Wrap Text
Audited results for the year ended 31 December 2013
Royal Bafokeng Platinum Limited
(Incorporated in the Republic of South Africa)
Share code: RBP ISIN: ZAE000149936
Registration number: 2008/015696/06
“RBPlat” or “the Company” or “the Group”
Audited results for the year ended 31 December 2013
Key features
37% reduction in SIFR
8% improvement in built-up head grade to 4.38g/t
4% increase in 4E PGM ounces to 280koz
2% decrease in cash operating cost per platinum ounce to R11 592/Pt oz
66% increase in headline earnings per share to 173 cents
Net cash of R772.9 million at year end
Summary consolidated statement of financial position
As at 31 December 2013
Group
31 Dec 2013 31 Dec 2012
Audited Audited %
R (million) R (million) change
Assets
Non-current assets 18 611.4 17 947.0 3.7
Property, plant and equipment 9 620.9 8 899.2 8.1
Mineral rights 6 583.7 6 645.0 (0.9)
Goodwill 2 275.1 2 275.1 0.0
Environmental trust deposits 106.8 103.1 3.6
Deferred tax asset 24.9 24.6 1.2
Current assets 2 206.1 2 154.4 2.4
Inventories 35.5 41.1 (13.6)
Trade and other receivables 1 397.7 1 202.4 16.2
Held-to-maturity investments – 260.6 (100)
Current tax receivables – 0.4 (100)
Cash and cash equivalents 772.9 649.9 18.9
Total assets 20 817.5 20 101.4 3.6
Equity and liabilities
Share capital 1.7 1.7 0.0
Share premium 7 808.9 7 789.0 0.3
Retained earnings 3 889.8 3 605.6 7.9
Other reserves 157.7 119.7 31.7
Non-controlling interest 4 128.2 3 964.6 4.1
Total equity 15 986.3 15 480.6 3.3
Non-current liabilities 4 331.6 4 175.1 3.7
Deferred tax liability 4 262.0 4 112.6 3.6
Long-term provisions 69.6 62.5 11.4
Current liabilities 499.6 445.7 12.1
Trade and other payables 499.4 443.3 12.7
Current income tax 0.2 2.4 (91.7)
Total liabilities 4 831.2 4 620.8 4.6
Total equity and liabilities 20 817.5 20 101.4 3.6
Notes 1 to 13 form an integral part of these summary consolidated
financial statements.
The summary consolidated financial statements for the year ended
31 December 2013 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 2013
Group
31 Dec 2013 31 Dec 2012
Audited Audited %
Notes R (million) R (million) change
Revenue 8 3 251.1 2 865.3 13.5
Cost of sales 9 (2 650.1) (2 525.5) (4.9)
Cost of sales excluding
depreciation/amortisation and
movement in inventory (2 223.2) (2 201.8) (1.0)
Depreciation and amortisation (433.5) (327.6) (32.3)
Increase in inventories 6.6 3.9 69.2
Gross profit 601.0 339.8 76.9
Other income 77.5 66.9 15.8
Administrative expenses (105.0) (101.7) (3.2)
Finance income 42.7 59.7 (28.5)
Finance cost (3.7) (3.4) (8.8)
Profit before tax 612.5 361.3 69.5
Income tax expense (164.7) (85.6) (92.4)
Income tax (15.6) (17.5) 11.0
Deferred tax (149.1) (68.1) (118.9)
Net profit for the year 447.8 275.7 62.4
Other comprehensive income – – –
Total comprehensive income 447.8 275.7 62.4
Total comprehensive income
attributable to:
Owners of the Company 284.2 170.3 66.9
Non-controlling interest 163.6 105.4 55.2
447.8 275.7 62.4
Basic earnings (cents per share) 7 173 104 66.3
Diluted earnings (cents per share) 7 173 104 66.3
Headline earnings (cents per share) 7 173 104 66.3
Notes 1 to 13 form an integral part of these summary consolidated
financial statements.
Summary consolidated statement of changes in equity
For the year ended 31 December 2013
Share-
Number of based
Shares Ordinary Share payment
issued* shares* premium* reserve
R (million) R (million) R (million)
Balance at
31 December 2012 164 150 804 1.7 7 789.0 119.7
Share-based payment
charge – – – 57.9
Mahube ordinary shares
vested in March 2013 187 971 – 12.2 (12.2)
2013 retrenchments
(BSP early vesting) 43 044 – 2.6 (2.6)
2010 BSP shares vested
in December 2013 77 843 – 5.1 (5.1)
Total comprehensive
income – – – –
Balance at
31 December 2013 164 459 662 1.7 7 808.9 157.7
Balance at
31 December 2011 163 677 799 1.7 7 759.9 81.1
Share-based payment
charge – – – 67.7
IPO shares vested in
May 2012 417 416 – 25.9 (25.9)
2009 BSP shares
vested in December
2012 55 589 – 3.2 (3.2)
Total comprehensive
income – – – –
Balance at 31
December 2012 164 150 804 1.7 7 789.0 119.7
Attribut-
able to Non-
Retained owners of controlling
earnings the Company interest Total
R (million) R (million) R (million) R (million)
Balance at 31
December 2012 3 605.6 11 516.0 3 964.6 15 480.6
Share-based payment
charge – 57.9 – 57.9
Mahube ordinary
shares vested in
March 2013 – – – –
2013 retrenchments
(BSP early vesting) – – – –
2010 BSP shares vested
in December 2013 – – – –
Total comprehensive
income 284.2 284.2 163.6 447.8
Balance at
31 December 2013 3 889.8 11 858.1 4 128.2 15 986.3
Balance at
31 December 2011 3 435.3 11 278.0 3 859.2 15 137.2
Share-based payment
charge – 67.7 – 67.7
IPO shares vested in
May 2012 – – – –
2009 BSP shares
vested in December
2012 – – – –
Total comprehensive
income 170.3 170.3 105.4 275.7
Balance at 31
December 2012 3 605.6 11 516.0 3 964.6 15 480.6
*The number of shares is net of 1 622 781 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 13 form an integral part of these summary consolidated
financial statements.
