Wrap Text
Condensed consolidated interim results for the six months ended 30 June 2014
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')
CONDENSED CONSOLIDATED INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 JUNE 2014
AN OVERVIEW OF OUR BUSINESS
OUR STRATEGY
The four pillars of our strategy are designed to deliver earnings and growth for all our stakeholders through
responsible safe mining. We measure our progress against these strategies by continually monitoring our
performance against our key financial and non-financial performance indicators.
Our strategies are underpinned by our aspiration of achieving More than mining.
More than mining
- Towards operational excellence
- Build flexibility
- Grow organically
- Pursue value enhancing opportunities
Our vision and mission
- To seek and deliver the good from mining
- To leave a lasting legacy of sustainable benefits for our stakeholders
Our purpose
- To create economic value for all our stakeholders
Our value chain
- Exploration
- Project development
- Mining
- Concentrate production
- People development
- Suppliers
- Refiners of our PGM concentrate and marketers of the end product
- Purchasers of PGMs in the form of ETFs, the automotive, jewellery, electronic, chemical, dental and medical
industries
PERFORMANCE
Achievements
- Signing of long-term wage agreement on 16 July 2014 without industrial action
- 3% increase in production to 134 229 PGM ounces (4E)
- 18% increase in revenue to R1.8 billion
- 33% increase in headline earnings per share to 116 cents
- Cash on hand of R2.2 billion
Challenges
- 7.2% increase in cash operating cost per tonne to R983
- 8.5% increase in cash operating cost per 4e ounce to R8 288
Disappointments
- 6.3% increase in serious injury frequency rate to 0.34
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 30 June 2014
30 June 2014 30 June 2013 31 December 2013
R (million) Notes Reviewed Reviewed Audited
ASSETS
Non-current assets 19 150.4 18 204.6 18 558.4
Property, plant and equipment 10 185.4 9 188.0 9 567.9
Mining rights 6 553.9 6 617.2 6 583.7
Goodwill 2 275.1 2 275.1 2 275.1
Environmental trust deposit 111.5 99.7 106.8
Deferred tax asset 24.5 24.6 24.9
Current assets 3 797.6 2 223.3 2 259.1
Employee housing assets 4 93.4 – 46.5
Inventories 62.1 46.4 35.5
Trade and other receivables 1 427.3 1 184.3 1 404.2
Held-to-maturity investments – 253.8 –
Current tax receivable 4.9 0.5 –
Cash and cash equivalents 2 209.9 738.3 772.9
Total assets 22 948.0 20 427.9 20 817.5
EQUITY AND LIABILITIES
Share capital 1.9 1.7 1.7
Share premium 9 317.9 7 801.2 7 808.9
Retained earnings 4 096.9 3 749.2 3 889.8
Other reserves 158.2 139.0 157.7
Non-controlling interest 4 243.4 4 049.7 4 128.2
Total equity 17 818.3 15 740.8 15 986.3
Non-current liabilities 4 475.2 4 257.5 4 331.6
Deferred tax liability 4 390.0 4 192.5 4 262.0
Employee housing facility 12.9 – –
Long-term provisions 72.3 65.0 69.6
Current liabilities 654.5 429.6 499.6
Trade and other payables 654.5 429.1 499.4
Current income tax – 0.5 0.2
Total equity and liabilities 22 948.0 20 427.9 20 817.5
The notes on pages 8 to 10 form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 30 June 2014
For the six months ended Year ended
30 June 2014 30 June 2013 % 31 December 2013
R (million) Notes Reviewed Reviewed change Audited
Revenue 9 1 826.5 1 548.0 18.0 3 251.1
Cost of sales 10 (1 337.6) (1 222.8) (9.4) (2 650.1)
Cost of sales excluding
depreciation and amortisation (1 158.5) (1 051.9) (10.1) (2 223.2)
Depreciation and amortisation (200.9) (186.2) (7.9) (433.5)
Increase in inventories 21.8 15.3 42.5 6.6
Gross profit 488.9 325.2 50.3 601.0
Other income 8.2 31.7 (74.1) 77.5
Administration expenses (77.9) (61.4) (26.9) (105.0)
Finance income 41.2 22.3 84.8 42.7
