Johannesburg - Black-owned Royal Bafokeng Platinum (RBPlat) would trim its capital expenditure and scale down on the construction of its R11 billion Styldrift I mine outside Rustenburg in a depressed market, which has seen the platinum price hit a six-year low.
The slump in commodity prices saw RBPlat yesterday post a headline loss of 60.4 cents a share in the six months to June, compared with headline earnings of 116c a share for the six months ended June last year. Shares fell as much as 10.68 percent, before paring losses to close 6.54 percent down on the JSE at R33.60.
Mining analyst Sibonginkosi Nyanga said RBPlat earnings had surprised markets as they were on the downside. “The market was expecting better from them given that they are the darling of market, with a strong balance sheet
.”
Speaking at the results presentation in Johannesburg yesterday, RBPlat chief executive Steve Phiri said the company would be tightening its belt as platinum prices had remained depressed due to increasing above ground stock.
“We are going to contain costs and protect our balance sheet. In mining if you don’t have a balance sheet you perish… We are under no illusion that it will be easy,” Phiri said.
Phiri said the curtailment of capital expenditure at Styldrift, the RBPlat’s second mine which was expected to improve cash flows, was aimed at preserving that jewel for the future of their children.
Construction at Styldrift would be limited to activities that could be funded from excess operational cash flows from Bafokeng Rasimone Platinum Mine (BRPM) during the second half of the year, and as revenue generated from on-reef development at Styldrift I.
Phiri said given that the platinum group metals (PGM) market was expected to remain depressed until the end of the year, the board had decided to materially reduce construction-related activities and related capital expenditure at the Styldrift I project.
He said the aim was to cut back on activities at Styldrift I so that expenditure could be serviced from excess cash flows generated from operations at its BRPM operations and revenue generated from on-reef development at Styldrift I.
Prudence
“It is not deemed appropriate to ramp up these high quality Merensky ounces into a currently depressed market at prevailing market prices, and neither is it deemed prudent to burden the balance sheet by raising further funding with its related excessively restrictive and/or dilutive terms and conditions that would apply in the current environment,” Phiri said.
“The board will continuously monitor the situation and necessary adaptive decisions will be taken as market conditions change or improve.”
The half year to June had proven to be its most challenging since RBPlat took operational control of the BRPM joint venture in January 2010, the company said.
Net revenue fell by 22.1 percent to R1 422.6 million for the first half of this year due to a 14.6 percent decrease in the average rand basket price to R18 062 per platinum ounce in the first half of the year.
It cost RBPlat R21 148 to produce a platinum ounce last year, an 8.8 percent decrease in platinum ounces produced due to intermittent stoppages at the mining and processing operations. Its gross profit margin reduced by 97.8 percent.
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