Summary consolidated cash flow statement
For the year ended 31 December 2013
Group
31 Dec 2013 31 Dec 2012
Audited Audited %
R (million) R (million) change
Cash generated by operations 875.8 687.3 27.4
Interest received 49.4 64.0 (22.8)
Tax paid (17.4) (18.7) 6.9
Net cash flow generated by operating
activities 907.8 732.6 23.9
Proceeds from disposal of property,
plant and equipment 0.3 – 100
Acquisitions of property, plant and
equipment (1 036.6) (1 173.9) (11.7)
Increase in environmental trust
deposits (2.4) (8.0) (70.3)
Decrease in held-to-maturity
investments 253.9 – 100
Net cash flow utilised by investing
activities (784.8) (1 181.9) (33.6)
Net cash flow generated by financing
activities – – 0.0
Net increase/(decrease) in cash and
cash equivalents 123.0 (449.3) 127.4
Cash and cash equivalents at beginning
of year 649.9 1 099.2 (40.9)
Cash and cash equivalents at end of
year 772.9 649.9 18.9
Notes 1 to 13 form an integral part of
these summary consolidated
financial statements.
Notes to the summary consolidated financial statements
For the year ended 31 December 2013
1. Basis of presentation
The summary consolidated financial statements are prepared in accordance
with the requirements of the JSE Limited Listings Requirements
(JSE Listings Requirements) for abridged reports, and the requirements of
the Companies Act applicable to summary financial statements. The JSE
Listings Requirements require abridged reports to be prepared in
accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards
(IFRS) and the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by
the Financial Reporting Standards Council and also, as a minimum, contain
the information required by IAS 34 Interim Financial Reporting. The
accounting policies applied in the preparation of the consolidated
financial statements from which the summary consolidated financial
statements were derived are in terms of IFRS and are consistent with
those accounting policies applied in the preparation of the previous
consolidated annual financial statements.
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
These summary consolidated financial statements for the year ended
31 December 2013 have been audited by PricewaterhouseCoopers Inc. who
expressed an unmodified opinion thereon. The auditor also expressed an
unmodified opinion on the annual financial statements from which these
summary consolidated financial statement were derived.
A copy of the auditors report on the summary consolidated financial
statements and of the auditor’s report on the annual consolidated
financial statements are available for inspection at the Registered office
of Royal Bafokeng Platinum Limited, together with the financial statements
identified in the respective auditor’s report.
4. Capital commitments
Capital commitments in respect of property, plant and equipment
Group
2013 2012
R (million) R (million)
Commitments contracted for 918.3 499.0
Approved expenditure not yet contracted for 6 432.7 7 903.9
Total 7 351.0 8 402.9
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
2013 2012
R (million) R (million)
Guarantees issued
Royal Bafokeng Resources Proprietary Limited,
a wholly-owned subsidiary of RBPlat, 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 77.5 75.3
DMR for the rehabilitation of land disturbed
by prospecting/mining 1.3 –
Housing guarantee for employees 200.0 –
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 353.8 150.3
The housing guarantee of R200 million was reduced to R147 million in
January 2014 as R53 million was drawn from Nedbank working capital
facilities. Royal Bafokeng Platinum Limited granted a security guarantee
in favour of Nedbank Capital in respect of the revolving credit facility.
5.2 Tax contingency
On 31 January 2013 Royal Bafokeng Resources (RBR) 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. On 19
February 2014, RBR received revised assessments from SARS for the 2008,
2009 and 2010 years amounting to R437.5 million comprising income tax of
R106.0 million, penalties of R246.4 million and interest of R85.1 million
payable within seven days. RBR is in the process of lodging an objection
against these assessments and an application to suspend payment of taxes
in terms of section 164(2) of the Tax Administration Act. Based upon
independent advice and consultation to date, RBPlat remains confident that it
has a reasonable prospect of successfully defending this matter.
6. Financing facilities in place
RBPlat has cash and cash equivalents on hand of R772.9 million as at
31 December 2013. It also has an unutilised revolving credit facility (RCF) of
R1 billion. The RCF facility is repayable by 31 December 2015. To date nothing
has been drawn from the R1 billion facility.
The Group has an intra-month funding working capital requirement, which
is met through a R458 million (2012:R258 million) working capital facility of
which R353.8 million had been utilised for guarantees as at 31 December 2013.
