JOHANNESBURG (miningweekly.com) – With its focus maintained on its dump retreatment operations, Aim-listed Sylvania Platinum is considering placing its Grasvally chrome exploration project up for sale during the 2016 financial year.

The platinum group metals (PGMs) producer expected to complete exploration at the Limpopo-based chrome operation in October, with the application for authorisation to mine the area to be pursued shortly thereafter.

Despite stating a year ago – and reaffirming on Monday – that Sylvania’s dump retreatment was a priority for the company and that it had “no intention” of becoming a chrome miner, it continued legal and geological activities at Grasvally, with an operational plan in the works.

Now, Grasvally, which had the potential to become a high-grade, low-cost, openpit chrome mine, would “most likely” be available for sale during the 2016 financial year, Sylvania chairperson Stuart Murray said on Monday.

“It has since been found that the Grasvally resource contains some of the best quality chromitite in the country, comparable with Turkish-grade chromitite, and presents a very exciting opportunity should the company wish to diversify its operations or decide to sell this asset,” Sylvania CEO Terry McConnachie added.

In March, Sylvania posted an initial mineral resource estimate of 64 900 t of high-grade chromitite with an in-situ grade of 40.70% chromium oxide and a chrome-to-iron ratio of 2.19:1 – all of which was accessible by small and shallow openpits.

The Grasvally chrome ore mine operated between 1966 and 1988 and boasted some of the highest chrome grades recorded in South African chrome mines, Sylvania reported earlier this year.

However, the company aimed to narrow its focus to becoming a platinum miner at the adjacent Volspruit mine, in Limpopo.

The group continued its legal and licensing activities at Volspruit, while it awaited the outcome of the mining right application from the Department of Mineral Resources.

“It would appear that the mining right approval rests on the decision to be taken by the Limpopo Department of Economic Development and Environment whether to grant an environmental authorisation to mine,” the company said.

However, Sylvania remained confident of its preparation of the environmental-impact assessment and environmental management plan for the mining right.

Meanwhile, the company’s Sylvania Dump Operations (SDO) continued to deliver record production during the 2015 financial year.

SDO production for the year was up 7% to 57 587 oz, surpassing the group’s revised guidance of between 55 000 oz and 57 000 oz.

Overall group capital expenditure (capex) decreased 27% year-on-year from $5.5-million to $4-million in the year under review, as the group aimed to maintain a positive cash balance amid low commodity prices.

However, capex injected into the SDO operations surged 129% over the prior year on the back of the construction of new tailings facilities at Lannex, Doornbosch and Tweefontein, as well as the changeover from mechanical mining of the dumps to a hydromining process.

FINANCIAL RESULTS
Meanwhile, despite low platinum prices battering Sylvania’s fourth-quarter performance, the company returned to profitability for the full year.

The PGM producer, which fell into the red in 2014 with a net loss of $5.1-million, posted profit for the year under review of $1.7-million.

Gross profit for the year under review increased 51% to $6.5-million, while basic earnings a share reached 0.57c, a turnaround from the basic loss a share of 1.7c posted in the prior year.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) increased 13% to $12.6-million for the SDO, while the group’s adjusted Ebitda increased 35% to $10.1-million.

Sylvania’s revenue for the 12 months to June remained stable at $47.8-million, despite a 12% drop in the gross basket price from $1 224/oz in 2014 to $1 072/oz in 2015.

“The past financial year was not an easy one. After starting the year at $1 497/oz, the platinum price quickly moved into steady decline, closing the financial year at $1 078/oz, and declining further,” said Murray.

Sylvania achieved an 18% cut in general and administrative costs to $3.3-million in the financial year under review, with the group’s cash cost at $642/oz, below the company's guidance of $700/oz.

Sylvania had a cash balance of $8.4-million as at June 30, a 58% rise on the prior year, while cash generated from operations increased 78% to $9.1-million.

CAUTIOUS APPROACH
As the group moved into the 2016 financial year, Sylvania aimed to produce 55 000 PGM ounces at a cash cost of under $700/oz and at a capex cap of $3-million, McConnachie said.

Sylvania expected to meet the full-year guidance despite the impact of a fire at the company's Western dump operations, the Mooinooi dump and run-of-mine plants, last week, as well as disruptions to the Eastern dump operations, namely Lannex and Steelpoort, on the back of recent violent community protests amid demands for improved infrastructure and jobs. These disruptions were expected to result in lost production of up to 1 000 PGM ounces for the first quarter of the new financial year.

Meanwhile, Murray warned that more restraint was needed moving forward owing to the volatile PGM market.

“The platinum price has fallen below $1 000/oz and I am not convinced that it will recover in the near term,” he said.

This was further exacerbated by an oversupplied market, power interruptions and regulatory interventions, which required a “cautious approach” to production costs and cash flow.

“At present, we are caught in a market distorted by the overhang of a large supply of metal in speculative holdings, which are only slowly unwinding. Consequently, we are planning on a difficult first half in which platinum prices will not be in our favour.”

The company did not declare a dividend for the year under review.