Wrap Text
Audited abridged results for the year ended 31 December 2012
ROYAL BAFOKENG PLATINUM LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2008/015696/06)
JSE share code: RBP ISIN: ZAE000149936
(“RBPlat” or the “company”)
AUDITED ABRIDGED RESULTS FOR THE YEAR ENDED 31 DECEMBER 2012
Royal Bafokeng Platinum is a black-owned and controlled, mid-tier
platinum group metals (PGMs) producer originating from a joint
venture in existing mining operations and endowed with resources for future
mining in the Styldrift property.
The strategy driving our business has four pillars which are underpinned by
the aspiration of More than mining.
1. Towards operational excellence
2. Build flexibility
3. Grow organically
4. Pursue value enchancing opportunities
Our business model creates economic value, within a mutually
beneficial joint venture, in a manner that also creates value for society.
- Mining BRPM, our current operation to extract platinum group metals in
a safe and cost effective manner
- Growing our business organically through our investment in the
Styldrift I and II projects which contributes to the national economy and employment creation
- Treating the ore we produce locally in our concentrator plant
- Selling concentrate, our end product, which generates cash flow for investment, growth
and community development
Achievements:
- Fatality-free shifts: 1.78 million
- Intersected Styldrift Merensky Reef: 600m level
- Improved operational flexibility: Immediately stopable reserves (IMS)
25% improvement in face length:
2011: 4 580 metres 2012: 5 710 metres
- Capex*: 2.4% increase
2011: R1 164 million 2012: R1 192 million
- Phase II South shaft replacement project completed on schedule with a R110 million saving
- Balance sheet remains ungeared
- IMS panel ratio increased to 1.48
* 100% BRPM JV
Improvements:
- Productivity: 30 tonnes milled per employee
2% improvement
- Tonnes milled: 3% increase to 2 375kt
Challenges:
- Built-up head grade 2012: 6.4% reduction to 4.07g/t
- Cash operating cost per tonne milled: 10.4% increase - R864/tonne
- Cash operating cost per platinum ounce: 19% increase - R11 775 Pt/oz
- Cash position: 2011: R1 364.5 million 2012: R910.5 million
- Headline earnings per share: 37.8% reduction to 104 cents
- 4E PGM ounces (4E): 4.4% decrease to 269 koz
Disappointments:
- Milled tonnes lost: 117kt lost due to safety stoppages
70kt lost due to unprotected industrial action
- Fatality at North shaft
Summary consolidated statement of financial position
As at 31 December 2012
Group
31 Dec 31 Dec
2012 2011
Audited Audited Change
R (million) R (million) %
Assets
Non-current assets 17 947.0 17 101.5 4.9
Property, plant and equipment 8 899.2 7 999.3 11.2
Mineral rights 6 645.0 6 700.5 (0.8)
Goodwill 2 275.1 2 275.1 0.0
Environmental trust deposits 103.1 92.4 11.6
Deferred tax asset 24.6 34.2 (28.1)
Current assets 2 154.4 2 391.1 (9.9)
Inventories 41.1 31.1 32.3
Trade and other receivables 1 202.4 995.7 20.8
Held-to-maturity investments 260.6 264.9 (1.6)
Current tax receivables 0.4 0.2 76.1
Cash and cash equivalents 649.9 1 099.2 (40.9)
Total assets 20 101.4 19 492.6 3.6
Equity and liabilities
Share capital 1.7 1.7 –
Share premium 7 789.0 7 759.9 0.4
Retained earnings 3 605.6 3 435.3 5.0
Other reserves 119.7 81.1 47.6
Non-controlling interest 3 964.6 3 859.2 2.8
Total equity 15 480.6 15 137.2 2.3
Non-current liabilities 4 175.1 4 112.2 1.5
Deferred tax liability 4 112.6 4 054.1 1.4
Long-term provisions 62.5 58.1 7.5
Current liabilities 445.7 243.2 83.3
Trade and other payables 443.3 239.8 84.9
Current income tax 2.4 3.4 29.4
Total liabilities 4 620.8 4 355.4 6.1
Total equity and liabilities 20 101.4 19 492.6 3.1
Notes 1 to 12 form an integral part of these summary consolidated
financial statements.
The summary annual financial statements for the year ended 31 December
2012 were prepared under the supervision of the Chief Financial Officer
Martin Prinsloo CA(SA).
Summary consolidated statement of comprehensive income
For the year ended 31 December 2012
Group
31 Dec 31 Dec
2012 2011
Audited Audited Change
Notes R (million) R (million) %
Revenue 8 2 865.3 2 974.9 (3.7)
Cost of sales 9 (2 525.5) (2 408.7) 4.9
Cost of sales excluding
depreciation and amortisation (2 201.8) (1 867.1) 17.9
Depreciation and amortisation (327.6) (518.3) 36.8
Increase/(decrease) in
inventories 3.9 (23.2) 116.7
Gross profit 339.8 566.2 (40.0)
Other income 66.9 54.8 22.2
Administrative expenses (101.7) (104.3) 2.5
Finance income 59.7 62.6 (4.6)
Finance cost (3.4) (4.9) 31.5
Profit before tax 361.3 574.4 (37.1)
Income tax expense (85.6) (163.6) 47.7
Income tax (17.5) (29.9) 41.6
Deferred tax (68.1) (133.7) 49.0
Other comprehensive income – – –
Total comprehensive income 275.7 410.8 (32.9)
Total comprehensive income
attributable to:
Owners of the Company 170.3 273.4 (37.7)
Non-controlling interest 105.4 137.4 (23.3)
275.7 410.8
Basic earnings (cents per share) 7 104 167 (37.8)
Diluted earnings (cents
per share) 7 104 167 (37.9)
Headline earnings (cents
per share) 7 104 167 (37.8)
Notes 1 to 12 form an integral part of these summary consolidated
financial statements.