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
2013 2012
Number of shares issued 166 082 443 165 548 067
Mahube Trust (563 914) (563 914)
Management incentive scheme (1 367 725) (1 306 354)
Number of shares issued outside the Group 164 150 804 163 677 799
Adjusted for weighted shares issued during
the year 168 987 282 910
Weighted average number of ordinary shares
in issue for earnings per share 164 319 791 163 960 709
Management incentive scheme 149 113 139 362
Weighted average number of ordinary shares
in issue for diluted earnings per share 164 468 904 164 100 071
Profit attributable to owners of the Company
R (million) 284.2 170.3
Basic earnings per share (cents per share) 173 104
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) 173 104
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) 284.2 170.3
Adjustment net of tax:
Profit on disposal of property, plant and
equipment (0.3) –
Headline earnings R (million) 283.9 170.3
Basic headline earnings (cents per share) 173 104
Diluted headline earnings (cents per share) 173 104
8. Revenue
Group
2013 2012
R (million) R (million)
Revenue from concentrate sales – production
from BRPM concentrator 2 944.7 2 720.9
Revenue from UG2 toll concentrate 306.4 144.4
Total 3 251.1 2 865.3
9. Cost of sales
Group
2013 2012
R (million) R (million)
On-mine costs:
– Labour 773.3 753.1
– Utilities 179.4 171.1
– Contractor costs 489.0 478.4
– Movement in inventories (6.6) (3.9)
– Materials and other mining costs 615.8 614.7
– Materials and other mining costs – BRPM JV 651.0 648.0
– Elimination of intergroup management fee (35.2) (33.3)
State royalties 10.9 9.6
Depreciation – Property, plant and equipment 372.2 272.1
Amortisation – Mineral rights 61.3 55.5
Share-based payment expense 35.8 43.6
Social and labour plan expenditure expensed 91.0 126.9
Retrenchments* 21.2 –
Styldrift incidental expenses 4.8 –
Other 2.0 4.4
Total 2 650.1 2 525.5
*18 D1 and below and 17 D2 and above employees were retrenched in 2013.
All retrenchment cost have been fully paid out.
10. Related party transactions
Group
2013 2012
R (million) R (million)
BRPM Joint Venture balances:
Amount owing by RPM for concentrate sales 1 313.2 1 059.9
Amount owing to RPM for contribution to BRPM
JV (working capital nature) 213.4 223.1
BRPM Joint Venture transactions:
Concentrate sales to RPM (Refer Note 8) 3 251.1 2 865.3
Associate of holding company balances:
Amount owing by Impala Platinum Limited for
the fourth quarter royalty 10.9 20.3
Fellow subsidiaries and associates of holding
Company transactions:
Transactions with Fraser Alexander for rental
of mining equipment, maintenance of tailings
dam and operation of sewerage plant
(a subsidiary of RBH) 10.7 20.6
Impala Platinum Limited for royalty income (an
associate of RBH) 75.2 61.8
Geoserve Exploration Drilling Company for
exploration drilling on Boschkoppie and
Styldrift (a subsidiary of RBH) 23.2 15.6
Trident South Africa Proprietary Limited for
steel supplies (a subsidiary of RBH) 0.8 5.7
Tarsus Technologies for electronic equipment
purchases (a subsidiary of RBH) 2.4 3.5
Royal Marang Hotel (a subsidiary of RBH) 0.7 0.3
11. Dividends
No dividends have been declared or proposed for the current period
(2012: Rnil).
12. Segmental reporting
The Group is currently operating one mine with two decline shafts (BPRM)
and is 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
2013 2012
R (million) R (million)
Concentrate sales 3 251.1 2 865.3
Cash cost of sales (2 092.8) (2 050.6)
Depreciation (262.7) (170.9)
Other operating income 76.8 64.9
Share-based payment expense (non-cash) (35.8) (43.6)
Other operating expenditure (112.4) (127.5)
Net finance income 6.0 10.3
Segmental profit before tax 830.2 547.9
Additional depreciation on purchase price
allocation (PPA) adjustment and amortisation (170.8) (156.7)
Overheads of corporate office (115.9) (111.3)
Consolidation adjustments 36.0 33.9
Other income and net finance income 33.0 47.5
Profit before tax per the statement of
comprehensive income 612.5 361.3
Taxation (164.7) (85.6)
Profit after tax 447.8 275.7
Non-controlling interest (163.6) (105.4)
Contribution to basic earnings 284.2 170.3
Contribution to headline earnings 283.9 170.3
Segment assets 7 960.0 7 109.1
PPA adjustment to carrying amount of PPE
(includes mineral rights) 9 096.9 9 268.4
Corporate assets and consolidation adjustments
(includes goodwill) 3 760.6 3 723.9
Total assets per the statement of financial
position 20 817.5 20 101.4
Segment liabilities 270.0 249.3
Corporate liabilities and consolidation
adjustments 299.0 256.6
Unallocated liabilities (tax and deferred tax) 4 262.2 4 115.0
Total liabilities per the statement of
financial position 4 831.2 4 620.9
Group capital expenditure per cash flow
statement 1 036.6 1 173.9
13. Financial risk management
Fair value determination
The table below analyses financial instruments carried at fair value, by
valuation method. The different levels have been defined as follows:
- Quoted prices (unadjusted) in active markets for identical assets or
liabilities (level 1)
- Inputs other than quoted prices included within level 1 that are
observable for the asset or liability, either directly (that is, as
prices) or indirectly (that is, derived from prices) (level 2)
- Inputs for the asset or liability that are not based on observable
market data (that is, unobservable inputs (level 3).
