| Tue 16 Aug 2011, 8:00 | | RBP - Royal Bafokeng Platinum Limited - Reviewed interim results for the six |
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RBP
RBP
RBP - Royal Bafokeng Platinum Limited - Reviewed interim results for the six
months ended 30 June 2011
Royal Bafokeng Platinum Limited
(Incorporated in the Republic of South Africa)
Share code: RBP
ISIN: ZAE000149936
Registration number: 2008/015696/06
"RBPlat" or "the Company" or "the Group"
Reviewed Interim results for the six months ended 30 June 2011
Key features
- One million fatality-free shifts achieved by June, safety remains a key focus
- Conclusion of three-year wage agreement
- Production steady, 142 100 ounces of PGMs (4E) despite challenging environment
- Concentrator recoveries improve by 1.6% to 87.27%
- BRPM revenue up by 3% to R1.5 billion
- Cash operating cost per tonne milled rises by 14.8% (9% on normalised basis)
- Settlement of intercompany balances result in R325.8 million cash inflow into
BRPM
- Earnings per share of 105 cents (2010: 132 cents)
- Balance sheet ungeared with healthy cash and near-cash position of R1.29
billion
- Accelerated capital expenditure of R592 million for the first half of 2011
(2010: R363 million)
- Styldrift I Project on schedule, R233.4 million declared savings to date
Consolidated statement of financial position
Group Reviewed Reviewed Restated
as at 30 June 30 June 31 Dec
R (million) 2011 2010 2010
Assets
Non-current assets
Property, plant and equipment 7 728.1 3 747.8 7 337.9
Mineral rights 6 728.6 2 914.5 6 756.7
Goodwill 2 275.1 - 2 275.1
Environmental trust deposit 91.3 57.3 87.5
Deferred tax asset 22.0 - 15.2
16 845.1 6 719.6 16 472.4
Current assets
Inventories 33.0 8.7 48.4
Trade and other receivables 1 086.3 779.1 1 384.5
Held to maturity investments 257.8 - 250.9
Current tax receivable 4.8 - 4.8
Related party loans - 0.6 -
Cash and cash equivalents 1 032.0 182.1 899.4
2 413.9 970.5 2 588.0
Total assets 19 259.0 7 690.1 19 060.4
Equity and liabilities
Share capital 1.7 1.4 1.7
Share premium 7 759.9 6 817.8 7 759.9
Retained earnings 3 333.9 178.0 3 161.9
Other reserves 49.4 - 18.8
Non-controlling interest 3 798.5 - 3 721.8
Total equity 14 943.4 6 997.2 14 664.1
Non-current liabilities
Deferred tax liability 3 994.0 420.2 3 901.4
Borrowings - 114.7 -
Long-term provisions 74.6 43.6 73.4
4 068.6 578.5 3 974.8
Current liabilities
Trade and other payables 246.5 114.4 421.5
Related party loans 0.5 - -
247.0 114.4 421.5
Total liabilities 4 315.6 692.9 4 396.3
Total equity and liabilities 19 259.0 7 690.1 19 060.4
Consolidated statement of comprehensive income
GROUP
for the period ended
%
R (million) Reviewed Reviewed Change Restated
30 June 30 June 31 Dec
2011 2010 2010
Revenue 1 510.4 988.4 52.8 2 106.8
Cost of sales (1 171.1) (685.7) 70.8 (1 608.1)
Cost of sales,
excluding under
mentioned (922.2) (526.8) 75.1 (1 247.5)
Depreciation and
amortisation (230.1) (158.9) 44.8 (375.6)
(Decrease)/increase
in inventories (18.8) - 100 15.0
Gross profit 339.3 302.7 12.1 498.7
Other income 34.0 0.4 8 400 1.6
Profit on
remeasurement of
previously held
interest in BRPM - - - 2 894.8
Administration
expenses (57.5) (20.6) 179.1 (60.6)
Finance income 29.9 2.7 1 007.4 15.7
Finance cost (0.4) (7.1) (94.4) (12.5)
Profit before tax 345.3 278.1 24.1 3 337.7
Income tax expense (96.6) (97.2) (0.6) (171.7)
Income tax (10.7) (0.2) 5 223 (0.4)
Deferred tax (85.9) (97.0) (11.4) (171.3)
Total comprehensive
income 248.7 180.9 37.5 3 166.0
Profit and
comprehensive
income for the
period attributable
to:
Owners of the
Company 172.0 180.9 (4.9) 3 164.8
Non-controlling
interest 76.7 - 100.0 1.2
248.7 180.9 37.5 3 166.0
Weighted average
number of shares 163 677 799 137 057 500 19.4 141 132 832
Basic earnings
per share
(cents/share) 105 132 (20.4) 2 242