Finance cost (3.0) (1.8) (66.7) (3.7)
Profit before tax 457.4 316.0 44.7 612.5
Income tax expense (135.1) (87.3) (54.8) (164.7)
Income tax (6.7) (7.4) 9.5 (15.6)
Deferred tax (128.4) (79.9) (60.7) (149.1)
Net profit for the period 322.3 228.7 40.9 447.8
Other comprehensive income – – – –
Total comprehensive income 322.3 228.7 40.9 447.8
Attributable to owners of the Company 207.1 143.6 44.2 284.2
Attributable to non-controlling interest 115.2 85.1 35.4 163.6
Basic EPS (cents/share) 8 116.0 87.4 32.7 172.9
Diluted EPS (cents/share) 8 115.8 87.3 32.6 172.8
HEPS (cents/share) 8 116.0 87.2 33.0 172.7
The notes on pages 8 to 10 form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the six months ended 30 June 2014
Attributable Non-
Share-based to owners control-
Number of Ordinary Share payment Retained of the ling
ordinary shares premium reserve earnings Company interest Total
shares R (million) R (million) R (million) R (million) R (million) R (million) R (million)
Balance at
1 January 2013 164 150 804 1.7 7 789.0 119.7 3 605.6 11 516.0 3 964.6 15 480.2
Mahube ordinary shares
vested 31 March 2013 187 971 – 12.2 (12.2) – – – –
Share-based payment
charge for the six months – – – 31.5 – 31.5 – 31.5
Total comprehensive income – – – – 143.6 143.6 85.1 228.7
Balance at
30 June 2013 (reviewed) 164 338 775 1.7 7 801.2 139.0 3 749.2 11 691.1 4 049.7 15 740.8
Share-based payment
charge for the six months – – – 26.4 – 26.4 – 26.4
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 – – – – 140.6 140.6 78.5 219.1
Balance at
31 December 2013 (audited) 164 459 662 1.7 7 808.9 157.7 3 889.8 11 858.1 4 128.2 15 986.3
Share-based payment
charge for the six months – – – 29.8 – 29.8 – 29.8
Mahube ordinary shares
vested 31 March 2014 187 971 – 12.2 (12.2) – – – –
2011 BSP shares vested
in March/April 2014 263 029 – 17.1 (17.1) – – – –
Issue of shares
– book build 11 290 323 0.1 699.9 – – 700.0 – 700.0
Issue of shares
– rights offer 14 545 455 0.1 799.9 – – 800.0 – 800.0
Costs relating to issue
of shares capitalised - – (21.5) – – (21.5) – (21.5)
Rights followed on
treasury shares – – (6.5) – – (6.5) – (6.5)
Share options exercised – – 7.9 – – 7.9 – 7.9
Total comprehensive income – – – – 207.1 207.1 115.2 322.3
Balance at
30 June 2014 (reviewed) 190 746 440 1.9 9 317.9 158.2 4 096.9 13 574.9 4 243.4 17 818.3
The notes on pages 8 to 10 form an integral part of these condensed consolidated interim financial statements.
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
for the six months ended 30 June 2014
For the six months ended Year ended
30 June 2014 30 June 2013 % 31 December 2013
R (million) Reviewed Reviewed change Audited
Cash generated by operations 747.4 515.7 44.9 875.8
Interest paid (0.8) – (100.0) –
Interest received 35.2 16.4 114.6 31.1
Dividend received 5.7 12.7 (55.1) 18.3
Tax paid (11.0) (9.4) 17.0 (17.4)
Net cash flow generated by
operating activities 776.5 535.4 45.0 907.8
Proceeds from disposal of PPE – 0.4 (100.0) 0.3
Acquisition of PPE (784.0) (445.9) (75.8) (1 036.6)
Acquisition of employee housing assets (46.9) – (100.0) –
Decrease in held-to-maturity investments – – – 253.9
Increase in environmental trust deposit – (1.5) 100.0 (2.4)
Net cash flow utilised by investing activities (830.9) (447.0) (85.9) (784.8)
Issued ordinary shares net of costs 1 478.5 – – –
Increase in employee housing facility 12.9 – – –
Net cash flow generated by financing activities 1 491.4 – 100 –
Net increase in cash and cash equivalents 1 437.0 88.4 1 525.6 123.0
Cash and cash equivalents at beginning of period 772.9 649.9 18.9 649.9
Cash and cash equivalents at end of period 2 209.9 738.3 199.3 772.9
The notes on pages 8 to 10 form an integral part of these condensed consolidated interim financial statements.
NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
for the six months ended 30 June 2014
1. Basis of preparation
The condensed consolidated interim financial statements are prepared in accordance with International Financial
Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards
Council and the requirements of the Companies Act of South Africa. The accounting policies applied in the
preparation of these interim financial statements are in terms of International Financial Reporting Standards
and are consistent with those applied in the previous consolidated annual financial statements.
2. Accounting policies
The condensed consolidated financial statements have been prepared under the historical 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. Independent review by the auditors
These condensed consolidated interim financial statements have been reviewed by PricewaterhouseCoopers Inc., who
expressed an unmodified conclusion thereon. A copy of the auditor’s report on the condensed consolidated interim
financial statements is available for inspection at the company’s registered office, together with the financial
statements identified in the auditor’s report. The preparation of these interim financial statements was
supervised by the Finance Director, Mr MJL Prinsloo, CA(SA).
4. Employee housing assets
A non-cash acquisition of R46.5 million (excluding VAT) relating to the first 106 houses of Phase 1 of the
RBPlat housing project that RBPlat took ownership of in 2013 was classified as non-current assets included in
property, plant and equipment in the 2013 Integrated Annual Report (“IAR”). The intention of when these houses
will be sold to employees was not clear at the time of finalisation of the 2013 IAR and has since been
clarified. As the intention is to sell these houses to employees within a 12-month period, employee housing
assets have been reclassified as current assets.
5. Capital commitments
Capital commitments relate to the Styldrift I and BRPM Phase III projects (2013 included BRPM Phase II).
Reviewed Reviewed
For the period ended 30 June 30 June
R (million) 2014 2013
Contracted commitments 1 012.5 729.4
Approved expenditure not yet contracted for 5 648.0 7 647.5
6 660.5 8 376.9
The capital commitments reflect 100% of the BRPM JV project commitments. Effectively RBPlat must fund
67% thereof and Rustenburg Platinum Mines Ltd (RPM) the remaining 33%.
Should either party elect not to fund their share, their interest will be diluted according to the terms of the
BRPM JV agreement.
6. Contingencies
6.1 Guarantees
Reviewed Reviewed
For the period ended 30 June 30 June
R (million) 2014 2013
Eskom guarantee to secure power supply for the Styldrift I Project 17.1 17.1
Eskom early termination guarantee for the Styldrift I Project 17.5 17.5
Eskom connection charges guarantee for the Styldrift I Project 40.0 40.0
Anglo American Platinum guarantee for environmental rehabilitation liability 77.5 77.5
Rental guarantee 0.4 0.4
Employee housing guarantee 93.5 200.0
246.0 352.5
6.2 Tax contingency
On 19 February 2014 Royal Bafokeng Resources (Pty) Ltd (RBR) received revised assessments from the South African
Revenue Services (SARS) for the 2008, 2009 and 2010 years relating primarily to SARS not allowing the deduction
of interest on shareholders’ loans amounting to R586 million previously deducted by RBR and allowed by SARS in
the 2008 and 2009 income tax assessments. These revised assessments amounted to R437.5 million comprising income
tax of R106 million, penalties of R246.4 million and interest of R85.1 million payable within seven days from
19 February 2014. RBR lodged an objection against these assessments and submitted 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, RBR remains confident that it has a reasonable prospect of successfully defending this
matter.
7. Available funds
RBPlat had cash and near cash investments on hand at 30 June 2014 of R2 209.9 million. The Group has an intra-
month funding working capital requirement which is met through a R458 million working capital facility of which
R246 million had been utilised for guarantees at 30 June 2014. At 30 June 2014, the R1 billion revolving credit
facility was undrawn.