The only financial asset carried at fair value is the equity linked
component of the BRPM Environmental Trust deposit. This was valued using
the level 2 fair values which are directly derived from the Shareholders
Weighted Top 40 Index (SWIX 40) on the JSE and the Bettabeta CIS BGreen
portfolio exchange traded fund.
The following table presents the Group’s assets that are measured at
fair value at 31 December.
Notes Level 1 Level 2 Level 3
Financial assets at fair value
through profit or loss 2013
Environmental trust deposits 7 – 102.2 –
2012
Environmental trust deposits 7 – 100.9 –
Operating and financial statistics
2013 vs
2012***
Description Unit % change 2013 2012 2011
Safety
Fatal injuries No. (100) 2 1 0
LTIFR /200 000 9 0.61 0.68 0.91
SIFR /200 000 37 0.26 0.42 0.47
Injury free days days 7 240 255 204
Mining production
Stoping square metres ‘000m2 6 505 479 471
Total tonnes delivered kt (3) 2 310 2 384 2 284
Merensky kt (3) 1 895 1 959 2 026
UG2 kt (2) 415 425 258
Development km (8) 36.5 39.4 30.2
Stoping to development
replacement rate m2/m (19) 32.4 27.1 32.2
Immediately stopable
reserves km 5 6.00 5.71 4.58
Delivered ROM grade (4E) g/t 4 4.31 4.14 4.27
Merensky delivered grade
(4E) g/t 3 4.45 4.30 4.36
UG2 delivered grade (4E) g/t 10 3.70 3.38 3.54
Concentrator production
Total tonnes milled kt (3) 2 301 2 375 2 305
BRPM tonnes milled kt (9) 2 010 2 214 2 162
Waterval tonnes milled kt 82 291 160 142
Merensky kt (4) 1 887 1 958 2 047
UG2 kt (1) 414 417 258
UG2% % 3 18 18 11
UG2 BRPM % (47) 6 12 5
Built-up head grade (4E) g/t 8 4.38 4.07 4.35
Built-up Merensky head
grade (4E) g/t 7 4.51 4.22 4.44
Built-up UG2 head grade
(4E) g/t 12 3.76 3.36 3.60
Recovery – 4E (total
concentrating) % (0.4) 86.37 86.71 87.47
Recovery BRPM concentrator % (0.2) 87.05 87.21 87.83
Metals in concentrate
4E koz 3.8 280 269 282
Platinum koz 4.1 181 174 183
Nickel kt (0.03) 1.8 1.9 2.1
Safety stoppage losses kt (23) 89 117 92
Safety stoppage losses 4E koz (28) 10.2 14.0 11.5
Labour
Total labour No. (2) 7 907* 7 743* 7 942
Working cost labour No. (2) 6 180* 6 057* 6 553
Capital labour No. (2) 1 727* 1 686* 1 389
per stoping crew m²/crew 4 320 307 308
Tonnes milled/per working
cost employee t/emp 6 31.6 29.8 29.3
Financial
Cash operating costs R’m (2) 2 093 2 051 1 802
Cash unit cost** R/t (6) 920 864 782
Cash unit cost** R/4E oz 1 7 519 7 616 6 399
Cash unit cost** R/Pt oz 2 11 592 11 775 9 863
Total capex R’m 11 1 059 1 192 1 164
SIB R’m 42 138 238 146
Replacement R’m 40 184 308 379
Expansion R’m (14) 737 646 639
Gross profit margin % 55.4 18.5 11.9 19.0
EBITDA margin % 40.3 31.0 22.1 34.8
Average basket price R/Pt oz 9.3 17 927 16 404 16 282
Average R:US$ R/US$ 17.5 9.65 8.21 7.26
* 2013 and 2012 labour numbers are year end numbers while the numbers
for 2011 are averaged for the year
** Unit cash costs are calculated excluding the incidental tonnages
ounces and costs generated by Styldrift I on-reef development
*** Please note that any difference in percentage change in this
table is due to rounding
Commentary
Overview
In many ways 2013 has seen the culmination of our efforts to achieve our
long-term strategic objectives, which was made possible by the support and
commitment of our employees, the unions and the communities in which we
operate. Regrettably, the one strategic objective we were not able to meet
was our target of achieving zero harm.
We have achieved the operational flexibility we wanted to achieve and have
contained unit costs on a rand per tonne basis in line with the inflation
rate. Our grade has improved considerably, largely due to the
flexibility we have achieved, which has resulted in our cash unit costs
per platinum ounce reducing by 2%. The Styldrift I project remains on
schedule and on budget with a strong performance in 2013. Our other
projects remain on schedule or ahead of schedule and within budget.
An important development in 2013 has been the development of our revised
ore processing strategy. We believe that the revised strategy will further
augment our current operational strategies to ensure our long-term
sustainability in the current macroeconomic environment, without
sacrificing future UG2 treatment requirements should market conditions
improve.
Safety, health and environment
Our respect and care for our employees, and our understanding that it is
not possible to achieve sustainable business performance without high
health and safety standards and performance, drive our long-term health
and safety strategies.