Diluted earnings
per share
(cents/share) 105 132 (20.6) 2 240
Dividends per share
(cents/share) - - - -
Consolidated cash flow statement
GROUP
for the period ended
R (million) Reviewed Reviewed Restated
30 June 30 June 31 Dec
2011 2010 2010
Cash generated by operations 390.2 264.2 777.0
Interest paid - (1.2) (9.8)
Interest received 21.6 2.7 15.7
Tax (paid)/refund (10.7) (0.2) 2.4
Net cash flow generated
by operating activities 401.1 265.5 785.3
Net cash received on acquisition of
additional interest in BPRM - - 91.7
Increase in held to maturity
investments - - (250.9)
Proceeds from disposal of property,
plant and equipment 0.1 - 0.1
Acquisition of property, plant
and equipment (592.4) (243.6) (718.5)
Increase in environmental
trust deposit (2.5) (0.9) (2.4)
Net cash flow utilised by investing
activities (594.8) (244.5) (880.0)
Issue of ordinary shares net
of cost - - 942.4
Increase in long-term borrowings - 140.0 -
Repayment of long-term borrowings - (30.0) -
Settlement of intercompany balances 325.8 - -
Related party loans received/
(advanced) 0.5 (0.4) 0.2
Net cash flow generated by financing
activities 326.3 109.6 942.6
Net increase in cash and cash
equivalents 132.6 130.6 847.9
Cash and cash equivalents at beginning
of period 899.4 51.5 51.5
Cash and cash equivalent
at end of period 1 032.0 182.1 899.4
Consolidated statement of changes in equity
Share-
based
Number Ordinary Share payment
of shares shares Premium reserve
R (million) R (million) R (million)
Balance at 31
December 2009
(audited) 137 057 500 1.4 6 817.8 -
Profit for the
six months to 30
June 2010 - - - -
Balance at 30
June 2010
(reviewed) 137 057 500 1.4 6 817.8 -
Transactions
with
shareholders
Shares issued:
Contingent
consideration
for the
17% interest in
BRPM 10 000 000 0.1 (0.1) -
Shares issued on
listing of the
Company 16 620 299 0.2 1 005.4 -
Capitalisation
of listing
transaction
costs - - (63.2) -
IFRS 2 charge
for the six
months - - - 18.8
Profit for the
six months - - - -
Non-controlling
interest on
gaining
control of BRPM - - - -
Purchase price
adjustment - - - -
Balance at 31
December 2010
(restated) 163 677 799 1.7 7 759.9 18.8
IFRS 2 charge
for the six
months - - - 30.6
Profit for the
six months to
30 June 2011 - - - -
Balance at
30 June 2011
(reviewed) 163 677 799 1.7 7 759.9 49.4
Consolidated statement of changes in equity (Continued)
Attri-
butable
to owners Non-
Retained of the controlling
earnings Company Interest Total
R (million) R (million) R (million) R (million)
Balance at
31 December 2009
(audited) (2.9) 6 816.3 - 6 816.3
Profit for the six
months to 30 June
2010 180.9 180.9 - 180.9
Balance at 30 June
2010 (reviewed) 178.0 6 997.2 - 6 997.2
Transactions with
shareholders
Shares issued:
Contingent
consideration for
the 17% interest
in BRPM - - -
Shares issued on
listing of the
Company - 1 005.6 - 1 005.6
Capitalisation of
listing
transaction costs - (63.2) - (63.2)
IFRS 2 charge for
the six months - 18.8 - 18.8
Profit for the six
months 2 985.4 2 985.4 1.9 2 987.3
Non-controlling
interest on
gaining control of
BRPM - - 3 405.5 3 405.5
Purchase price
adjustment (1.5) (1.5) 314.4 312.9
Balance at 31
December 2010
(restated) 3 161.9 10 942.3 3 721.8 14 664.1
IFRS 2 charge for
the six months - 30.6 - 30.6
Profit for the
six months to
30 June 2011 172.0 172.0 76.7 248.7
Balance at 30 June
2011 (reviewed) 3 333.9 11 144.9 3 798.5 14 943.4
Notes to the financial statements
1. Basis of preparation
The consolidated financial information has been prepared in accordance with
International Financial Reporting Standards (IFRS), IAS 34 and interpretations
of those standards (as adopted by the International Accounting Standards Board)
and applicable legislation (requirements of the South African Companies Act and
the regulations of the JSE Limited).