Summary consolidated statement of changes in equity
For the year ended 31 December 2012
Number
of shares Ordinary Share
issued* shares* premium*
R (million) R (million)
Balance at
31 December 2011 163 677 799 1.7 7 759.9
Share-based
payment charge – – –
IPO shares vested
in May 2012 417 416 – 25.9
2009 BSP shares vested
in December 2012 55 589 – 3.2
Total comprehensive
income – – –
Balance at
31 December 2012 164 150 804 1.7 7 789.0
Balance at
31 December 2010
(Restated) 163 677 799 1.7 7 759.9
Share-based payment
charge – – –
Total comprehensive
income – – –
Balance at
31 December 2011 163 677 799 1.7 7 759.9
* The number of shares is net of 833 349 treasury shares relating to the
Company’s management share incentive scheme and the Mahube Trust as
shares held by these special purpose vehicles are eliminated on consolidation.
Notes 1 to 12 form an integral part of these summary consolidated
financial statements.
Share- Attributable
based to owners Non-
payment Retained of the controlling
reserve earnings Company interest Total
R (million) R (million) R (million) R (million) R (million)
81.1 3 435.3 11 278.0 3 859.2 15 137.2
67.7 – 67.7 – 67.7
(25.9) – – – –
(3.2) – – – –
– 170.3 170.3 105.4 275.7
119.7 3 605.6 11 516.0 3 964.6 15 480.6
18.8 3 161.9 10 942.3 3 721.8 14 664.1
62.3 – 62.3 – 62.3
– 273.4 273.4 137.4 410.8
81.1 3 435.3 11 278.0 3 859.2 15 137.2
Summary consolidated cash flow statement
For the year ended 31 December 2012
Group
31 Dec 31 Dec
2012 2011
Audited Audited Change
R (million) R (million) %
Cash generated by operations 687.3 998.4 (31.2)
Interest received 64.0 48.6 31.7
Tax paid (18.7) (21.9) (15.0)
Net cash flow generated by
operating activities 732.6 1 025.1 (28.5)
Proceeds from disposal of property,
plant and equipment – 0.3 (100.0)
Acquisitions of property, plant and
equipment (1 173.9) (1 146.5) (2.4)
Increase in environmental trust
deposits (8.0) (4.9) (63.3)
Net cash flow utilised by
investing activities (1 181.9) (1 151.1) (2.7)
Settlement of Rustenburg Platinum
Mines Limited (RPM) receivable – 325.8 (100.0)
Net cash flow generated by
financing activities – 325.8 (100.0)
Net increase/(decrease) in cash and
cash equivalents (449.3) 199.8 (324.9)
Cash and cash equivalents at
beginning of year 1 099.2 899.4 22.2
Cash and cash equivalents at
end of year 649.9 1 099.2 48.9
Notes 1 to 12 form an integral part of these summary financial statements.
Notes to the summary consolidated annual financial statements
For the year ended 31 December 2012
1. Basis of presentation
The summary consolidated financial statements have been prepared
in accordance with IAS 34, Interim Financial Reporting, the JSE listing
requirements and requirements of the Companies Act of South
Africa. They should be read in conjunction with the annual financial
statements for the year ended 31 December 2012, which have been
prepared in accordance with the International Financial Reporting
Standards as issued by the International Accounting Standards Board
(IFRS). The accounting policies are consistent with those described in
the annual financial statements.
The financial information is presented in South African Rands which
is the Company’s functional currency.
2. Accounting policies
The summary consolidated financial statements have been prepared
under the historic 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. Audit opinion
The summary consolidated financial statements have been audited by
the Group’s external auditors, PricewaterhouseCoopers Inc. whose
unqualified opinion is available for inspection at the registered office
of Royal Bafokeng Platinum Limited.
The auditors report does not necessarily cover all of the information
contained in this financial report. Shareholders are therefore advised
that in order to obtain a full understanding of the nature of the
auditors work, they should obtain a copy of that report together
with the accompanying financial information form the registered
office of Royal Bafokeng Platinum Limited.
4. Capital commitments
Capital commitments in respect of property, plant and
equipment.
Group
2012 2011
R (million) R (million)
Commitments contracted for 499.0 771.9
Approved expenditure not yet
contracted for 7 903.9 8 737.9
Total 8 402.9 9 509.8
The commitments reflect 100% of the BRPM JV project
commitments. Effectively Royal Bafokeng Resource Proprietary Limited
(RBR) must fund 67% thereof and RPM the remaining 33%.
Should either party elect not to fund their share, the participation
interest in the BRPM JV will be diluted according to the terms
reflected in the BRPM JV agreement.