We have consistently reduced our lost time injury frequency rate at BRPM
during the four years since RBPlat took over operational control of the
BRPM Joint Venture (BRPM JV). Since 2010 the BRPM JV has achieved a 36%
reduction in our lost time injury frequency rate and a 50% reduction in
our serious injury frequency rate. In 2013 we achieved a 37% reduction
in our serious injury frequency rate and a 9% reduction in our lost time
injury frequency rate.
Sadly, we did not achieve a fatality-free year as we had two fatalities
at BRPM during 2013. We are, however, encouraged by the continuing
improvement in our lost time injury and serious injury statistics and we
believe that the hard work everyone at RBPlat is putting into developing
a culture where everybody takes responsibility for their own safety and
the safety of their colleagues will help us achieve a fatality-free year
in 2014.
In terms of health and wellness we had no new cases of occupational
illness in our operations during 2013 and our new HIV infection rate
decreased to 2.7% from 5.3% in 2012.
We achieved a very pleasing environmental performance in 2013 with an
excellent improvement in our energy efficiency and water use reduction
and no environmental incidents. We received approval for the construction
of an onsite water treatment plant at BRPM, which will further reduce our
future water requirement from Magalies Water.
The good from mining
Our social responsibility and sustainable development strategies and
policies are designed to support our More than Mining philosophy and
help us achieve a balance between the Company’s interests and those of
our communities. Our philosophy commits us to creating economic value
in a way that also creates value for society. This is a particularly
challenging commitment in the current economic environment.
Both BRPM and Styldrift I have completed their current social and labour
plan commitments and following consultation with the communities in
which we operate undertook additional projects, over and above our
original commitments. Over the past three years RBPlat has invested
R268 million in corporate social investment and social and labour plan
projects.
During 2013 we partnered with the Royal Bafokeng Institute on classroom
education. A project facilitation coordinator has been appointed to
facilitate the roll-out of the educational interventions in schools in
our doorstep communities. The initial project included funding the salaries
of two additional maths teachers and one science teacher at
Charora High School, renovating the maths and science classrooms and
re-equipping them. We also undertook a number of infrastructure,
health, poverty alleviation and job creation projects. One of these
projects, a commercial community garden in Chaneng village won the
Department of Agriculture’s 14th Annual Female Entrepreneur Award in 2013.
Labour relations
While 2013 has been a challenging year for most platinum mining companies
in terms of the need to restructure to cope with the current
economic circumstances and constant strike activity, at RBPlat we were
fortunate to be able to restructure our workforce and end the year with a
stable operating environment.
During 2013 we entered the final year of our three-year wage agreement,
which ends in June 2014. Part of this wage agreement was our commitment
to building homes for our employees. The first phase of our housing
development for BRPM employees was well under way by the end of 2013.
We will be renegotiating our wage agreement during 2014.
Operational performance
Production
Our persistent focus over the past two years on our objective of improving
operational flexibility by increasing the immediately stopable face
length, has increased the immediately stopable reserves (IMS) panel
to stoping team ratio at BRPM to above 1.5. From a strategic perspective
this has been one of the most important structural improvements we have
achieved to date. It has contributed to a number of important
performance improvements in safety, grade, labour productivity and
ultimately our operating costs that we achieved in 2013.
During 2013 our overall development reduced by 8% from 39.4km to 36.5km,
which is mainly attributable to the normalisation of our working cost
development rate, in line with our overall depletion and IMS requirements.
Our IMS face length improved by a further 5% to 6km and our stoping
production improved by 6% with a total of 505 000m2 being mined compared
to 479 000m2 in 2012.
Our delivered tonnes, however, reduced by 3% to 2 310kt year on-year
despite the improvement we achieved in stoping performance. The main
contributor to this lower performance was the shortfall in sweepings and
vamping tonnes as a result of our labour reductions implemented towards
the end of 2012. Remedial action has been implemented to address this
shortfall.
Our built-up head grade improved by 8% from 4.07g/t (4E) to 4.38 g/t
(4E), with the grade benefiting from the normalisation of development
rates, a reduction in off-reef mining due to increased IMS, higher in-
situ reef grades, no processing of low grade stockpile material (as was
the case in 2012) and the recovery of high grade fines from the crusher
classifier overflow thickener during the mill repair. We do, however,
expect that the increase in on-reef development contribution from the
Phase III project at BRPM will reduce our built-up head grade by 4% in
2014. UG2 production remained at similar levels to 2012.
Total milled tonnes decreased by 3% to 2 301kt from 2 375kt in 2012, with
2 010kt being milled at the BRPM concentrator and 291kt at the
Waterval concentrator. The BRPM concentrator’s throughput was impacted by
the replacement of the primary mill discharge end during August, following a
wear-related failure, which resulted in a 15-day shutdown. A
90kt Merensky stockpile accumulated ahead of the concentrator during the
shutdown and was depleted by year end. The BRPM concentrator recovery at
87.05% and overall recovery (including toll concentrating) of 86.37% was
in line with our expectations. The increase in built-up head grade
combined with the reduction in throughput and recovery yielded a total
of 280koz (4E) metals in concentrate which is a 3.8% increase year-on-
year.
Operating costs
Our cash operating costs increased by 2% to R2 093 million and the unit
cost per tonne milled by 6% to R920. This was due to the 3% reduction in
the tonnes treated. The unit operating cost per platinum ounce benefited
from the 8% increase in built-up head grade resulting in a 4% increase
in metals produced and as a result it decreased by 2% to R11 592 per
ounce.
