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RBPlat chalks up FY output, revenue gains to stable labour relations, cost conservatism

3rd March 2015

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Despite a year in which the platinum industry battled extended strikes and a fractious labour relations environment, black-owned Royal Bafokeng Platinum (RBPlat) CEO Steve Phiri said he was “cautiously satisfied” with the company’s 2014 results, attributing revenue, production and earnings gains in the 12 months ended December 31, to the company’s unique, and apparently stable, partnership with labour.

“Its been an annus horribilis for the platinum sector and the country as a whole, but I’m cautiously satisfied with our progress since taking over management control.

“[Our] labour stability is achieved through a good relationship with the unions… and the positive consequences of this can be seen in our tons milled and ounces produced. I’m [also] not shy to say that we’re the first mining company to sign a five-year wage deal,” he said, referencing an extended wage agreement inked between the RBPlat and majority union, the National Union of Mineworkers in June 2014.

The company had built 422 houses for its employees during the fiscal period and had recently approved Phase 2 of its housing strategy, which would see the development of a further 3 100 houses and associated infrastructure in Rustenburg, Phiri told shareholders in Johannesburg on Tuesday.

He added that the platinum group metals (PGMs) market had significantly destocked in 2014, with global platinum production falling by 22% to 4.7-million ounces for the period and platinum recycling increasing by 2.3% to two-million ounces over the 12 months.

“This is mainly owing to more platinum-rich diesel catalytic converters being scrapped [and recycled] in Europe. This is concerning, as autocatalyst producers are less keen to rely on primary supply from South Africa as a result of labour and other issues.

“The vibe we’re getting is that we’re not a reliable supplier. There is still a lot of above-ground stock, but the biggest threat is recycling, so we need to be vigilant and keep an eye on our margins,” he told shareholders.

BASKET PRICE GROWTH
Commenting on the group’s financial showing, CFO Martin Prinsloo outlined on Tuesday that operational stability and the impact of cost saving initiatives underpinned a strong financial performance, with headline earnings increasing by R157-million, from R283.9-million in 2013 to R440.9-million in 2014, reflecting an improvement in the PGM rand basket price and cost containment.

The average basket price increased 10.7% to R19 842/oz, owing mainly to the rand weakening against the dollar over the 12 months.

Headline earnings a share increased by 38.2% year-on-year to 239c apiece, while
revenue grew by 15.9% to R3.76-billion as a result of the improved rand basket price and an increase in production volumes.

“The base metal content of the Merensky reef makes a valuable contribution to our rand basket price,” he remarked, adding that the company’s gross profit margin improved “significantly” from 18.5% in 2013 to 23% in 2014.

The Bafokeng Rasimone Platinum Mine’s (BRPM’s) average cash unit cost increased by 4%, from R920/t milled in 2013, to R957/t milled in 2014, while the cash unit cost increased by 7.5% from R11 592/oz in 2013 to R12 463/oz in 2014.

“The BRPM joint venture remains at the lower end of the industry cost curve,” said Prinsloo.

Earnings before interest, taxes, depreciation and amortisation as a percentage of revenue increased slightly from 30% in 2013 to 31.6% in 2014 as a result of increased revenue and RBPlat’s continued focus on cost management performance.

OPERATIONAL PERFORMANCE
RBPlat operations head Neil Carr told shareholders that the group’s performance for the year remained in line with its strategic objectives, with the overall mining performance “encouraging”, despite the difficult start to the year.

The group’s ongoing focus on safeguarding its operational flexibility by ensuring that immediately stopable reserves were maintained at optimal levels, with the extraction of the upper group two (UG2) reef horizon as a supplemental source of ore to its Merensky production, continuing to “pay dividends”.

Volumes delivered increased by 7% year-on-year to 2.4-million tons, with Merensky-delivered tons increasing by 1% to 1.9-million tons and UG2-delivered tons by 36% to 563 000 t.

Overall PGM output increased 5% to 294 000 oz.

“We [had] nine requests from [energy utility] Eskom to cut our [electricity consumption] by 10%, or 5 MVA, over the 12 months and have managed to do so without affecting production, as we’ve been able to cut back on other parts of the operation,” Carr noted.

ONGOING PROJECTS
RBPlat progressed two key capital projects at BRPM over the period – the North shaft chairlift project and the Phase III North shaft Merensky replacement project.

The North shaft chairlift project, which would provide employees with a faster and safer method of transportation into the mine than the previous beltriding option, included the development and installation of a chairlift from surface to 5 level.

“Work on the project, which began in June 2011, was completed in October last year and the chairlift was commissioned in November. Capital expenditure on the project ended within the approved project budget at completion,” said Carr.

The Phase III North shaft replacement project, which would extend the life of Merensky at BRPM’s North shaft by extending the North shaft Merensky decline system and associated infrastructure from 10 level to the mine boundary at 15 level, was scheduled for completion in 2017.

“As previously mentioned, the project is already making an on-reef development contribution to BRPM’s production. The overall project is 73% complete against a planned completion of 67%, with 8 301 m of development [having been] achieved to date,” he outlined.

OUTLOOK
Looking ahead, Phiri said the company’s target for 2015 was steady production and recoveries that, in essence, matched those of 2014.

“We are not counting on PGM prices improving significantly from 2014 levels in the short term and we will, therefore, be continuing to focus on containing cost increases,” he noted.

Autocatalyst demand was, meanwhile, expected to grow by 4.3% in 2015, with overall PGM automotive demand likely to rise above 12-million ounces in 2015.

RBPlat expected to deliver between 2.4-million ounces and 2.5-million ounces in the coming year, given its “good” stakeholder relations and “strong” operating platform, with the headgrade being maintained at between 4.15 g/t and 4.2 g/t

“Our Merensky ore will be preferentially treated at the BRPM concentrator facility and excess UG2 will be toll treated at Waterval,” the group stated.

Operating costs were expected to remain below mining inflation, while RBPlat had budgeted capital spend of some R2.9-million for the year.

“While the 2014 results will be tough to repeat, we should be able to match them in 2015 and keep costs below inflation,” Phiri concluded.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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