5. Guarantees and contingencies
5.1 Guarantees
Group
2012 2011
R (million) R (million)
Guarantees issued
Royal Bafokeng Resources Proprietary
Limited, a wholly-owned subsidiary of
RPBlat, granted the following guarantees:
Eskom to secure power supply for
Styldrift I Project development 17.1 17.1
Eskom early termination guarantee for
Styldrift I 17.5 17.5
Eskom connection charges guarantee for
Styldrift I 40.0 40.0
Anglo American Platinum Limited for the
rehabilitation of land disturbed by mining
activities at BRPM 75.3 75.3
Security guarantee in favour of Nedbank
Capital in respect of the funding facility - -
Royal Bafokeng Platinum Management
Services Proprietary Limited, a wholly-
owned subsidiary of RBPlat, granted the
following guarantees:
Tsogo Sun guarantees arising from lease
agreements 0.4 0.4
Total guarantees issued at
31 December 150.3 150.3
5.2 Tax contingency
On 31 January 2013 Royal Bafokeng Resources received notice from
the South African Revenue Services (SARS) that they have completed
an audit of RBR’s 2008 to 2010 tax assessments and that they
intend re-opening these assessments to effect certain proposed
adjustments. These proposed adjustments primarily relate to SARS
intending to disallow interest on shareholder’s loans amounting to
R586 million previously deducted by RBR in the 2008 and 2009
income tax assessments. RBR has enlisted independent advice
regarding this matter and based upon consultation to date, remain
confident that it would be successful in defending this matter.
6. Financing facilities in place
RBPlat had cash and near cash investment on hand of R910.5 million
as at 31 December 2012. The Group has an intra-month funding
working capital requirement which is met through a R250 million
working capital facility of which R150.3 million had been utilised for
guarantees as at 31 December 2012. It also has an unutilised
revolving credit facility (RCF) of R500 million. The RCF terms were
renegotiated in 2012 resulting in a reduction in the commitment
fees and the interest rate and the extention of the RCF from
31 December 2013 to 31 December 2015.
7. Earnings per share
The weighted average number of ordinary shares in issue outside the
Group for the purposes of basic earnings per share and the
weighted average number of ordinary shares for diluted earnings per
share are calculated as follows:
Group
2012 2011
Number of shares issued 165 548 067 165 123 082
Mahube Trust (563 914) (563 914)
Management incentive scheme (1 306 354) (881 369)
Number of shares issued outside
the Group 163 677 799 163 677 799
Adjusted for weighted shares issued
during the year 282 910 -
Weighted average number of
ordinary shares in issue for
earnings per share 163 960 709 163 677 799
Management incentive scheme 139 362 462 537
Weighted average number of
ordinary shares in issue for
diluted earnings per share 164 100 070 164 140 336
Profit attributable to owners of
the Company R (million) 170.3 273.4
Basic earnings per share
(cents per share) 104 167
Basic earnings per share is
calculated by dividing the profit
attributable to owners of the
Company for the year by the
weighted average number of
ordinary shares in issue for earnings
per share.
Diluted earnings per share
(cents per share) 104 167
Diluted earnings per share is
calculated by dividing the profit
attributable to owners of the
Company for the year by the
weighted average number of
ordinary shares in issue for diluted
earnings per share.
Headline earnings
Profit attributable to owners of the
Company is adjusted as follows:
Profit attributable to owners of
the Company R (million) 170.3 273.4
Adjustment net of tax:
Loss on disposal of property, plant
and equipment – 0.3
Headline earnings R (million) 170.3 273.7
Basic headline earnings
(cents per share) 104 167
Diluted headline earnings
(cents per share) 104 166
8. Revenue
Group
2012 2011
R (million) R (million)
Revenue from concentrate sales –
production from BRPM concentrator 2 720.9 2 846.6
Revenue from UG2 toll concentrate 144.4 128.3
Total 2 865.3 2 974.9
9. Cost of sales
Group
2012 2011
R (million) R (million)
On-mine costs:
– Labour 753.1 673.9
– Utilities 171.1 144.5
– Contractor costs 478.4 377.0
– Movement in inventories (3.9) 23.3
– Materials and other mining costs 648.0 614.8
– Elimination of intergroup
management fee (33.3) (31.5)
State royalties 9.6 14.1
Depreciation – Property, plant and
equipment 272.1 462.1
Amortisation – Mineral rights 55.5 56.2
Share-based payment expenses 43.6 33.1
Social and labour plan expenditure
expensed 126.9 35.8
Other 4.4 5.4
Total 2 525.5 2 408.7
10. Related party transactions
Group
2012 2011
R (million) R (million)
BRPM Joint venture balances:
Amount owing by RPM for
concentrate sales 1 059.9 941.8
Amount owing to RPM for
contribution to BRPM JV (working
capital nature) 223.1 37.5
Amount owing to RPM in respect of
Service Level Agreements with RPM – 0.1
BRPM Joint venture transactions:
Concentrate sales to RPM (Refer
Note 8) 2 865.3 2 974.9
Fellow subsidiary transactions:
Transactions with Fraser Alexander
for rental of mining equipment,
maintenance of tailings dam and
operation of sewerage plant 20.6 15.6
Impala Platinum Limited for royalty
income 61.8 24.9
Geoserve Exploration Drilling
Company for exploration drilling on
Boschkoppie and Styldrift 15.6 15.5
Trident South Africa Proprietary
Limited 5.7 –
Tarsus Technologies for electronic
equipment purchases 3.5 0.8
Zurich Insurance Company of SA for
underwriting a portion of BRPM
insurance (previously related) – 0.7
Royal Marang Hotel for
accommodation and conferences 0.3 0.5
11. Dividends
No dividends have been declared or proposed for the current period
(2011: Rnil).