We mainly attribute the operating cost performance during 2013 to working
cost labour reductions at the end of 2012, rationalisation of key mining
and supply contracts, productivity improvements enabled by the increase
in IMS, the establishment of shared services between BRPM and Styldrift I
and improved cost management.
Capital expenditure
Total capital expenditure for the RBPlat Group (net of intergroup charges)
for the period under review decreased by 11.7% to R1 036.6 million.
Stay-in-business (SIB) capital ended the year at R138 million
which was R101 million or 42% down from 2012. The substantial reduction
in SIB capital is attributed to the completion of the following once off
projects during 2012:
- Establishing ICT independence from Anglo American Platinum (R40.3 million)
- Tailings line replacement, water separation and Larox projects
(R33.7 million)
- Deferral of South shaft chairlift (R22.5 million)
- Equipping
of IMS (R11.2 million).
SIB capital expenditure during 2013 was 7% of operating costs, well within
our target range of between 6% and 8%.
During 2013 replacement capital consisted of the Merensky Phase II and
Phase III decline extension projects at BRPM’s North and South shafts.
We concluded Phase II in 2012, which extended both declines from level 5
to level 10 and resulted in a reduction in expenditure from R308 million
in 2012 to R184 million in 2013.
Expansion capital expenditure increased by 14% or R87 million to R737
million, in line with the Styldrift I construction schedule and
Styldrift II study programme.
Project review
BRPM capital projects
Our two key capital projects at BRPM during 2013 comprised the Phase III
North shaft Merensky replacement project and the North shaft chairlift
project.
The Phase III project extends the North shaft Merensky decline system
and associated infrastructure from 10 level to the mining boundary at 15
level which will extend the life of Merensky at North shaft. The project
commenced in November 2010 and ended the year 57% complete against a
planned completion of 52% i.e. 5% or 75 days ahead of schedule. The
cumulative project expenditure at year end was R585 million with a R40
million declared saving to date. Completion of the project is
scheduled for 2017 with a current estimated saving at completion of R100
million against the approved project budget of R1 409 million.
The North shaft chairlift project, which includes the development and
installation of a chairlift from surface to 5 level, commenced in June
2011 and ended the year with the project 83% complete against a planned
completion of 86%. The shortfall between actual and planned completion is
attributed to an amended construction strategy which will allow for the
civil, mechanical and electrical construction to be effected concurrently
subsequent to the completion of mining, as opposed to a modular level by
level approach during the development phase. The forecast completion date
remains on schedule for the first quarter of 2015.
Capital expenditure on this project during 2013 was R42 million. The
cumulative project expenditure at year end was R71 million against a
planned expenditure of R92 million. The variance is attributed to the
shortfall in project progress and a decision to defer the procurement of
the chairlift drive stations due to the change in our construction
strategy. The project expenditure is forecast to be within the approved
project budget of R110 million at project completion.
Styldrift I project
During 2013 we made steady progress with the Styldrift I project. Overall
our project progress at year end was 39.2 % compared to a planned progress
of 37.5%, which is a gain of 1.7%.
Sinking of both the main and services shafts progressed to 708 level
(shaft loading level) and we completed a total of 2 304 metres of lateral
development, as well as 235 metres of raise boring for the ore passes and
silos. The number of contracting companies on site escalated to 11
companies in December and is expected to increase to 21 in 2014 when the
project reaches its peak planned annual progress (20%) for the mining and
infrastructure portion of the project. Overall, the project remains on
schedule to commence with stoping ramp-up in July 2015, reaching steady
state in June 2018.
Following the Board’s approval of the change of scope and our revised
concentrator strategy the project’s overall budget was reduced from
R11 801 million to R11 014 million, a saving of R787 million. The total
capital expenditure for 2013 was R681 million and the cumulative project
expenditure by year end was R2 511 million against an earned value of R2
705 million. This reflects a saving of R194 million on the work
completed to date. Total capital commitments increased to R3 149 million
at year end.
Revised processing strategy
PGM basket price trends and the escalation rates of industry operating
costs made it necessary for RBPlat to review the strategic role of UG2,
and in particular the UG2 General Facies mined at South shaft, in the
long-term production profile of RBPlat.
At the same time, we evaluated opportunities to utilise excess industry
processing capacity or the joint development of a shared concentrator
infrastructure against the construction of a new standalone concentrator
for Styldrift I. We evaluated possible synergies in collaboration with our
neighbours Anglo American Platinum, Impala Platinum and Wesizwe. The
spirit of cooperation between all the parties involved in searching for
the optimal technically achievable and commercially viable solution
exceeded all our expectations.
We identified five potential ore processing options and undertook
studies into the technical and commercial viabilities of each option. The
evaluation culminated in a strategic decision to upgrade the BRPM
concentrator in two phases.
Phase 1: Upgrade from 200ktpm to 250ktpm
Phase 2: Upgrade to 350ktpm with an additional 100ktpm module.
This approach provides us with the ability to treat all future Merensky
reef production from BRPM and Styldrift I and avoids committing RBPlat to
significant UG2 volumes until market conditions warrant it.
