 228 million.
Capital expenditure increased to R1 141 million owing mainly to the higher expenditure at Styldrift I, in line with the project’s previously planned execution schedule. Expansion and replacement capital expenditure increased by R348 million and R10 million respectively. Stay-in-business (SIB) capital expenditure decreased by R23 million.
Expansion capex is likely to reduce materially in H2, given the Board’s decision to scale back construction activities at Styldrift I.
Employee relations remain healthy at RBPlat, and are characterised by constructive and constant dialogue. Mining contracting companies at BRPM have now aligned their wage agreements with the five-year wage agreement between NUM and RBPlat concluded in 2014.
CONCLUSION AND OUTLOOK
We are focused on achieving operational excellence in our core business of mining at BRPM, with an increased focus on improving safety, increasing our Merensky contribution, productivity improvements, grade control and strict cost management.
Demand growth for platinum this year is anticipated to be 4%, with increases seen in autocatalyst and industrial uses. However, the platinum price, together with the prices for the other platinum group metals, is expected to remain depressed for the remainder of the year and into the foreseeable future.
With the persisting weak PGM markets, we will be closely monitoring business expenditure and expenditure patterns in order to maintain a healthy balance sheet and to preserve cash in the business through an even more enhanced focus throughout the RBPlat Group on:
• Operational cost savings
• Capital deferment
• Improving efficiencies and productivity
• Reviewing our Merensky and UG2 mix
• Rescheduling and restructuring of mining operations.