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RBPlat eyes rocky year ahead with fears of recession and declining PGM prices

Economic headwinds are likely to be the primary challenge for PGM demand for the rest of the year, says RBPlat. Photo: Reuters

Economic headwinds are likely to be the primary challenge for PGM demand for the rest of the year, says RBPlat. Photo: Reuters

Published Aug 3, 2022

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As Royal Bafokeng Platinum (RBPlat) yesterday delivered interim earnings that had halved, the miner said it had taken a “conservative approach” to its interim dividend due to the global recession outlook as well as a declining platinum group metals (PGM) basket price.

In its interim results for the six months ended June 30, RBPlat said headline earnings decreased by 54.5 percent to R2.2 billion, while headline earnings per share (Heps) decreased by 58.1 percent to 767.3 cents.

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“Taking into consideration the declining basket price, the uncertain demand fundamentals, global recession fears and the continuing uncertainty brought about by the M&A (Mergers and acquisitions) activity, the board decided to adopt a conservative approach in declaring the interim dividend,” RBPlat said.

The group declared an interim gross cash dividend of 245c per share, equating to R711 million, a year-on-year decline of roughly 54 percent.

RBPlat chief executive Steve Phiri said: “The combination of a world emerging from the Covid-19 pandemic, the lockdown in China, and the war in Ukraine have disrupted global supply chains. Inflation is rising, and fears of a global recession loom large.

“As RBPlat, we have built a robust business with a strong management team that works tirelessly to deliver on all the operational and strategic objectives of the business, whether this be the Covid-19 pandemic, or the geopolitical tensions created by Russia invading Ukraine.“

According to the group, PGM prices have since come down as Russia continues to supply palladium to the market.

It said the average basket price of PGMS had decreased by 16.4 percent in rand terms.

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“The war in Ukraine has affected global supply chains resulting in inflationary cost pressures impacting profit margins and raising fears of a global recession. The Covid-19 lockdown in China further exacerbated existing supply chain challenges,” it said.

The war in Ukraine had also resulted in downward revisions to light-vehicle production forecasts due to production losses in Russia and supply chain problems in Europe.

“Economic headwinds are likely to be the primary challenge for PGM demand for the rest of the year,” it said.

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“Forecasts for economic growth have been reduced and a recession is possible in the major economies in Europe and North America, which account for 26 and 16 percent of automotive platinum demand, respectively,” RBPlat said.

Group revenue dropped by 14.7 percent to R8.17bn, while operating cost increased by 20.4 percent.

The miner, which operates the Styldrift and the Bafokeng Rasimone Platinum Mine (BRPM) in the North West, said production increased by 4 percent to 225500 ounces on a 4E basis.

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BRPM contributed 126.5 ounces of (4E) production, an increase of 9 percent, while Styldrift’s production decreased by 0.6 percent to 99 ounces of (4E) due to operational challenges.

Looking forward, RBPlat said that subject to unforeseen operational disruptions its full-year production remained forecast at 4.65 million tonnes and 4.90 million tonnes, yielding 485 thousand ounces to 505 thousand ounces of 4E metals in concentrate.

RBPlat is currently subject to a takeover offer by Impala Platinum (Implats), which the Competition Tribunal is sussing out.

The closing date on the Implats offer has been extended to September 16. As at June 30, Implats and Northam held 37.83 percent and 34.52 percent in RBPlat, respectively.

RBPlat also said in line with its decarbonisation strategy it was adding renewable energy to the mix. Hence, it was doing a feasibility study, including an environmental impact assessment, for the construction of a solar PV plant of 98MW, which was under way.

The share price yesterday was 1.67 percent lower at R145.55

BUSINESS REPORT

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