The financial information is presented in South African Rands which is the
Company`s functional currency.
2. Accounting policies
The consolidated financial statements have been prepared under the historical
cost convention. The principal accounting policies used by the Group are
consistent with those of the previous period, except for the adoption of various
revised and new standards. The adoption of these standards had no material
impact on the financial results for this review period.
3. Independent review by the auditors
The interim financial statements have been reviewed by PricewaterhouseCoopers
Inc. whose unqualified review conclusion is available for inspection at the
registered office of RBPlat.
4. Re-statement of prior year statement of financial position, statement of
comprehensive income and statement of changes in equity
On 8 November 2010 RBPlat listed on the JSE Limited and obtained control of
Bafokeng Rasimone Platinum Mine (BRPM). In line with IFRS 3 Business
Combinations, RBPlat remeasured its previously held equity interest in BRPM at
its acquisition date fair value and recognised the resulting gain in profit. In
its 2010 financial statements the Company stated that it is still in the process
of assessing the fair values allocated to individual components, specifically
mineral rights included in life of mine.
During the period under review, the assessment of fair values allocated to
individual components and the purchase price allocation were finalised,
resulting in a revised allocation to the fair values of assets, liabilities and
goodwill.
In terms of the guidance provided in IFRS 3 Business Combinations, the Group has
restated its statement of financial position, statement of comprehensive income
and statement of changes in equity and accompanying notes, for the 2010
financial year, to reflect the abovementioned changes as if they had occurred at
the acquisition date. These changes did not impact the cash flow statement.
The revised details of net assets acquired and goodwill are as follows:
For the year ended 31 December 2010 Restated Previously
R (million) reported
Fair value of 67% interest assumed as the
purchase price 10 002.7 10 002.7
Purchase consideration allocated to
identifiable net assets: 11 448.2 10 371.0
Property, plant and equipment 7 212.3 7 212.3
Mineral rights 6 767.0 5 730.9
Environmental trust deposit 87.0 87.0
Inventories 61.3 61.3
Trade and other receivables 999.5 995.7
Intercompany balances 341.0 6.9
Cash and cash equivalents 277.9 277.9
Deferred tax liability (3 860.7) (3 570.6)
Long-term provisions (67.8) (67.8)
Trade and other payables (369.3) (362.6)
Less: Non-controlling interest (3 720.6) (3 405.5)
Goodwill 2 275.1 3 037.2
A multi-period excess earnings model was used to finalise the fair value of
mineral rights included in the life of mine resulting in an increase in the
value of mineral rights of R1 billion.
The revised details of comprehensive income are as follows:
For the year ended 31 December 2010
Previously
R (million) Restated reported
Amortisation of mineral rights 28.6 26.4
Profit for the year attributable to:
Owners of the Company 3 164.5 3 166.3
Non-controlling interest 1.5 1.9
3 166.0 3 168.2
Basic earnings per share (cents/share) 2 242 2 243
Diluted earnings per share (cents/share) 2 240 2 241
5. Capital commitments
Capital commitments relate to the Styldrift I and BRPM Phase II and III
projects.
For the period ended
Reviewed Reviewed Restated
30 June 30 June 31 Dec
R (million) 2011 2010 2010
Contracted commitments 995.2 299.6 960.8
Approved expenditure not yet
contracted for 10 822.8 6 202.0 8 262.1
11 818.0 6 501.6 9 222.9
The 30 June 2011 and 31 December 2010 capital commitments reflect 100% and 30
June 2010 reflect 67% of the BRPM project commitments. Effectively RBPlat must
fund 67% thereof and RPM the remaining 33%.
