JOHANNESBURG – Royal Bafokeng Platinum (RBPlat) aims to cash in on the high gold price after signing a R2.1 billion gold streaming agreement with Triple Flag Mining Finance Bermuda.
RBPlat chief executive Steve Phiri on Wednesday told investors that the deal presented the group with a liquidity injection which would strengthen its balance sheet and free up cash.
“This long-term streaming agreement represents a significant commitment of international capital in RBPlat and signals confidence in our business,” Phiri said.
Triple Flag Mining primarily targets precious metal streaming and royalty investments in the mining sector, while JSE-listed RBPlat is a platinum group metals producer whose assets include the Styldrift mine in Rustenburg, North West.
Gold is a by-product of RBPlat’s output and represents 3 percent of the company’s revenue, it said.
“The stream will allow RBPlat to monetise a portion of this gold production at a time when the rand gold price is at a high, compared to prices over the past decade,” said Phiri.
Gold has reached record highs this year as investors dump risky assets for safe havens amid the uncertainty emanating from among other things, the US-China trade wars.
The company said as part of the deal it would deliver 70 percent of its payable gold production to Triple Flag until 261 000 ounces were handed under the agreement, and 42 percent of payable gold production thereafter.
It said Triple Flag would in return pay RBPlat 5 percent of the spot gold price for every ounce delivered as part of the deal.
RBPlat chief financial officer Hanré Rossouw said the company aimed to use proceeds from the agreement to pay off the acquisition of the 33 percent holding in the Bafokeng Rasimone Platinum Mine (BRPM) joint venture.
“This agreement, which is accretive both in terms of value and earnings per share, further optimises the company’s balance sheet and enables us to settle in cash the outstanding deferred consideration for the purchase of Anglo American Platinum’s 33 percent stake in the BRPM Joint Venture,” said Rossouw.
Seleho Tsatsi, an investment analyst at Anchor Capital, said: “Gold is a very small revenue contributor for RBPlats, but this transaction was well timed given the high rand gold price.”
RBPlat also released its September quarter output yesterday, saying that 432 000 tons of ore was delivered to the concentrators for the quarter, equating to a 21.3 percent increase against the comparative 2018 period.
“This represents a 16.8 percent improvement in tons per month delivered compared to the average of 123 000 a month achieved during the first half of 2019,” it said.
The company said cash operating costs for the quarter and year to date increased by 98.8 percent and 97.1 percent to R1.51bn and R4.1bn respectively, compared to the comparative 2018 reporting periods, as Styldrift began commercial operations in January 2019.
RB Plats shares closed 0.24 percent lower at R42.40 on the JSE on Wednesday.