12. Segmental reporting
The Group is currently operating one mine with two decline shafts
BRPM and developing the Styldrift I Project. The BRPM operation is
treated as one operating segment.
The Executive Committee of the Company is regarded as the Chief
Operating Decision Maker.
BRPM
2012 2011
R (million) R (million)
Concentrate sales 2 865.3 2 974.9
Cash cost of sales (2 050.6) (1 802.4)
Depreciation (170.9) (357.1)
Other operating income 64.9 29.0
Other operating expenditure (171.1) (101.7)
Net finance income 10.3 5.2
Segmental profit before tax 547.9 747.9
Additional depreciation on purchase
price allocation (PPA) adjustment
and amortisation (156.7) (161.2)
Overheads of corporate office (111.3) (104.3)
Consolidation adjustments 33.9 10.0
Other income and net
finance income 47.5 82.0
Profit before tax per the statement
of comprehensive income 361.3 574.4
Taxation (85.6) (163.6)
Profit after tax 257.7 410.8
Non-controlling interest (105.3) (137.4)
Contribution to basic earnings 170.3 273.4
Contribution to headline earnings 170.3 237.7
Segment assets 7 109.1 6 626.8
PPA adjustment to carrying amount
of PPE (includes mineral rights) 9 268.4 9 407.1
Corporate assets and consolidation
adjustments (includes goodwill) 3 723.9 3 458.7
Total assets per the statement
of financial position 20 101.4 19 492.6
Segment liabilities 249.3 245.1
Corporate liabilities and
consolidation adjustments 256.6 52.8
Unallocated liabilities (tax and
deferred tax) 4 115.0 4 057.5
Total liabilities per the
statement of financial position 4 620.9 4 355.4
Capital expenditure 1 173.9 1 146.5
Operating and financial statistics
Description Unit Var % 2012 2011
Safety
Fatal injuries No. (100) 1 -
LTIFR /200 000 hrs 26 0.68 0.91
SIFR /200 000 hrs (10) 0.42 0.47
Mining production
Total tonnes delivered kt 4 2 384 2 284
Merensky kt (3) 1 959 2 026
UG2 kt 65 425 258
Development km 31 39.4 30.2
Immediately stopable reserves km 25 5.71 4.58
Concentrator production
Total tonnes milled kt 3 2 375 2 305
Merensky kt (4) 1 959 2 046
UG2 kt 61 417 258
UG2 % 57 18 11
Total BRPM UG2 % 117 11.59 5.35
Built-up head grade (4E) g/t (6.4) 4.07 4.35
Merensky built-up g/t (5) 4.22 4.44
head grade (4E)
UG2 built-up head grade (4E) g/t (7) 3.36 3.60
Recovery – 4E (total
concentrating) % (0.9) 86.71 87.47
Recovery BRPM concentrator % (0.7) 87.21 87.83
4E metals in concentrate koz (4.4) 269.26 281.67
Pt metal in concentrate koz (4.7) 174 183
Nickel kt (10) 1.9 2.1
Safety stoppage losses kt (28) 117 92
Labour
Total labour No. (3) 7 743 7 942
Working cost labour No. (8) 6 057 6 553
Capital labour No. (21) 1 686 1 389
m² per stoping crew m²/crew 0 307 308
Tonnes milled/total operating t/emp 2 30 29
employee
Operating costs
Cash operating costs R’m (14) 2 051 1 802
Cash unit cost R/t (10) 864 782
Cash unit cost R/4E oz (19) 7 616 6 399
Cash unit cost R/Pt oz (19) 11 775 9 863
Capital expenditure
Total capital expenditure R’m 2 1 192 1 164
SIB R’m 63 238 146
Replacement R’m (19) 308 379
Expansion R’m 1 646 639
Other
EBITDA R’m (38.8) 633.8 1035
EBITDA margin % (36.5) 22.1 34.8
Average basket price R/Pt oz 0.7 16 404 16 282
Average R:US$ exchange rate R/US$ 13.1 8.21 7.26
* Please note that any difference in variance percentages in this table is due to
rounding.
Commentary
Safety
We made significant progress in terms of safety at both BRPM and Styldrift.
We achieved this through implementing our safety strategy, which is aimed
at developing a resilient safety culture and reducing the exposure of our
employees to hazards. The 26% reduction in our lost time injury frequency
rate and the 10% reduction in our serious injury frequency rate are
indications of the success of our safety programme this year. Regrettably,
however, we had a fatal injury at BRPM on 6 February 2012 due to a fall
of ground incident at our North shaft. Subsequent to this initial
disappointment no further fatalities were recorded and we achieved
1.78 million fatality-free shifts by year end.