Should either party elect not to fund their share, their interest will be
diluted according to the terms of the BRPM JV agreement.
6. Contingencies - guarantees
For the period ended
Reviewed Reviewed Restated
30 June 30 June 31 Dec
R (million) 2011 2010 2010
Environmental rehabilitation guarantees
provided by Royal Bafokeng Management
Services (Pty) Ltd (RBMS) 47.5 47.5 47.5
Eskom guarantee 17.1 17.1 -
Rental guarantee 0.5 - -
65.1 64.6 47.5
7. Financing facilities in place
RBPlat had cash and near cash investments on hand at 30 June 2011 of R1.29
billion. The Group has an intra-month funding working capital requirement which
is met through a R250 million working capital facility of which R17.6 million
had been utilised for guarantees at 30 June 2011. It also has an unutilised
revolving credit facility of R500 million.
8. Basic and headline earnings
The reconciliation between basic and headline earnings is shown below:
For the period ended Reviewed Reviewed Restated
30 June 30 June 31 Dec
R (million) 2011 2010 2010
Basic earnings - profit
attributable to owners of the
Company (R million) 172.0 180.9 3 164.8
Adjustments net of tax:
Profit on remeasurement of
previously held interest in - - (2 894.8)
BRPM (R million)
(Profit)/loss on disposal of
property, plant and equipment
(R million) (0.1) - 0.2
Headline earnings (R million) 171.9 180.9 270.2
Weighted average number of
ordinary shares in issue for
basic and headline earnings per
share 163 677 799 137 057 500 141 132 832
Basic earnings per share
(cents/share) 105 132 2 242
Diluted earnings per share
(cents/share) 105 132 2 240
Headline earnings per share
(cents/share) 105 132 191
Diluted headline earnings per
share (cents/share) 105 132 191
9. Sales
Concentrate sales - production
from BRPM concentrator 1 419.8 982.8 2 094.7
UG2 toll concentrate sales 90.6 - -
Intergroup management fee - 5.6 12.1
1 510.4 988.4 2 106.8
10. Cost of sales
Labour 330.6 203.0 489.5
Utilities 63.0 35.4 87.6
Contractor costs 179.6 112.9 264.1
Materials and other mining
costs 323.1 174.7 377.6
Movement in inventories 18.8 - (15.0)
Depreciation 202.0 147.9 347.0
Amortisation 28.1 11.0 28.6
Other 25.9 0.8 28.7
1 171.1 685.7 1 608.1
11. Related party transactions
Loan from RBMS 0.5 0.6 -
Amount owing by RPM for
concentrate sales 1 016.4 674.2 1 008.5
Amount owing to RPM for
contribution to BRPM 20.0 37.8 69.7
Transactions during the year:
Concentrate sales to RPM 1 510.4 982.8 2 094.7
Royal Bafokeng Platinum
Management Services (Pty)
Limited management fee charged
to BRPM - 5.6 12.1
Transactions with Fraser
Alexander 10.7 2.8 5.6
RBMS fees of administrative
nature 0.8 - 0.8
12. Dividends
No dividends have been declared or proposed in the current period (2010: nil).
13. Segmental reporting
The Group is currently operating one mine with two declines and a new vertical
shaft development. This operation is treated as one operating segment and
therefore no separate segmental reporting is provided. The information reviewed
by the chief operating decision maker is the same as the information provided in
the primary statements and therefore no separate reporting segments have been
identified.
Commentary
Overview
Royal Bafokeng Platinum (RBPlat) is pleased to report a satisfactory performance
for the six months ended 30 June 2011 despite a challenging environment, with
headline earnings of R171.9 million, or headline earnings per share of 105
cents. Comparisons are made with the six months to end June 2010 where this is
appropriate, however, reporting for the six months to 30 June 2011 reflects the
full consolidation of BRPM, whereas only a 67% interest in BRPM was
proportionately consolidated in the comparative period.