At 30 June 2014, 213 houses of Phase 1 of the RBPlat housing project were handed over to RBPlat and paid for.
This amounted to a cost of R106.5 million of which R12.9 million was funded from the employee housing facility
and R93.6 million from RBPlat cash resources in order to minimise the interest cost on the employee housing
facility.
8. Basic and headline earnings
The reconciliation between basic and headline earnings is shown below:
Reviewed Reviewed
30 June 30 June
For the period ended 2014 2013
Basic earnings – profit attributable to owners of the Company R (million) 207.1 143.6
Adjustments net of tax:
Profit on disposal of property, plant and equipment R (million) – (0.4)
Headline earnings R (million) 207.1 143.2
Weighted average number of ordinary shares in issue for basic and
headline earnings per share 178 530 999 164 291 783
Basic earnings per share (cents/share) 116.0 87.4
Diluted earnings per share (cents/share) 115.8 87.3
Headline earnings per share (cents/share) 116.0 87.2
Diluted headline earnings per share (cents/share) 115.8 87.1
9. Revenue
Reviewed Reviewed
For the period ended 30 June 30 June
R (million) 2014 2013
Concentrate sales – production from BRPM concentrator 1 619.3 1 449.7
UG2 toll concentrate sales 207.2 98.3
1 826.5 1 548.0
10. Cost of sales
Reviewed Reviewed
For the period ended 30 June 30 June
R (million) 2014 2013
Labour 408.9 371.4
Utilities 90.3 82.9
Contractor costs 256.0 231.0
Materials and other mining costs 331.3 280.4
Materials and other mining costs – BRPM JV 353.9 302.8
Elimination of intergroup charges (22.6) (22.4)
Movement in inventories (21.8) (15.3)
Depreciation 171.1 158.5
Amortisation 29.8 27.7
Share-based payment expense 15.2 20.0
Social and labour plan expenditure 45.3 44.0
State royalties 6.1 5.2
Retrenchments – 12.4
Other 5.4 4.6
1 337.6 1 222.8
11. Related party transactions
Reviewed Reviewed
For the period ended 30 June 30 June
R (million) 2014 2013
Amount owing by RPM for concentrate sales 1 298.5 1 050.5
Amount owing to RPM for contribution to BRPM JV 267.6 200.7
Amount owing by Impala Platinum Limited to BRPM JV – 18.9
Transactions during the six months:
Concentrate sales to RPM 1 826.5 1 548.0
Impala Platinum Limited royalty income 2.2 36.4
Transactions with Fraser Alexander 2.9 7.7
Royal Marang Hotel 0.3 0.2
Geoserve Exploration Drilling Company 6.2 1.0
Trident South Africa (Pty) Ltd 0.8 0.3
Tarsus Technologies 1.4 1.1
12. Dividends
No dividends have been declared or proposed in the current period (2013: nil).
13. Financial risk management
Financial risk factors: 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.
Level 1 Level 2 Level 3
R (million) R (million) R (million)
Financial assets at fair value through profit or loss
Environmental trust deposits
2014 – 106.9 –
2013 – 97.5 –
14. Segmental reporting
The Group is currently operating one mine with two decline shafts and the Styldrift I Project. The BRPM JV is
treated as one operating segment. The Executive Committee of the Company is regarded as the Chief Operating
Decision Maker.