Our safety stoppages increased by 28% during 2012. Despite this increase,
it was encouraging to note that the reasons for these stoppages bore a
significantly increased correlation with injuries or factors directly
contributing to injuries compared to previous years. We believe the trend
of continual safety improvement at our operations should mitigate this risk.
RBPlat remains fully committed to our policy of zero harm. To this end we
will continue to interact and collaborate with our employees, unions and
business partners as well as the Department of Mineral Resources and
other PGM producers, to further improve our safety performance.
More than mining
2012 was a remarkable year for RBPlat in terms of community
development, environmental stewardship and stakeholder engagement.
A highlight was the completion and handover to the Royal Bafokeng
Sports (RBS) and Royal Bafokeng Institute (RBI) of the world class sports
fields at the five schools within the villages that neighbour our operations.
The construction of these sports fields, at a cost of approximately
R24 million, was the beginning of our long-term whole-school development
programme in association with the RBI aimed at improving both primary
and secondary education within these villages, both in and outside the
classroom. The in-class intervention commences in 2013 and will include
the development of both school leadership and teaching skills, including
the employment of four maths and science teachers and school
infrastructure refurbishment which includes the equipment for a
laboratory at one of the local high schools. We have also commenced construction
of a large-scale agri-based business hub which will include various
enterprise development initiatives intended to benefit local entrepreneurs
and households. Other projects we delivered during the period under
review are described in our Integrated Annual Report and on our website.
With respect to environmental stewardship, we completed the
environmental impact assessment and related environmental management
programme report for the construction of a water treatment plant and
these were placed for public review. We will submit the report, inclusive of
public comments, for consideration and approval by the authorities during
March 2013.
Our climate change strategy is driven by our energy conservation plans,
given that approximately 97% of our carbon emissions are generated from
Eskom electricity. We have implemented some of the initiatives identified
during the energy audit we completed mid-year. These include installation
of vanes in the phase 1 main ventilation fans at both the North and South
shafts and control of compressed air leaks. The expected carbon dioxide
equivalent (CO2e) reduction we will achieve from these combined electricity
savings is between 2% and 3% p.a. In addition, we have obtained a better
understanding of the risks and opportunities related to climate change
following the conclusion of our vulnerability assessment and are cultivating
response plans. We were pleased with the improvement in our Carbon
Disclosure Project (CDP) ranking from 71 in 2011 to 22 in 2012 and our
score of 89.
RBPlat’s vision and mission is orientated towards its stakeholders, and we
place great emphasis at both corporate and operational levels on
stakeholder engagement and mutuality in our relationships. We started
2012 by signing up to the UN Global Compact Network and committing to
its 10 universally accepted principles in the areas of human rights labour, the
environment and anti-corruption. The second half of the year was marked
by industry-wide industrial action which had a relatively modest impact on
our operations. We believe that the impact on our operations was
minimised by our open engagement with the disgruntled employees,
assisted by the Rustenburg Crisis Resolution Committee, the National Union
of Mineworkers and United Association of South Africa, in arriving at a
peaceful resolution of the employees’ grievances. A highlight of the year
was the inclusion of RBPlat in the JSE SRI Index and the Nedbank Green
Index for the first time.
Operational performance
In recent years the Merensky output at BRPM in has been constrained by
the limited number of Merensky production levels and the low ratio of
immediately available stoping panels to stoping crews. During 2012 we
realised a significant improvement in this area through a 31% increase in
development from 30.2km to 39.4km which includes primary development
as well as redevelopment to re-establish panels that had been temporarily
lost due to geological conditions. The result was an increase in immediately
stopable reserve (IMS) face length from 4.58km to 5.71km and an increase
in panel ratio from 1.01 at the start of the year to 1.48 at the end of the
year. Our stated target panel ratio is 1.5 panels per stoping crew. However,
Merensky production was compromised by safety stoppages resulting from
mine injuries and operational disruptions emanating from industry-related
rock drill operator remuneration disputes. Safety stoppages for the year
resulted in production losses amounting to 117kt while we suffered
production losses of 70kt from industrial unrest. This resulted in a 4%
decline in Merensky tonnes milled to 1.96 million tonnes. The lower
Merensky output was offset by a 61% increase in UG2 production to
417kt and the treatment of approximately 60kt of low grade surface
stockpile. The net result was a 3% increase in total tonnes milled to
2.375 million tonnes.
The built-up head grade reduced by 6.4% from 4.35g/t (4E) to 4.07g/t (4E)
due to lower grades associated with the increased overall UG2
contribution, the increased reef development to stoping ratio, treatment of
the 60kt of low grade surface stockpile and low grades achieved at South
shaft UG2. The Merensky and UG2 grades at North shaft were 4.37g/t (4E)
and 3.64g/t (4E), which were relatively in line with expectation other than
the additional dilution from increased development. At South shaft the
Merensky grade was 4.24g/t (4E) and similarly, in line with expectation.
The UG2 grade at South shaft however, was 2.96g/t (4E) and well below
the expected grade of 3.51g/t (4E). We attribute these lower grades to
difficult mining conditions caused by rolling reef, combined with a narrow
reef width and a high reef development to stoping ratio due to the early
phase of stope establishment. We will continue to review results as the
South shaft UG2 platform is expanded in 2013.
