Reviewed Interim Results for the six months ended 30 June 2017
RBP GETS ITS NOSE IN FRONT
Creditable H1 performance in tough market
REVIEWED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2017
Johannesburg, 01 August 2017: Royal Bafokeng Platinum Limited (RBPlat) today issued its results for the half-year ended 30 June 2017.
Key features of the half-year
|•||14.3% increase in tonnes milled|
|•||8.9% improvement in tonnes milled per employee|
|•||9.4% increase in 4E metals in concentrate|
|•||Unit cost per tonne milled unchanged|
|•||Rand basket price down 9.8%|
|•||HLPS of 15.3 cents|
|•||Cash and near-cash investments of R 1 664.5 million|
Speaking to the financial investment community today, chief executive Steve Phiri said: “Although we are pleased that the reporting period was fatality-free, it is disappointing that our other safety injury indicators signalled a regression year-on-year.
“Sustained engagement with our employees and securing the commitment of all stakeholders on improving our safety culture continues to be a core part of our daily operational activities.”
Along with HIV/Aids management, TB tracing remains a major focus area. There were 6 321 screenings for TB during the period under review. In the first six months, 29 employees completed their treatment successfully. The community TB screening programme, introduced in December 2015, has had similar successes, with approximately 3 000 people screened for TB.
The company’s performance in the half-year was underpinned by a peaceful and stable labour environment. The current five-year wage agreement was recently reviewed following three years since implementation. Both the company and the NUM are satisfied with its current form. As a result the agreement will run its natural course of five years.
The company continued with its educational and community skills development programmes. We also partnered with the MQA to provide portable skills training to community members at a cost of R20 million, fully funded by the MQA.
Depressed commodity prices have forced the company to review some of its infrastructure development programmes. “However,” Phiri said, “the employee housing scheme has now entered its second phase, with 736 houses due to be completed by the fourth quarter of 2017, bringing the total number of employee houses to 1 158.”
The employee housing project is part of the shared 2030 vision with the NUM of ensuring that every RBPlat employee is provided with a decent and affordable house.
The headline loss of 15.3 cents per share (H1 F2016: headline profit of 77.8 cps) was largely attributable to:
|•||a 9.8% lower realised average rand basket price for the six months ended 30 June 2017 and|
|•||a once-off restructuring charge of R57.1 million|
Despite the lower rand basket price, the drop in revenues was contained to 3%, given that BRPM’s production volumes grew by 7.7% to 139.8koz (4E). Average cash operating costs were 7.5% higher, but were offset by the higher platinum production, thereby restricting the increase in cash operating costs per platinum ounce to R15 913, well below CPI at 0.2%.
The gross profit margin reduced from 11.4% to 0.7%, occasioned by the lower net revenues combined with an 8.5% increase in total cost of sales to R1 583 million.
Earnings before interest, tax and depreciation and amortisation (EBITDA) as a percentage of revenue decreased from 18.5% to 6.3% in the first half of 2017, mainly as a result of the lower revenues and restructuring costs.
At 30 June 2017 the RBPlat Group had cash and near-cash investments of R1 664.5 million. RBPlat successfully raised R1.2 billion through the placement of convertible bonds and secured R2 billion debt facilities in March 2017. The debt facilities comprise a R750 million seven-year term debt facility, a R750 million five-year revolving credit facility and R508 million of general banking facilities.
During the period under review, the Group embarked upon a process to restructure the overhead and operational structure of the business. The restructuring strategy entails a two-pronged approach whereby:
|•||through a reduction in fixed-cost labour, an annual benefit of approximately R118 million will be realised at BRPM; and|
|•||redeployment of 60% of the mining crews from the non-profitable South shaft UG2 to superior-margin Merensky and UG2 production will result in additional revenue and optimised processing arrangements in benefits of approximately R37 million per annum.|
|1.||The company reported metal production of 155.4koz (4E) and 99.9koz (Pt) for the half-year, reflecting increases of 9.4% and 9.1% respectively.|
|2.||The higher volumes are attributable to an increase in mill volumes and concentrator recoveries. Tonnes delivered to concentrators increased by 13.7% to 1 473kt, with BRPM contributing 1 235kt and Styldrift 238kt. Merensky-delivered tonnes increased by 156kt or 15.3% to 1 174kt, with the BRPM contribution increasing by 59kt and Styldrift 98kt. UG2-delivered tonnes increased by 7.6% to 299kt.|
|3.||BRPM concentrator recoveries improved by 0.7% to 86.38% whilst toll concentrator recoveries remained in line with contractual limits.|
|4.||The 4E built-up head grade for the reporting period declined by 5.2% from 4.01g/t (4E) to 3.80g/t (4E). The drop is mainly attributable to higher than planned on-reef dilution at Styldrift, associated with re-establishing working faces through a known fault system. At Styldrift the grade was impacted for the bulk of the second quarter and ended at 2.53g/t for the half-year. There has been an improvement in the grade subsequently at Styldrift and this is expected to stabilise at around 3.30 g/t (4E) during the second half of 2017.|
Productivity improvements in our two key efficiency metrics of square metres per stoping crew and tonnes milled per total employee costed (t/TEC) were also realised during the reporting period. Square metres per stoping crew increased by 4.8% to 352 m2/crew, whilst t/TEC improved by 8.9% to 33.0 t/TEC.
Total capital expenditure for the period under review increased by 63.8% to R847 million compared to the corresponding period in 2016.
Replacement capital was reduced by R33 million to R10 million in line with reduced Phase III construction activities as the project nears physical completion.
Expansion capital expenditure increased by 86.1% or R360 million to R778 million, reflecting the accelerated construction activities related to the ramp-up phase at the Styldrift I project.
Stay-in-business capital expenditure increased by 5.4% to R59 million compared to the same period in 2016 and amounted to 4.1% of operating expenditure.
The platinum market is forecast to be in a modest surplus for 2017 and prices are expected to have limited upside.
RBPlat remains committed to achieving a zero harm operating environment by continuing to foster a resilient safety culture. Improving the safety performance will be a critical success factor, with specific focus on reducing injury frequency rate metrics to their historic performance levels and remaining fatality free.
“Our focus will be aimed at consolidating the strong operating performance achieved during the first half by securing further tangible gains in volume, grade and cost. The restructured business is expected to enhance margins, while we continue to contain costs and defer non-essential capital expenditure. With cash and near cash investments of R1 664.5 million, together with the R2 billion debt facilities, RBPlat is well poised to take the business to the next phase, that of ramping up Styldrift to 150ktpm by end of 2018,” Phiri said.