Tough decisions see RBPlat’s return to profit
Johannesburg, 28 February 2017: Royal Bafokeng Platinum Limited (RBPlat) today issued its results for the year ended 31 December 2016.
- Improved safety performance
- Labour and union stability
- 9.8% higher revenues
- Headline earnings per share 204% higher at 87 cents (2015: 83 cps loss)
- R585.3 million cash generated by operating activities
- 74% of the joint venture capex funded from excess cash flows from operations
- R835.5 million cash on hand
Although the period under review was marred by the loss of Mr. Thabang Clemente Frederick Mokone in a conveyor belt accident at BRPM, there was a 31.5% improvement in the total injury frequency rate (TIFR), with a 7.1% improvement year-on-year in the lost time injury frequency rate (LTIFR) and an overall 62% improvement in the LTIFR since 2010.
Year-on-year our SIFR deteriorated by 62.4% due to five additional serious injuries sustained by employees in 2016 which included three minor falls of ground injuries and two slip and fall injuries.
The safety, health and wellness of our employees is a critical component of achieving operational excellence at RBPlat. With this in mind work continues on addressing leadership, operational design, systems and behaviour, in terms of the revised safety strategy.
SOCIAL AND LABOUR PLANS
For our doorstep communities, the main focus of the year was education support which is designed to address maths and science learning, governance and school management skills. There has been good progress in this area. With our support since 2013, Charora High School, the only high school in the communities in which we operate, has grown its matric learners in maths and science by 155% and 110% respectively.
Sales revenue (excluding Styldrift) increased by 9.8% to R 3.3 billion year-on-year, reflecting the higher rand basket price and serving as the main driver of the increase in the gross profit margin to 7.2% (FY2015:loss of 1.3%). EBIDTA as a percentage of revenue increased from 9.8% in 2015 to 14.7% in 2016, which represents a 50% improvement.
RBPlat’s headline earnings grew by 204% to R166.7 million with headline earnings per share of 87 cents compared to a headline loss of 83 cents per share for the previous comparable period.
BRPM’s average cash unit per tonne milled increased by 10.4% from R1 066 in 2015 to R1 177 in 2016. The cash unit cost per platinum ounce increased by 7.8% from R 14 504 to R 15 639 mainly due to above inflationary increases in labour, contractor and utility costs.
Net cash flow generated by operations reduced marginally from R619.2 million to R 585.3 million in 2016. At 31 December 2016 the Group’s cash and near-cash investments amounted to R835.5 million compared to R917.6 million at 31 December 2015.
During 2016, RBPlat funded 74% of its R1.1 billion capital expenditure from cash generated by operations and Styldrift I on-reef development revenue receipts – a significant improvement on the 30% of capital expenditure that was funded from cash generated by operations in 2015.
Total capex was reduced by 44% year on year to R1.126 billion given the scaling down of activities at Styldrift in response to the flat markets. At BRPM replacement capital expenditure was 78.5% lower due to the completion of certain projects and the deferral of others. Stay-in-business capital expenditure was only marginally down by 1.8% to R110 million (40% of operating expenditure), which is expected to increase to between 4% and 6% of operating expenditure.
REVIEW OF OPERATIONS
Tonnage losses attributable to DMR safety stoppages were less serious in 2016 (102kt) than in 2015 (275kt). However the frequency of section 54 stoppages spiked in the third quarter of the year, adversely affecting that quarter’s output and the overall 2016 output.
Overall, combined Merensky and UG2 tonnes delivered increased by 12.3% to 2 759kt (FY2015: 2 457kt). Merensky tonnes increased by 16.2% to 2 176kt mainly due to on-reef development contribution from Styldrift I (FY2015: 1 872kt). UG2 tonnes delivered decreased 0.3% year-on-year. The higher Merensky delivered tonnes resulted in the UG2 contribution reducing to 21%.
The increased on-reef development at Styldrift had a predictable impact on the 4E built-up head grade, which declined to 4.03g/t. On the other hand the 4E built-up head grade at BRPM improved by 1%to 4.18g/t.
The upgrade of the BRPM concentrator’s metallurgical circuit to 250kptm was completed in the first half of 2016. At 85.6% the BRPM concentrator recoveries were in line with expectations. Year-on-year 4E production ounces grew by 9.4% to 304koz. Of these, platinum ounces amounted to 196koz.
Notwithstanding the steady progress and growth in production capacity at Styldrift I to 50ktpm, development progress of 5km was below the 6.8km target owing to changes in support methodology and localised geotechnical conditions.
Progress made at Styldrift I, together with the improvements in the rand basket price allowed RBPlat to commit to the next phase of expansion at Styldrift which will ramp-up the mine to 150ktpm at a capital cost of R4.75 billion in addition to the R6.09 billion that had been spent since the commencement of the project up to the end of September 2016. This will secure an optimal level of Merensky production without the need to incur the significant expenditure to process production beyond this level.
Labour stability continues to be an important element of our overall performance. In a ballot held by the National Union of Mineworkers in November 2016, over two-thirds of our workforce voted for having a closed-shop agreement at RBPlat.
CONCLUSION AND OUTLOOK
“Our flexible and robust operations allow for tough cash preservation strategies, which helped us to progress our journey and protect stakeholder value. Our focus will remain on achieving operational excellence, zero fatalities, continuing to improve our safety performance and improving productivity levels and our cost profile,” concluded RBPlat CEO Steve Phiri.