Out of the 2.375 million tonnes milled, 2.214 million were treated at the
BRPM concentrator and 160kt tonnes at the Waterval concentrator.
UG2 volumes treated at BRPM increased from 116kt to 257kt representing
an increase in contribution from 5.35% to 11.59%. The increase in UG2
volumes was facilitated by the installation of a blending facility during the
second half of 2012. Overall concentrator recovery reduced by 0.9% from
87.47% to 86.71% due to the reduction in head grade, increased UG2
contribution and a 35% punitive recovery apportionment at the Waterval
concentrator in the first quarter when the delivered UG2 grade dropped
below the contractually agreed grade with Anglo American Platinum. This
resulted in a net 4.4% reduction in 4E ounce output to 269koz.
Operating labour reduced by 8% from 2011 to 6 057 by year end in line
with our business optimisation strategy. This reduction was achieved
through a review of organisational structures and employee complements
and leveraging opportunities to share services with Styldrift. As a result of
the impact of safety stoppages and labour unrest, there was no significant
improvement in stoping crew and total labour efficiencies year-on-year.
We were, however, encouraged by improvements achieved during the
fourth quarter with stoping crew efficiency showing a 29% improvement
compared to the corresponding period in 2011.
Operating costs
As with the rest of the mining industry, we experienced mining inflation
that is well above the CPIX of 5.6%. Cash operating costs increased by
14% to R2.05 billion. Key contributing factors to this significant increase
included a newly implemented incentive scheme which applies to enrolled
and contractor employees, additional development and above inflation
increases for labour and utilities. We believe the new incentive scheme and
the additional development will promote productivity and thereby
ultimately reduce our costs.
Labour accounted for 62% of our total operating costs for the 2012
financial year, followed by materials and other mining costs at 30% and
utilities at 8%. Utility cost increases exceeded CPIX by 11% while labour
costs exceeded this inflation measure by 3.4%. Our labour cost increases
are governed by our current three-year wage agreement which include
productivity and efficiency targets.
The increase in cash operating cost was partially mitigated by the increase
in milled tonnes resulting in a unit operating cost increase of 10.4% to
R864 per tonne milled. The 6.4% reduction in head grade combined with a
1% reduction in recovery, contributed to a 19% increase in unit operating
cost to R7 616 per 4E ounce and R11 775 per platinum ounce.
Given the economic climate and the level of cost increases in 2012, cost
management will be a key success driver for RBPlat during 2013.
Capital expenditure
Total BRPM capital expenditure increased by 2.4% to R1 192 million
compared to R1 164 million in 2011. Expansion capital expenditure
increased by R8 million to R646 million in line with the construction
schedule. The Styldrift project remained below budget and there have been
no further savings on the work completed during 2012 resulting in the
declared savings remaining at R323 million.
Replacement capital reduced from R379 million in 2011 to R308 million in
2012 due to the completion of the Merensky Phase II replacement project.
This saving was offset by an increase in stay-in-business (SIB) capital from
R116 million in the prior comparative period to R238 million in 2012.
The increase in SIB can be attributed to a number of large projects, most
notably the North shaft chairlift project (R51.0 million), the SAP Information
Communication Technology (R27.4 million) and supply chain (R8.7 million)
migration projects to achieve increased independence from our joint
venture partner, Anglo American Platinum Limited, the tailings line
replacement (R16.9 million) and a security surveillance system (R4.36 million)
to increase protection of our workforce as well as the mine property during the
labour unrest experienced in the second half of 2012.
We will continue to review our capital expenditure and where possible,
reduce expenditure, provided the reduction does not place our business
sustainability at risk.
Project review
BRPM Phase II and III replacement projects
The BRPM Phase II replacement project which entails the deepening of
both North and South shafts from 6 level to 10 level was successfully
completed in September 2012 on schedule and under budget by
R110 million. Extension of the North shaft decline from 6 to 10 level was
completed in 2011 and the South shaft completed in September in 2012.
This involved the final development of the decline system, development
and handing over of 10 level (the final level of Phase II) to production and
construction and commissioning of the main pump station and water
handling infrastructure.
The Phase III replacement project at North shaft extends the decline system
and associated infrastructure from 10 to 15 level. This project has
progressed well ahead of schedule and under budget with total
development to date being 544 metres ahead of schedule. At end of the
year the project was 40% complete and it is scheduled for completion
during the third quarter of 2017.
The Phase III replacement project will deliver Merensky production of
1.41 million 4E ounces over the life of BRPM.
North shaft chairlift project
The chairlift project which commenced in 2012 will allow for the
development and installation of a chairlift from surface to 5 level. This will
replace the use of the personnel-riding belt to transport people at North
shaft. At end of December 2012 the project was 35% complete and
592 metres ahead on the development schedule.