Safety
RBPlat is pleased to have achieved one million fatality-free shifts on 22 June
2011. There were no fatal injuries in the six months to 30 June 2011. In its
continuous drive towards zero harm RBPlat achieved a further reduction of 4% in
its Lost Time Injury Frequency Rate (LTIFR) from 1.15 in the six months to 30
June 2010 to 1.10 lost time injuries per 200,000 hours worked. In addition,
RBPlat managed to reduce its Serious Injury Frequency Rate (SIFR) by 32% to 0.43
serious injuries per 200,000 hours from 0.63 in the first six months of 2010.
This improvement in safety performance is attributed to a new safety strategy
that focuses on leadership, design, systems and behaviour, specifically in areas
associated with high severity injuries (fall of ground, mobile machinery and
equipment). In addition, a system of internal cross-auditing was introduced to
ensure a high level of compliance to operating standards, procedures and
policies.
Conclusion of wage agreement
After much deliberations and engagements, a landmark three-year wage agreement
has been concluded with Labour, represented by National Union of Mineworkers.
The process of engagement followed a strategic approach from the beginning as
opposed to the conventional approach of traditional positional bargaining.
The wage agreement is a mutually beneficial arrangement with sustainable long-
term benefits and obligations for all parties. Basic pay increases are
structured on a sliding scale basis over the three-year period with Operational
Bargaining Unit employees receiving 10%, 8% and 9% respectively whilst employees
represented by the Supervisory Bargaining Unit will be receiving 8%, 7% and 7%
respectively. Where CPI reaches 7% by March of the increase year, the
Supervisory Bargaining Unit employees will receive CPI plus 1%. The settlement
also incorporates an agreement in respect of all other related terms and
conditions of employment.
This three-year multiple agreement is unique in the Platinum Industry which
provides the business and partners with stability and an aligned growth focus
for the future. It is also considered unique due to the inclusion of the
principle that aspects of remuneration are being linked to agreed performance
and efficiency targets.
This agreement is not a destination in itself, but provides a steady platform
for all stakeholders towards growing RBPlat.
Operational performance
Despite a challenging environment that prevailed particularly in the first
quarter, 4E ounces in concentrate remained relatively stable at 142,100 ounces
compared with 141,200 ounces in the first half of 2010, an increase of 1%. This
was achieved through additional direct mining resources, working additional
shifts, an increase in UG2 output and improved concentrator plant recoveries.
The total reef tonnage milled at 1,172,000 tonnes was 1% down from the first six
months of 2010 mainly as a result of Merensky output reducing by 11% from
1,169,000 tonnes to 1,037,000 tonnes. This reduction was largely offset by an
increase in UG2 production from 8,900 tonnes to 134,900 tonnes. Factors
contributing to the reduced Merensky output were safety-related stoppages, a
conveyor belt failure at the North shaft and lower immediately minable reserve
face length (IMS). Appropriate measures to increase IMS have been initiated.
The overall mill head grade was 4.32g/t4E compared with 4.34g/t4E the previous
year. The Merensky grade improved from 4.34g/t4E to 4.41g/t4E but the overall
grade was diluted by an increased contribution from UG2 production at a lower
grade of 3.65g/t4E. UG2 production is expected to contribute around 15% of total
volumes for the remainder of 2011.
The marginally lower milled tonnage and grade was offset by a 1.6% improvement
in concentrator plant recoveries, from 85.89% to 87.27%. This is attributed to a
more efficient plant operation and the impact of the ISA mill. A total of 99,600
tonnes of UG2 ore was processed at the Waterval concentrator through the UG2 ore
offtake agreement with Rustenburg Platinum Mines Limited (RPM), a wholly-owned
subsidiary of Anglo American Platinum Limited.
Efficiency
The challenging operating conditions in the first six months of the year had an
adverse impact on mining team efficiencies which declined by 10% from 351m2 per
team to 315m2 per team. Key drivers to improve stope team efficiencies include
increasing IMS, improving safety performance and specifically ensuring strict
compliance with mine operating standards and procedures. Total mine labour
productivity improved by 4% from 29.5 tonnes milled per employee (including
contractors) to 30.54 tonnes per employee, largely as a result of a reduction in
the total labour complement from 6,658 employees to 6,398 employees through
natural attrition..
