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RBPlat’s full-year performance hampered by takeover delay

An image showing RB Platinum's Styldrift

Styldrift

8th March 2023

By: Tasneem Bulbulia

Senior Contributing Editor Online

     

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Platinum group metals (PGMs) miner Royal Bafokeng Platinum (RBPlat) remained profitable in the financial year ended December 31, despite operating and inflationary pressures, CEO Steve Phiri has said.

In a report to shareholders on March 8, he listed inflationary pressures, supply chain disruptions, Section 54 stoppages, electricity supply disruptions and production constraints among the biggest challenges for the company.

“The company has been under a takeover offer for more than a year and this has created a difficult operating environment. The uncertainty caused by the delay in finalising the corporate action has become a challenge in retaining and keeping the employee morale high under the circumstances,” Phiri added.

Fellow South African PGM miners Impala Platinum and Northam Platinum have both sought to acquire control of RBPlat.

Meanwhile, RBPlat’s revenue for the year decreased by 3.1% to R15.91-billion, mainly owing to lower production.

A very good operational performance from the Bafokeng Rasimone Platinum Mine (BRPM) was offset by a weaker performance at Styldrift, resulting in a 3.9% decrease in the group’s platinum, palladium, rhodium and gold (4E) ounces for the year.

BRPM contributed 266 000 oz of 4E production, an increase of 7% year-on-year, while Styldrift’s production decreased by 16.2% to 183 000 oz of 4E owing to operational challenges.

Cost of sales increased by 21.3% to R11.67-billion. Considerable increases in the cost of steel, fuel and spares contributed to higher on-mine inflation.

The depletion of the unredeemed capital expenditure (capex) balance in the first half of 2022 resulted in an increase in State royalties payable to government from R214.3-million in 2021 to R630.6-million in 2022.

RBPlat’s consolidated gross profit decreased by 37.7% to R4.24-billion from R6.81-billion, with a return on capital employed of 12.7% compared with 22.4% in 2021, as a result of the weak Styldrift production performance and higher cost of sales.

Earnings before interest, taxes, depreciation and amortisation (Ebitda) decreased by 29.7% from R8.53-billion to R5.99-billion, with the Ebitda margin having decreased to 37.7% from 51.9% in the prior year.

RBPlat’s income tax expense increased from R541.1-million to R1.1-billion, mainly owing to the depletion of the unredeemed capex balance in the first half of 2022.

Lower production, coupled with inflationary pressures, also contributed to a 50.9% year-on-year decrease in earnings a share to R114.63.

Headline earnings a share decreased to R120.31.

Despite the reduction in earnings, RBPlat said it continued to be profitable, with its balance sheet remaining robust.

The overall operating performance in 2022, impacted by Styldrift’s weak performance, was said to be disappointing despite the stellar performance of BRPM, which has exceeded its business plan for 23 consecutive months.

Total capex increased by 2.3% year-on-year to R1.85-billion. Expansion capex decreased by 34% to R439-million in line with Styldrift, the BRPM tailings storage facility and Maseve MF2 project expenditure requirements.

RBPlat declared a gross cash final dividend of R5.35 apiece, equating to R1.5-billion. This is in addition to the interim dividend amounting to R711-million that was declared in August 2022.

“In arriving at the appropriate capital allocation in 2022, the board weighed returning a significant amount of cash in the form of dividends to shareholders against a cautious approach in light of the prevailing challenges.

“The board considered the aforementioned significant cash balance, our unutilised banking facilities as well as the fact that we do not have significant capital expenditure requirements in 2023,” Phiri said.

OUTLOOK

“The country’s current energy crisis, and our need to reduce our carbon footprint and to reduce our reliance on Eskom makes it more urgent that we introduce renewable energy in our operations.

“The bankable feasibility study for the construction of a modular solar photovoltaic plant, which would introduce renewable energy into our energy mix, will be completed in the third quarter of 2023, depending on the receipt of regulatory approval.

“The environmental-impact assessment (EIA) process was finalised in February, with the submission of the final EIA report to the authorities,” Phiri outlined.

Subject to any unforeseen operational disruptions, challenges regarding the stability of the Eskom power supply and the ongoing impact of the war in Ukraine on supply chain stability and costs, RBPlat’s 2023 production guidance has been set at between 4.65-million and 4.90-million tonnes at a grade of 3.78 g/t to 3.80 g/t, which will yield 470 000 oz to 490 000 oz of 4E metals-in-concentrate.

Group cash unit costs are forecast to be between R19 750/oz and R20 500/oz of 4E.

Group capex for 2023, including escalation and contingencies, is forecast at about R2.6-billion.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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