Styldrift I expansion project
The excellent progress made at Styldrift I on both the Main and Service
shafts has been a highlight for us in 2012. We successfully intersected the
Merensky Reef level 600 metres below surface on the Main shaft on
15 August, a month ahead of schedule. The Service shaft reached the
600 level on 18 October. Lateral development commenced on both shafts
on the 600 level and after achieving the planned development metres we
then re-commenced sinking operations on the Service shaft on
17 November and the Main shaft on 7 December to the 642 level.
As previously communicated in the Company’s interim results for the six
months ended 30 June 2012, the design optimisation study of the Styldrift I
Project was completed during 2012. A key consequence of the optimised
design is the extended ramp-up profile from the two years initially planned
to three years. The changed bord and pillar configuration has resulted in a
reduced extraction rate which in turn will reduce the ore reserves from 68
million to 60 million tonnes. The forecast steady state operating cost at
Styldrift based on the optimised design is R687 per tonne in June 2012 real
terms. There has been no negative impact from the optimisation study on
the capital expenditure and savings to date remain at R323 million.
We completed a pre-feasibility study on the concentrator plant during the
first half of 2012 which concluded that a stand-alone concentrator
adjacent to the Styldrift mine would be the optimal location for the
Styldrift plant. This was followed by a feasibility study that we commenced
mid-2012 and will be concluded by the third quarter of 2013.
Concentrator construction needs to commence in the second half of 2014
in order to meet the project ramp-up profile.
Work related to operational readiness has been initiated in order to prepare
the mine for the ramp-up phase and safe sustainable production. During
2012 RBPlat appointed the General Manager of Styldrift I, Velile Nhlapo, as
part of operational readiness. Velile has put together an operational team
which is looking at the various aspects including safety, health and
environment, employment strategy, procurement of machinery,
engagement with various stakeholders, social labour plans and
accommodation of the workforce, amongst others.
Financial review
In response to the global market conditions that prevailed in 2012,
particularly in the first half of the year, we made a decision to defer
R462 million in project capital expenditure that would not have any
immediate impact on the business. This included exploration drilling at
BRPM and Styldrift II (R71.7 million), construction of the chairlift at South
shaft (R90.7 million), and the BRPM concentrator upgrade (R300 million).
While we have deferred some of our capital expenditure projects, unlike
most other platinum mines, we have not reduced our production. Instead,
our focus is on optimising BRPM’s performance and increasing its
production as the revenue and cash flow we derive from BRPM is enabling
the development of Styldrift.
Net revenue decreased by 3.7% due to lower volumes produced (4.4%)
and a marginal increase of 0.7% in our rand basket price of R16 404 per
platinum ounce in 2012 compared to R16 282 per platinum ounce in
2011. Revenue from production through the BRPM concentrator decreased
by 4.4% from R2 846.6 million in 2011 to R2 720.9 million in 2012 due to
a 5.1% reduction in ounces produced. Revenue from toll concentrating of
UG2 increased by 12.5% from R128.3 million in 2011 to R144.4 million in
2012 mainly as a result of a 10.4% increase in toll concentrating ounces.
Gross profit margin declined by 37.4% from 19% to 11.9% in 2012. This
was due to the 3.7% decrease in net revenue and a 10.4% increase in
cash operating cost per tonne milled. Depreciation charges (including
depreciation on head office assets) reduced by 41.1% from R462.1 million
to R273.3 million in 2012 mainly due to the inclusion of the UG2 ounce
base in the calculation of depreciation on a unit of production basis.
Earnings before interest, tax, depreciation and amortisation (EBITDA) as a
percentage of revenue decreased to 22.1% from 34.8% in 2011 mainly as
a result of reduced sales volumes and an increase in cash operating costs at
the operation.
Other income increased from R54.8 million in 2011 to R66.9 million in 2012
despite the fact that other income for 2011 included a once off amount of
R28.9 million relating to income received as a result of the settlement of the
Rustenburg Platinum Mine intercompany balance received in 2011. The
increase is mainly due to the significant increase in the royalty income from
Impala from R24.9 million in 2011 to R61.8 million in 2012.
Finance income decreased slightly from R62.6 million in 2011 to
R59.7 million in 2012.
The current income tax charge decreased from R29.9 million in 2011 to
R17.5 million in 2012. Deferred tax decreased from the prior year mainly
due to the calculation relating to RPM’s share of the BRPM JV profits being
refined. In future, it is expected that an effective tax rate below 28% will
be realised due to exempt dividend income, RPM’s tax on non-mining
income is carried by RPM and is not reflected in the Group’s results.
Capital expenditure of R1 192.3 million was funded partly from cash flows
from operations of R732.6 million and the remainder from cash
contributions by the shareholders of the BRPM JV.
At 31 December 2012 the RBPlat Group’s balance sheet remained
ungeared with cash and near cash investments of R910 million. The
R500 million Nedbank revolving facility remains undrawn.
Market review
The grave state of the global economy, affected by the ongoing financial
woes of the European Union and the consequent slowing of growth in
China, has resulted in weak demand for PGMs and falling metal prices.
The price of platinum has fluctuated considerably over the past two years,
moving from over US$1 800/oz in January 2011 to around US$1 400/oz in
August of 2012. Although the platinum price increased towards the end of
2012, briefly touching US$1 700/oz in October, this increase was not
driven by a recovery in market demand, but was rather a result of
uncertainty surrounding supply stemming from the impact of labour unrest
on South African platinum mines.
Global mine supply fell 530koz to 5.64 million ounces in 2012, with
South African output estimated to have decreased by 11% year-on-year
to just under 4 million ounces. Softer commodity prices also reduced
recycling by around 85koz resulting in total supply declining by 7.7% to
7.4 million ounces.