Operating cost
The additional effort invested in maintaining total output during the difficult
first half of 2011 is reflected by the increase in operating costs. Cash
operating cost per tonne milled increased by 14.8% from R667 per tonne milled to
R765 per tonne milled and cash cost per platinum ounce increased by 14.2% from
R8,524 per platinum ounce to R9,732 per platinum ounce. On a normalised basis,
after excluding the non-recurring optimisation project cost, the above normal
safety stoppages and the impact of the conveyor belt failure at the North shaft,
the normalised cash operating cost per tonne milled is R726.59, which represents
a 9% increase compared to the same period for 2010. Key contributing factors
were increased direct mining labour costs, overtime allowances for working on
public holidays and the costs associated with a business optimisation project
which amounted to R25.2 million for the first six months of 2011.
Capital expenditure
Total capital expenditure increased from R363 million in the first six months of
2010 to R592.4 million in the first six months of 2011. This is mainly
attributable to an increase in the Styldrift I Project expenditure which
increased from R152.1 million to R371.4 million in line with the construction
programme. Replacement capital involves the Phase II and Phase III Boschkoppie
decline extension projects and reduced marginally from R170 million to R168.6
million, being R107 million for Phase II and R59 million for Phase III.
Stay-in-business capital expenditure increased from R40.9 million in the first
half of 2010 to R52.4 million in the first half of 2011. The R52.4 million is
6.1% of total operating expenditure and well within RBPlat`s target range of
between 6% and 8%..
Financial review
The Group`s financial statements reflect the proportionate consolidation of 67%
of BRPM up to 7 November 2010 and from the date of change in control of BRPM
being the date of listing (8 November 2010) the Group fully consolidates BRPM
and accounts for non-controlling interest as a separate line item.
Net revenue increased by 52.8% mainly as a result of the change in the basis of
accounting as noted above. The actual increase in revenue at BRPM for the six
months ended 30 June 2011 compared with the same period for 2010 was 3%. Revenue
from production through the BRPM concentrator decreased from R1,466.9 million
for the first six months of 2010 to R1,419.8 million for the first six months of
2011. This 3.2% decrease was due to a 6% reduction in ounces produced at the
BRPM concentrator and an 8.5% strengthening in the Rand/US dollar exchange rate
offset by higher PGM and base metal prices.
Toll concentrating of UG2 contributed R90.6 million to revenue for the six
months ended 30 June 2011, offsetting the decrease in revenue from BRPM. No toll
concentrating revenue was reflected in the comparative period.
The 12.1% improvement in gross profit is as a result of the change in the basis
of accounting, offset by a 14.8% increase in cash operating cost per tonne
milled for the first six months of 2011 compared with the same period for 2010.
Furthermore, the depreciation and amortisation charges for the six months ended
30 June 2011 were 44.8% higher than the same period for 2010 due to the change
in the basis of accounting.
Earnings before tax, interest, depreciation and amortisation (EBITDA), as a
percentage of revenue decreased from 44.7% for the first six months of 2010 to
36.1% for the first six months of 2011 mainly as a result of the increase in
cash operating costs at the operation and the increased administration costs at
corporate office.
Other income increased by R33.6 million mainly as a result of net income of
R28.9 million from the settlement of intercompany balances with RPM and the
first time inclusion of the 6&8 shaft Impala royalty of R3.9 million.
Administration expenses increased by 179.1% compared to the same period last
year as a result of the full staffing of the RBPlat corporate office (including
non-executive directors). The administration costs for the first six months of
2011 also include a share-based payment charge of R13.2 million that was not
there in the comparative period.
The current income tax charge increased to R10.7 million from R0.2 million for
the first six months of 2011, mainly due to income tax payable on interest
income.
Finance income increased compared to the comparative period due to interest
earned on funds raised from the 2010 listing invested in interest bearing
deposits and R6.9 million dividends received on the Nedbank preference shares.
The RBPlat Group utilised R114.7 million of its Nedbank revolving credit
facility at 30 June 2010. This was repaid during November 2010 with some of the
proceeds from the listing. This is also the reason for the reduction in finance
costs for the first six months of 2011 compared to the same period for 2010.
Capital expenditure of R592 million was funded partly from cash flows from
operations of R390 million and the remainder from the cash inflow from the
settlement of the intercompany balances.
