JOHANNESBURG (miningweekly.com) – Platinum group metals mining company Royal Bafokeng Platinum (RBPlat) on Wednesday reported stable first-quarter production output despite significant operational headwinds related to power grid stability, the Anglo American Platinum (Amplats) force majeure declaration and the Covid-19 pandemic.

The JSE-listed company, headed by CEO Steve Phiri, hoisted 8.7% more tonnes in the three months to March 31 and reported a 40.6% safety improvement in terms of lower serious injury frequency rates. Total reef tonnes hoisted for the quarter increased by 8.7% to 954 000 t.

Although mining and concentrating operations are being restarted, Mining Weekly can report that there will be limited production in the first two weeks as employees go through the screening process and testing, where required.

Given the latest production impediments, RBPlat has withdrawn its previously stated 2020 guidance to the market and group 2020 capital expenditure (capex), including escalation and contingencies, is forecast to be R1.8-billion.

At the end of March, RBPlat was in a net cash position of R209.5-million, compared with a net debt position of R491.3-million at the end of December.

The company has R800-million of general banking facilities available with cash and cash equivalents on hand of R2 194-million.

During the reporting period, it received a $145-million cash prepayment from Triple Flag Mining Finance Bermuda Limited in exchange for the future delivery of gold from the RBPlat mining operations. Consequently, RBPlat fully settled the deferred consideration owing to Amplats’ subsidiary Rustenburg Platinum Mines of R1 851-million including accrued interest.

While employee salaries were paid during the lockdown period, executives and senior management waived 33% of their remuneration during the lockdown period and food, hygiene and educational support is being provided to communities in response to Covid-19.

RBPlat has also afforded financial help to certain contractors critical to its operations and deferred R400-million planned capex for the remainder of the year to bolster its strong net cash position of R209.5-million during this time of global health crisis.

INCREASED CASH OPERATING COSTS

Cash operating costs for the quarter amounted to R1 365-million, representing an 11.6% increase compared to 2019.

The increase in expenditure is attributable to the combination of increases in Styldrift cash costs during ramp-up and industry-related inflation.

Increased surface stocks as a result of Eskom load curtailment and the lockdown on milling volumes has resulted in double-digit year-on-year unit cost increases of 12% and 12.9% per tonne milled and 4E ounces.

BRPM operating cash costs for the quarter increased 6.4% to R716-million in line with volume and on-mine inflation-related increases for labour, utilities and stores. Eskom load curtailment, lockdown requirements and lower built-up head grade negatively impacted unit cash costs with cost per tonne milled and 4E ounces increasing by 17.5% and 21.4% to R1 533 and R13 952.

CAPEX UP

Total capex for the reporting period increased by 16.2% to R327.1-million in line with project and operational stay-in-business (SIB) capital requirements. Expansion capital of R244.8-million was 6% lower than 2019 and aligned with project schedule and construction progress at Styldrift, Maseve concentrator MF2 upgrade and required expansion of tailing storage facilities.

Replacement capex amounted to R28-million for the quarter, an increase of R27.1-million compared with 2019. The increase is directly attributable to the Styldrift replacement project progress related to extending the footwall declines to the north, south and east as part of establishing and securing the required ore-reserves to sustain production in the longer term.

SIB capital increased by R34.3-million to R54.1-million, equating to 4% of cash operating costs.

OVERALL PRODUCTION

Overall production in the quarter was negatively impacted by a five-day production loss at the BRPM concentrator during the initial post-festive-season startup resulting from an electrical failure in the primary mill motor circuit. BRPM tonnes hoisted were 1.5% lower at 520 000 t and Styldrift tonnes hoisted were a 24% higher 434 000 t.

Total tonnes milled for the reporting period reduced marginally by 0.4% to 843 000 t resulting in surface stocks of 112 000 t of ore. Merensky milled volumes reduced by 6.6% to 693 000 t, while upper group two (UG2) tonnes milled increased to 150 000 t. Merensky ore surface stocks at the end of the reporting period were estimated at 83 000 t and UG2 ore surface stocks at 29 000 t.

The built-up head grade amounted to 4.04 g/t of four-element (4E) material, remaining unchanged compared to the first quarter of 2019.

Merensky built-up head grade increased by 0.7% while the UG2 built-up head grade decreased by 3.9%. The key contributor to the reduction in the UG2 grade was the increase in lower grade South shaft UG2 to the overall ore mix.

The reduction in UG2 head grade and impact of load curtailments on overall concentrator float stability resulted in a 0.7% reduction in recovery to 82.40% compared to the 82.97% achieved in the comparative 2019 reporting period.

Milled volumes, built-up head grade and associated recoveries yielded 4E and platinum metal-in-concentrate of 90 100 oz and 58 600 oz. Equivalent 4E and platinum metals in surface stocks were estimated at 11 900 oz and 7 600 oz.

On March 4,  Amplats announced the temporary shutdown of the Anglo Converter Plant (ACP) and declared force majeure. Subsequent to the initial suspension of concentrate deliveries to the Waterval Smelter complex in line with the force majeure declaration, an interim arrangement between Amplats and RBPlat was agreed to with revised concentrate delivery and payment terms during the shutdown.

Concentrate that was delivered to Rustenburg Platinum Mines Limited (RPM), a wholly owned subsidiary of Amplats, up to the force majeure announcement, will be bound by the terms as set out in the disposal of concentrate agreement (DOCA) with RPM.

All subsequent concentrate deliveries to RPM will be subject to newly agreed payment terms, whereby RBPlat will continue to receive a significant majority of the related proceeds during 2020, with the outstanding payments being settled in full before April 30.

Payment terms are set to revert to the original DOCA terms once the ACP Phase B unit is once again operational, which is currently estimated to be 80 days from March 6.