Reviewed year-end results for the 12 months ended 31 December 2017
RBPlats posts strong recovery despite challenging H1
11% increase in normalised headline earnings and cash position reaches R1.3 billion
Johannesburg, 6 March 2018: Royal Bafokeng Platinum Limited (RBPlat) today issued its results for the 12 months ended 31 December 2017
Key features of the year
9.4% increase in tonnes milled to 3 021kt.
4E ounces higher by 7.9% at 328koz
2.4% decrease in cash cost per tonne milled to R1 149/tonne
Improved EBITDA margin of 16.4%
5.7% increase in cash generated from operating activities
Strong cash position of R1.3 billion
The first half of 2017 was characterised by a low basket price environment. Improvements in production volumes at both of our operations however, combined with higher rand basket prices during the second half of the year helped boost revenues by 5% to R3.5 billion for the year.
Fixed cash costs ended lower by 2.6% compared to 2016, underpinned by the organisational restructuring, which was completed by August 2017. The reduction in fixed costs combined with an increase in metal in concentrate volumes yielded respectable cash operating unit costs of R15 414/Pt oz and R9 941/4E ounce, equating to a 1.3% and 1.4% lower unit cost year-on-year respectively.
Year-on-year capital investment increased by 91.8%, amounting to R2 160 million, with expansion capital accounting for 93% of total expenditure.
With the solid performance, cash generated by the operations rose by 5.7% to R618.4 million. At year-end the group was in a strong cash position with R1.3 billion in reserve.
Safety and health
While the 2017 financial year was fatality-free, the lost time injury frequency rate (LTIFR) and serious injury frequency rate (SIFR) increased by 47.9% and 32.9% respectively.
Says RBPlat CEO Steve Phiri: “The instability resulting from the restructuring of the business is believed to have negatively affected our safety performance.
“Once labour movement stabilised we were able to achieve a marked reduction in injuries during the final quarter of 2017.”
Noise-induced hearing loss (NIHL) continues to be a challenge in the mining industry. A new hearing capability baseline was established for employees in July 2016 during regular audio screenings. This, in accordance with the industry’s milestone requirements for noise. In future, we will measure any shift in employees’ hearing against this baseline.
While there was a 13.9% increase in the number of employees and contractors screening for TB, the 8.9% increase in the number testing positive was disappointing.
The number of employees and contractors agreeing to be tested for HIV/Aids increased by 17.2% and the HIV prevalence rate declined from 24.5% in 2016 to 23.1% in 2017.
Despite the impact of restructuring of the business and the uncertainty around the future of the employees of Oakbay-linked Westdawn Investments, trading as JIC Mining Services, labour stability was not negatively impacted.
RBPlat’s education support programme, which addresses maths and science learning, governance, school management skills, infrastructure, safety and security, resulted in the number of learners who wrote matric maths at Charora Secondary School increasing by 27% in 2017. Of the 75 learners who wrote maths, three achieved distinctions.
During 2017 315 learners from “doorstep” communities acquired portable skills training through a Mining Qualifications Authority (MQA) sponsored training programme.
2017 was characterised by greater levels of corporate activity which included.
- • A R1.2 billion convertible bond issue was concluded
- • R2 billion debt facilities were negotiated and concluded
- • An organisational redesign and restructuring process was concluded, resulting in a 1.4% reduction year on year in unit costs and a 2.6% reduction in fixed cash costs
- • The value-enhancing Maseve acquisition was negotiated and Phase I of the transaction concluded
RBPlat’s funding plan will secure the next phase of the ramp-up of Styldrift 1 to 150ktpm which, together with the acquisition of Maseve, will position the project well for its ultimate ramp-up to a 230ktpm Merensky operation.
During the second half of the year, the results of restructuring – together with a much improved average rand basket price of R19 156 per platinum ounce for the full year (2016: R18 906) – helped to achieve a strong recovery.
Revenue of R3 498.5 million was 4.7% higher due to the 1.3% higher realised average rand basket price and a 3.3% increase in BRPM’s platinum production.
Restructuring, together with other cost-saving initiatives, resulted in a 2.6% reduction in the fixed component of cash costs from 74.4% in 2016 to 71.8% in 2017.
Headline earnings for the full year recovered to R108.8 million from a headline loss of R29.4 million for the first six months.
Cash generated by operations, included in cash generated by operating activities, increased to R569.5 million in 2017 from R528.8 million in 2016. At 31 December 2017 the RBPlat Group had cash and near-cash investments of R1 333.1 million (2016: R835.5 million).
Total tonnes delivered to concentrators increased by 8.4% to 2 992kt; BRPM’s contribution was 3.5% higher at 2 431kt and that of Styldrift I 36.8% higher at 561kt, in line with ramp-up requirements. Merensky-delivered tonnes increased by 12% to 2 437kt, while UG2 delivered tonnes reduced by 4.8% to 555kt due to the suspension of UG2 mining at South shaft during the second half of the year.
Overall head grade (4E) reduced to 3.94g/t due to the increase in on-reef development tonnes from Styldrift I, in line with expectation. BRPM (4E) head grade declined by 0.5% to 4.16g/t due to higher off-reef dilution at the South shaft Merensky, a consequence of geological complexity in current mining areas.
Total tonnes milled increased by 9.4%, Merensky milled tonnes by 13.0% in line with higher production volumes from Styldrift I and BRPM. UG2 milled tonnes were 4.3% lower at 557kt, in line with the suspension of South shaft UG2 mining.
The overall JV and BRPM recoveries (4E) improved by 0.9% and 0.8% respectively, attributable to improved consistency of mill feed and other ongoing metallurgical improvement initiatives.
Lower built up head grade was offset by increased milled volumes yielding 328koz (4E) and 212koz (Pt) for the year, reflecting increases of 7.9% and 8.2% respectively.
Square metres per stoping crew at BRPM increased by 5.7% to 353m² per crew, while enrolled labour and contractor efficiency rose by 6.6% and 5.3% respectively. Tonnes milled per total employee costed (t/TEC) improved by 11% to 34.2 t/TEC.
Total capital expenditure rose by 91.8% to R2 160 million.
Expansion capital expenditure increased by 106.6% to R2 008 million, in line with the Styldrift I 150ktpm ramp-up schedule.
Replacement capital expenditure reduced by 22.7% to R34 million as BRPM Phase III project activities near completion.
Stay-in-business capital expenditure was R118 million – 4.2% of operating expenditure.
There are prospects of a market improvement for platinum. More than 300koz of supply capacity was lost in South Africa in 2017, the impact of which should be evident in 2018. On this basis, a market that is close to balance, after investment, is likely.
In 2018, RBPlat will ramp up Styldrift I to 150ktpm by year-end and incorporate Maseve into the business.
JV production for 2018, subject to any unforeseen operational disruptions, is forecast to increase to between 3.35Mt and 3.50Mt at a 4E built-up head grade of 3.95g/t to 4.04g/t. The built-up head grade is directly attributable to the high percentage of on-reef development that Styldrift I will contribute to overall production. 4E ounce production for 2018 is forecast to be between 370koz and 387koz, with cash operating unit cost increases expected to remain below inflation.
Total JV capital expenditure in 2018, including escalation and contingency, is forecast to be approximately R2.3 billion, the main driver being the Styldrift I project construction programme.
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