Project review
Boschkoppie North and South Shaft Phase II and North Shaft Phase III
Boschkoppie Phase II has been a seven year capital replacement project, which
entailed the extension of Boschkoppie North and South shafts from 6 level down
to 10 level. The project has progressed well over the last six months meeting
both cost and schedule parameters. North shaft will be completed in August this
year while South shaft will be completed in the first half of 2012.
Phase III is the extension of North shaft from 11 level down to 15 level. This
project started in January 2010 and will be completed in July 2017. The project
is presently under budget and slightly ahead of schedule.
Styldrift I Project
Styldrift I Project has progressed exceptionally well over the past six months
with erection of the main and service shaft headgears having commenced in
January 2011. The erection phase was completed successfully with zero harm,
this being a result of the intense focus that is placed on the implementation
of project safety protocols at Styldrift.
Pre-sink activities began during the last quarter of 2010 on the main and
service shafts. This was successfully completed down to a depth of just over
60 metres in April 2011. Conversion from pre-sink to full sink was completed at
the end of June with the full sink having commenced in July.
The project is currently two months ahead of schedule and reflecting a cost
saving against budget of approximately R233.4 million to date. These savings
have been effected by adopting a focused approach to design, procurement,
contract management and cost management. Major areas of saving are in civil and
EPCM (electrical and engineering, procurement and construction management)
costs.
A design optimisation study of Styldrift I is being conducted. The key
components of the optimisation include: shaft bottom infrastructure, bord and
pillar mining layouts, trucks or conveyors on strike haulages, pneumatic or
electric drilling and access to the UG2.
Sustainable development
RBPlat`s sustainability framework implementation commenced during the period
under review. The framework consists of key objectives and related indicators
that will guide the performance of the business in its strategy of growth in
safe ounces through operational excellence and project expansion.
Environmental stewardship
A feasibility study for the construction of a water retreatment plant was
started during the period under review. Construction of this plant is
anticipated to commence in the fourth quarter of 2012 subject to the completion
of an environmental impact assessment. An increase in the use of retreated water
is anticipated upon completion in 2012.
Community development
Community development in line with the Mining Charter and RBPlat`s own Social
and Labour Plan is progressing according to schedule. Particular focus during
the period has been establishing credible enterprise development initiatives to
benefit local small and medium sized enterprises.
Stakeholder engagement
Relationships with nearby communities have been co-operative, supported by a
visible and stable community leadership.
Regular engagement with the Minerals Regulator has been established on issues
relating to community development through the Social and Labour Plan.
Market review
The primary contributors to revenue for RBPlat for the period under review were
platinum (65.3%), palladium (11.5%), rhodium (6%), gold (3%), nickel (9.6%) and
copper (2.3%).
The platinum price appreciated by 9% in 2010, recovering from a mid-year retreat
to average $1,712 per ounce by December, and rising by a further 3% to average
$1,770 per ounce in June 2011. The platinum market is set to move into deficit
in the future, but there have been reductions in demand in the early part of
2011. The Japanese earthquake impacted vehicle manufacture (mainly affecting
palladium) and jewellery demand and with recent high oil prices, has reduced
previously forecast platinum market deficit to a balanced market for 2011. A
fundamental recovery in the platinum market is expected in late 2012 or early
2013 as buying of platinum for autocatalysts recovers. Thus, there is limited
further upside in the short term. Automotive platinum demand is forecast to rise
from 3.2 million ounces in 2010 to over 4 million ounces by 2014. Non-road
catalyst requirements should further boost consumption.
Jewellery currently represents just over a quarter of the platinum market. China
is still seen to dominate the platinum jewellery market. Global jewellery usage
is forecast to rise above 2010 levels in 2011 and exceed 2 million ounces in the
future.
Global primary platinum production is estimated to have increased by 126,000
ounces (+2.2% year-on-year) in 2010. There were substantial production losses as
a result of industrial action, safety stoppages in South Africa and structural
geology issues. Constrained growth is expected in 2011 as these issues persist,
exacerbated by depleting Merensky Reef reserves. These are likely to offset any
significant recovery at major operations.
The palladium price has recovered strongly through 2010 and 2011, from an
average of $460 per ounce in June 2010 to $770 per ounce in June 2011.