This treatment solution results in a net capital saving of R750 million
to RBPlat compared to the construction of a new standalone Styldrift
concentrator. In addition, the lower stockpile requirements of the two-
phased upgrade of the BRPM concentrator solution will result in earlier
revenues from Styldrift I enhancing our cash flow.
Financial review
The Group’s headline earnings increased by R113.6 million from R170.3
million in 2012 to R283.9 million in 2013. This increase reflects the
improved PGM rand basket price and cost saving initiatives implemented
in 2013. Headline earnings per share for 2013 of 173 cents is 66% higher
than the 104 cents per share reported in 2012.
Our revenue of R3 251.1 million for 2013 was 13.5% higher than that of
R2 865.3 million for 2012. The increase is due to a 9.3% increase in our
rand basket price and a 4% increase in production volumes.
Revenue from production through the BRPM concentrator increased by 8.2%
from R2 720.9 million to R2 944.7 million. The 2013 revenue number
included R11.9 million generated from the processing of on-reef
development ore from the Styldrift I project.
Revenue from toll concentrating of UG2 increased by 112.2% from R144.4
million in 2012 to R306.4 million in 2013 due to an 82% increase in toll
production volumes and an increase in the rand basket price.
Our gross profit margin improved significantly from 11.9% in 2012 to
18.5% in 2013. This was due to a 13.5% increase in revenue combined with
a marginal increase in cost of sales as a result of our focus on cost
management in 2013.
Depreciation charges included in cost of sales increased by 37% from
R272.1 million in 2012 to R372.2 million. The increase was due to a 4%
increase in production which increased the units of production
depreciation charge and the R1 billion capitalised of the R2.4 billion
BRPM Phase II Merensky replacement project which was commissioned in June
2012 and now depreciated for a full year in 2013 compared to six months in 2012.
The increase of 4% was also due to the capitalisation of the Phase
III project in 2013, the ICT and supply chain migration costs being
depreciated for the first time in 2013 and amendments made to the
remaining useful lives of specific items of the concentrator plant
following a detailed review conducted in 2013.
Earnings before interest, tax, depreciation and amortisation (EBITDA) as a
percentage of revenue increased from 22.1% in 2012 to 31% in 2013 as a
result of increased revenue and our improved cost management
performance.
Other income increased by 16% from R66.9 million in 2012 to R77.5 million
in 2013. The increase is mainly due to the increase in the royalty income
from Impala from R61.8 million in 2012 to R75.2 million in 2013. Finance
income decreased by 28.5% from R59.7 million in 2012 to R42.7 million as
more cash reserves were invested in the BRPM JV on average throughout the year.
BRPM’s average cash unit cost per tonne milled increased by 6% from R864
in 2012 to R920 in 2013. The cash unit cost per platinum ounce decreased
by 2% from R11 775 to R11 592 due to an improved built-up head grade
during 2013. We are proud of our outstanding cost management
performance, which we attribute to improved mining flexibility and
specific cost reduction strategies and initiatives.
Total social and labour plan (SLP) expenditure for 2013 amounted to R105.2
million of which R91 million was expensed and R14.2 million was
capitalised to the Styldrift I project. This is 17% lower than the SLP
spend of R126.9 million as part of our progression towards normalised
levels. Administration costs increased marginally by 3.2% from R101.7
million in 2012 to R105.0 million in 2013 due to a specific focus on cost
saving measures.
Capital expenditure for the year, consisting of stay-in-business,
replacement and expansion capital expenditure at the BRPM JV amounted to
R1 058.8 million compared to R1 192.3 million in 2012, which is a
reduction of 11%. The reduction is due to lower stay-in-business capital
expenditure and under expenditure on the North shaft Phase III replacement
project and not due to delays in projects.
Current income tax reduced by 11% from R17.5 million in 2012 to R15.6
million in 2013 mainly due to the reduction in taxable non-mining income
(interest income). Deferred tax increased by 119% from R68.1 million in
2012 to R149.1 million in 2013 due to increased BRPM JV profits.
The RBPlat Group’s balance sheet remained ungeared at 31 December 2013
with cash and near cash investments of R772.9 million. In July 2013
RBPlat’s revolving credit facility with Nedbank was increased from R500
million to R1 billion while the working capital facility for the Group was
increased from R258 million to R458 million. The R200 million
increase in the working capital facility was utilised by the RBPlat Group
to provide a R200 million guarantee for the 400 houses that were built as
phase 1 of the Group’s housing project. The R200 million housing working
capital facility represents an interim arrangement to ultimately
facilitate employee home ownership and third party funding thereof.
Renegotiation of Impala royalty agreement
In 2013 we renegotiated the terms and conditions of the 6 and 8 shaft
royalty agreement with Impala Platinum (Impala), which we originally
concluded in 2010. The agreement gives Impala the right to mine a
demarcated southern portion of our Boschkoppie property from its 6 and 8
shafts for an original royalty payment of 15% of revenue earned, with
Impala bearing all the associated mining, safety, health and environmental
risks. Due to the operational challenges experienced by
Impala at its Rustenburg operations and the rising costs at its 6 and 8
shafts in particular, we agreed with Impala that we would substitute the
royalty payment of 15% of revenue earned with a royalty payment linked
to market conditions and the profitability of its Rustenburg operations.
From 1 October 2013 we have received a royalty payment ranging between
5% and 25% of revenue earned depending on Impala’s profitability at its
Rustenburg operations.