Automotive platinum demand remained flat in 2012. European
consumption reduced by an estimated 180koz but this was offset by a
recovery in Japan post their earthquake and growth in the United States.
Net demand from jewellery fabricators rose by about 180koz as increased
wedding registrations, lower prices and reduced recycling boosted
restocking, however other industrial demand was down just under 200koz
over the year compared to the exceptional growth in 2011. Platinum
Exchange Traded Funds holdings increased by approximately 15% to end
the year at 1.5 million ounces with a record jump in mid-August to
mid-September as a result of industrial action in the platinum industry.
Glass demand retreated as the industry utilised new liquid crystal display
capacity and recycled returns from old tube display plant closures. The net
result was flat total demand year-on-year of 7.7 million ounces.
In 2012 palladium supply fell 350koz to 8.4 million ounces, while demand
increased 260koz to 9.5 million ounces, leaving the market short by over
1 million ounces. However, we believe global stocks are still significant.
Some analysts estimate stocks stand at well over a year’s consumption.
Nonetheless, the proliferation of exchange traded funds in recent years has
helped to absorb almost 1.8 million ounces of palladium stock.
The rhodium market was estimated to be in surplus by around 90koz in
2012 after three years of oversupply. If mine supply reduces the market
could swing back into deficit earlier than forecast and prices may start to
rise from current levels as stock levels reduce.
Outlook
Currently, our industry faces a wide array of challenges. Cost is a major
concern as mines deepen, grades decline with increased UG2 contributions
and achieving sufficient development is a challenge for most platinum
miners. We believe our strategic goals remain relevant. Our major focus for
2013 will continue to be on cost management. In light of the above
inflation cost pressures we expect in 2013 it is essential that we improve
efficiencies and control our workforce numbers.
Our operational platform has been significantly improved by the growth in
immediately stopable reserve face length, additional mining levels, access
to both Merensky and UG2 reefs, timely execution of replacement and
expansion projects, improved incentive schemes and our safety
performance improvements. We will leverage this strength through our
on-going high focus on stakeholder engagement, which is aimed at
reducing the risk of unnecessary operational disruptions. Given this
position, we are optimistic about maintaining production levels at BRPM
around 2.4 million tonnes and expect a 20% UG2 contribution up to 2015.
We are estimating that we will maintain head grade at BRPM between
4.1g/t (4E) and 4.2g/t (4E) based on our forecast Merensky and UG2 ratios.
Styldrift I remains on schedule to commence production in 2015 and to
ramp up to full production in 2018. The accelerated capital expenditure
profile for Styldrift I will result in increased demand on our surplus cash
resources to supplement the funding toward Styldrift capital and as was
initially anticipated, we expect to start tapping into our debt facilities for
this purpose during the course of 2013.
The platinum and palladium market deficits should continue to widen,
owing to constrained output from South Africa, resulting from mine cost
pressures, a lack of capital investment and unresolved labour issues. While
there should be a slight increase in platinum requirements ahead of the
implementation of Euro VI emissions legislation in 2014, we expect
platinum demand for autocatalysts to remain at current levels in 2013, as
economic growth in Europe continues to deteriorate. Demand from Japan
is likely to recede after the post-earthquake pickup in 2012. Consumer
demand for platinum jewellery in China continues to grow and should be
boosted by aggressive nation-wide jewellery store expansion plans.
Platinum prices are anticipated to rise on the back of supply shortages,
which could, however, motivate increased recycling and limit net new metal
demand growth. Palladium demand growth is anticipated to continue at
more than 3% in 2013, as the metal benefits from the continuing increase
in vehicle production, particularly in China, and tightening tailpipe
emissions legislation.
Administration and Company information
Company registered office
Royal Bafokeng Platinum Ltd
Registration number: 2008/015696/06
Share code: RBP
ISIN: ZAE000149936
The Pivot
No. 1 Monte Casino Boulevard
Block C
4th Floor
Fourways
Johannesburg
2021
PO Box 2283
Fourways
2055
South Africa
Company Secretary
Lester Jooste (ACIS)
Email: lester@bafokengplatinum.co.za
Telephone: +27 10 590 4519
Telefax: +27 086 572 8047
Investor relations
Lindiwe Montshiwagae
Email: lindiwe@bafokengplatinum.co.za
Telephone: +27 10 590 4517
Telefax: +27 086 219 5131
Public Officer
Reginald Haman
Email: reginald@bafokengplatinum.co.za
Telephone: +27 10 590 4533
Telefax: +27 086 588 4568
Independent external
auditors
PricewaterhouseCoopers Inc
2 Eglin Road
Sunninghill
Johannesburg
2157
South Africa
Transfer Secretaries
Computershare Investor Services
Proprietary Limited
70 Marshall Street
Johannesburg
PO Box 61051
Marshalltown
2107
South Africa
Telephone: +27 11 370 5000
Telefax: +27 11 688 5200
Sponsor
Macquarie First South Capital
Proprietary Limited
The Place
1 Sandton Drive
South Wing
Sandton
Johannesburg
2196
South Africa
Bankers
Nedbank Limited
135 Rivonia Road
Sandton
2196
South Africa
Fourways, Johannesburg
05 March 2013
JSE Sponsor
Macquarie First South Capital (Pty) Limited
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