JOHANNESBURG - Royal Bafokeng Platinum’s (RBPlat) shares declined the most in a year on plans to approach shareholders for a discounted R1billion capital raise to upgrade the Maseve concentrator plant and boost production at Styldrift as it posted disappointing financial results for the year to December.
The platinum junior slid 4.52percent to trade at R31.50 a share in afternoon trade after the surprise announcement, in which it said it would sell 46million shares at R22 a share representing a 33.3percent discount to Monday’s closing price.
The share price closed 6.34percent lower at R30.90 on the JSE yesterday.
RBPlat said it had received undertakings from shareholders, including Royal Bafokeng Holdings, which had agreed to take up 75percent of the rights. The company has previously said it would support the Maseve concentrator plant from existing cash and debt facilities as a capital raise was not in its best interest.
However, it changed its tune, saying yesterday that market conditions had changed.
“Having considered its near-term capital requirements and taking into account prevailing market conditions, the company has determined that now is an opportune time to raise equity capital to replenish the cash and debt facilities utilised by the company,” RBPlat said.
It said the capital raise was necessary for the upgrades to the Maseve plant and the ramp-up of Styldrift mine to become a 230000tons-a-month producer from the current 150000 tons a month.
Rene Hochreiter, an analyst at Noah Capital, said the capital raise had come as a surprise as the platinum group metals had benefited from strong palladium and rhodium prices.
“Why not use cash flows instead of approaching the market to fund the upgrade at Maseve and ramp-up at Styldrift? Shareholders would rather use their money to increase their shareholding than rather than maintaining their shares,” said Hochreiter.
Royal Bafokeng acquired Maseve assets, including a concentrator from Platinum Group Metals, for $78million (R1.11billion) in total in 2018.
Financial results for the year were disappointing with headline earnings plummeting by 54.2percent to R49.8million in 2018 from R108m in 2017. The company said it had paid R40.8m towards care and maintenance costs at Maseve, R25.9m relating to the scrapping of feasibility study costs previously capitalised.
“These costs were in respect of the 100000-a-ton concentrator plant originally envisaged to handle the output from the Styldrift Mine as an addition to the Bafokeng Rasimone Platinum Mine concentrator,” he said.
The company warned that the 2019 operating environment would include the complexities inherent in wage negotiations, as the current five-year wage agreement, which it signed with the National Union of Mineworkers (NUM) in 2014, came in June.
“There will also be elections for the NUM leadership positions at RBPlat, NUM regional elections and the country’s general elections,” the company said.
Group production guidance for 2019, was forecast to increase to between 4million tons and 4.4million tons.
In the year under review, RBPlat acquired Anglo American Platinum’s 33percent stake in the Bafokeng Rasimone Platinum Mine.