We believe that the amended terms of the royalty agreement align the
interests of both businesses and are therefore in the interest of our
shareholders. The terms and conditions of our 20 shaft royalty agreement
with Impala remain unchanged at 17.5% of revenue.
Market review
Platinum
Global platinum mine supply decreased by 4.5% to 5.59Moz in 2013, with
South African output decreasing to around 4Moz. However, recycling
increased by about 6% to 2.15Moz, which resulted in a net 2% drop in total
platinum supply to 7.74Moz for the year.
Demand for platinum increased by approximately 1.7% to 7.7Moz during
2013, with the deficit, including investment, in the platinum market
increasing to more than 800koz. The year saw strong offtake by exchange
traded fund (ETF) investors. ABSA’s Newplat ETF peaked at 910koz since
its launch in April 2013 and by year end was the largest global platinum
ETF. However, this did not result in a positive impact on prices mainly
due to the large levels of above-ground stocks at consumers.
Palladium
In 2013, total palladium demand grew by an estimated 0.6% to 9.5Moz. A
return to strong growth conditions in the Chinese car market lifted
global palladium usage in autocatalysts by 5% to 7Moz. While recycling
grew by approximately 8% to 2.1Moz, the gap between palladium supply and
demand increased in 2013 and primary supplies declined to 6.3Moz. This
decline was due to mine closures and lower Russian stock sales, however,
lease rates remain low which indicates that currently global inventories
are ample to meet growing demand.
Rhodium
In 2013, global demand for rhodium rose by 4.5% to 960koz, and although
supply decreased by 9.1% to 680koz as UG2 production was trimmed further,
the market remains closely balanced and is currently well stocked. The
reduction in the basket price, combined with rising unit costs, has resulted
in an unsustainable erosion of margins for a number of smaller-scale,
narrow-reef UG2 producers.
Future outlook
The safety, health and wellness of every employee will remain a key focus
for us. We believe we are well-positioned to continue the
improvements achieved in this regard during the past four years, through
further strengthening the barriers that prevent injuries.
RBPlat’s focus for 2014 will be on protecting our business continuity
through maintaining flexibility in the business, honouring our social
licence to operate and the successful negotiation of a mutually beneficial
wage agreement with our workforce. We will also need to finalise our
funding solution for the Styldrift I project through the combination of an
equity capital raising and a structured debt funding package during 2014.
In this regard the increase in activity at Styldrift I with the
resultant increase in capital expenditure will be a major focus for the
business during 2014. We forecast our total capital expenditure for 2014
to be approximately R2.4 billion, increasing to about R3.1 billion in
2015.
Our key operational challenges in 2014 will be to optimise volumes while
retaining our existing flexibility, grades and operating cost focus and
ensuring that the BRPM concentrator upgrade, which will commence in mid
2014, does not disrupt operations.
Our production estimate for 2014, based on the current operating platform,
is a mill throughput of around 2.3 million tonnes at a built-up head
grade of approximately 4.2 g/t (4E). From 2015 our production
will increase, in line with the Styldrift I project ramp up. BRPM’s UG2
production is expected to make up approximately 18% of production in
2014, decreasing to around 10% in 2018 in line with the increased
Merensky contribution from Styldrift I.
The structural changes we needed to make to reduce operating costs were
largely addressed during 2013. Further improvements will be informed by
our continuous business improvement processes. We expect our operating
cost increases to remain below mining inflation in 2014.
In the year ahead primary platinum supply is likely to remain flat year-
on-year, however, we anticipate further growth in recycling in 2014
which will compensate for this. Demand is expected to increase from
current levels, particularly as the decline in auto sales in Europe
appears to have bottomed out in 2013 and auto sales are expected to grow
in 2014. This, combined with higher metal loadings per vehicle
associated with the promulgation of Euro 6 tailpipe emissions legislation,
will kick start the automotive demand recovery in Europe.
There are also positive signs that platinum jewellery has gained a
foothold in the Indian market and has the ability to prosper going
forward. However, the offtake in platinum ETFs is not expected to be as
strong as it was in 2013.
Higher demand for palladium from the automotive industry is expected to
continue in 2014, while the reduction in primary supply in the absence
of Russian stock sales will be partially offset by additional recycling.
Rhodium has long been part of gasoline autocatalyst formulations, but as
emissions legislation to reduce nitrous oxides (NOx) tightens with Euro
6 for new models from September 2014, it is expected to be part of light
duty diesel formulations too, though facing competition from other
approaches.
Our strategies and focus areas for 2014 are informed by a longer term
rather than a shorter-term recovery in the PGM market and the Styldrift
funding requirements. Key success drivers are safety and health,
business continuity, ounce production and operating costs. Based on the
operational successes achieved in 2013, improved flexibility and the
constructive participation of all stakeholders, we believe we are in a
strong position to achieve all our goals in 2014. To add value to our
business we will continue to evaluate all potential value-enhancing
regional opportunities.
The Pivot,
No 1 Monte Casino Boulevard Block C, Floor 4, Fourways Johannesburg, 2021
PO Box 2283
Fourways, 2055
South Africa
Telephone: +27 (0)10 590 4510
Telefax: +27 086 572 8047 www.bafokengplatinum.co.za
Johannesburg
4 March 2014
JSE Sponsor
Macquarie First South Capital (Pty) Limited
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