Palladium autocatalyst demand in 2010 had already reached 96% of 2007
pre-crisis levels, while platinum was still at only 76%. Palladium consumption
should exceed pre-crisis levels in 2011. Mine supply picked up by only 2.4% in
2010, still over 1 million ounces per annum short of 2006 peak levels. Total
supply, including recycling, was 5% higher than in 2009, but was outpaced 2:1
by demand growth. Based on market fundamentals and excluding Exchange Traded
Fund (ETF) holdings and stock sales, the palladium market has shifted into
deficit.
Strong growth in Chinese auto demand, combined with gasoline vehicle dominance
and the use of palladium in diesel catalysts, will ensure that demand growth
outstrips supply, and prices remain firm. A palladium market deficit of over
300,000 ounces in 2010 is projected to rise to over 1 million ounces in the next
four years, leading to an over-reliance on above-ground stocks. The launch of a
palladium ETF in the United States of America could contract the market, causing
prices to spike in future.
The rhodium price has lost some of its early recovery since settling at around
$2,000 per ounce.
Despite automotive rhodium demand rising by just over 100,000 ounces year-on-
year to around 800,000 ounces, the market is still about 20% down on 2007 peak
levels. Rhodium demand is projected to achieve a full recovery by 2012, but
increasing supply from UG2 ores, recycling and significant above-ground stocks
should keep the market well supplied over the next three years. Prices are
unlikely to fall significantly from current levels and will appreciate as the
vehicle market gains traction. The market should once again shift to deficit as
recovering automotive catalyst demand absorbs excess market stock.
Directorate
Shareholders were advised of the appointment of the sixth independent non-
executive director, Ms Matsotso Vuso with effect from 12 April 2011. The
RBPlat Board now comprises ten directors, with three executive directors and
seven non-executive directors.
Prospects
2011 is a year of consolidation for RBPlat, with the further embedding of the
achievements since taking operational control from Anglo American Platinum
Limited in January 2010. Given the challenging first half of the year,
production for the full year is expected to remain at levels similar to those
achieved in 2010.
The decision by the Company to start with the co-extraction of UG2 is showing
results and continues to provide the Company with flexibility in its operations.
The operations continue to have a Merensky bias with the ratio of Merensky to
UG2 expected to remain at around 85%:15% for the foreseeable future.
Operating costs remain a key challenge for the Company and are expected to
increase at a higher rate than inflation for the remainder of 2011 due to
higher input costs as well as increased wages with effect from 1 July. RBPlat
continues to enjoy a healthy financial position with the strong cash generative
Boschkoppie anticipated to fund at least 50% of the Company`s Styldrift I
Project. The Company remains optimistic about the outlook for the PGM markets in
the medium to long term taking into account the supply constraints which
continue to face the industry..
Steve Phiri Kgomotso Moroka
Chief Executive Officer Chairman
Johannesburg
16 August 2011
Directorate Non-executive: *Adv KD Moroka SC (Chairman), *Prof L de Beer, *Mr RG
Mills, *Mr DC Noko, *Prof FW Petersen, Mr MH Rogers, Ms M Vuso*. Executive: Mr
SD Phiri (CEO), Mr MJL Prinsloo (CFO), Mr NJ Muller (COO). *Independent
directors. Registered office: 1st Floor, Block C, 37 High Street, Melrose Arch,
Johannesburg. PO Box 55669, Northlands, 2116. Company Secretary: LC Jooste
(ACIS). Email: lester@bafokengplatinum.co.za.
Telephone: +27 11 530 8058. Telefax: +27 086 572 8047.
Independent external Auditors: PricewaterhouseCoopers Inc, 2 Eglin Road,
Sunninghill, Johannesburg, 2157, South Africa.
Transfer secretaries: Computershare Investor Services (Pty) Limited, 70 Marshall
Street, Johannesburg, PO Box 61051, Marshalltown, 2107, South Africa. Telephone:
+27 11 370 5000. Fax: +27 11 688 5200.
JSE Sponsor: Macquarie First South Capital (Pty) Limited, The Place, Sandton
Drive, South Wing, Sandown, 2146, South Africa.
www.bafokengplatinum.co.za
Date: 16/08/2011 08:00:23 Produced by the JSE SENS Department.
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