Reviewed Reviewed
For the period ended 30 June 30 June
R (million) 2014 2013
Concentrate sales 1 826.5 1 548.0
Cash cost of sales (1 109.1) (988.1)
Movement in inventories 21.8 15.3
Depreciation (121.1) (107.1)
Other operating income 8.2 31.7
Other operating expenditure (65.9) (81.1)
Net finance income 3.4 4.6
Segmental profit before tax 563.8 423.3
Additional depreciation on purchase price adjustment and amortisation (79.8) (79.1)
Consolidation adjustments 22.6 22.5
Overheads of corporate office included in administration expenses (74.3) (61.4)
Employee housing project costs included in administration expenses (3.6) –
Royalties included in cost of sales (6.1) (5.2)
Other income and net finance income 34.8 15.9
Profit before tax per the statement of comprehensive income 457.4 316.0
OPERATING AND FINANCIAL STATISTICS
Description Unit 30 June 2014 30 June 2013 % change**
Safety
LTIFR Rate 0.68 0.61 (11.5)
SIFR Rate 0.34 0.32 (6.3)
Injury-free days Days 113 130 (13.1)
Production
Tonnes delivered – Total kt 1 159 1 128 2.7
Merensky (MER) kt 908 926 (1.9)
UG2 kt 251 202 24.3
IMS ore reserve km 6.06 6.08 (0.3)
IMS panel ratio ratio 1.57 1.52 3.3
Tonnes milled – Total kt 1 140 1 095 4.1
Tonnes milled – MER kt 890 896 (0.7)
Tonnes milled – UG2 kt 250 199 25.6
UG2% milled % 22 18 22.2
Built-up head grade (4E) – Total g/t 4.25 4.28 (0.7)
Built-up head grade (4E) – MER g/t 4.40 4.41 (0.2)
Built-up head grade (4E) – UG2 g/t 3.72 3.70 0.5
Metals in concentrate
4E koz 134 130 3.0
Platinum koz 86.4 84.6 2.1
Nickel t 854 847 0.8
Labour
Total working cost labour No 6 213 5 984 (3.8)
Stoping crew efficiencies m²/crew 325 311 4.5
Enrolled m²/crew 304 311 (2.3)
Contractor m²/crew 329 311 5.8
Tonnes milled/TEC t/emp 31 30 3.3
Financial
Cash operating cost R’m 1 109 988 (12.2)
Cash operating cost/t* R/t 983 917 (7.2)
Cash operating cost/4E oz* R/oz 8 288 7 637 (8.5)
Cash operating cost/Pt oz* R/oz 12 881 11 756 (9.6)
Total capital expenditure R’m 806*** 446 (80.7)
Stay-in-business capital (SIB) R’m 77 49 (57.1)
SIB% of operating cost % 7 5 (40.0)
Replacement capital R’m 82 85 3.5
Expansion capital R’m 647 312 (107.1)
Gross profit margin % 26.8 21.0 27.6
EBITDA % 34.0 31.2 9.0
Average basket price R/Pt oz 21 148 18 294 15.6
Average R:US$ R/US$ 10.70 9.3 15.1
* Unit cash costs are calculated excluding the incidental tonnages and ounces and costs generated by Styldrift
on-reef development
** Please note that any difference in various percentages in this table and in the commentary are due to
rounding
*** The R806 million capital expenditure for the BRPM JV excludes the elimination of inter-group charges of
R22 million resulting in RBPlat Group’s capital expenditure of R784 million
COMMENTARY
OVERVIEW
Against the background of the widespread and protracted industry strikes, a hallmark of the RBPlat performance
during the first six months of 2014 was operational stability. Business continuity contributed to a relatively
steady production environment and ounce output compared to the corresponding period in the previous year.
A 15.6% improvement in the basket price further contributed to a 33% increase in earnings per share.
Operating cost escalation remains a critical challenge for RBPlat and the industry and in this regard our target
of managing cost increases to below 10% was successfully achieved. Capital expenditure for the period under
review has increased in line with increased Styldrift project activities.
Overall progress of the mining and construction portion of the Styldrift I project ended the reporting period at
46.6% which is 0.4% behind the planned progress. Constraints associated with the principal shaft sinking and
development contractor and delays related to the loading box cutting below 708 level at the Main shaft impacted
negatively on the project critical path which ended the reporting period 26 days behind schedule. Expenditure
remains well below budget.
A key highlight was the conclusion of a long-term wage agreement with our employees, represented by the National
Union of Mineworkers (NUM), without any industrial action.
SAFETY
Following a sustained period of consistent safety improvement in 2013, BRPM started the year with an unusually
high safety incident rate, recording seven serious injuries in January. The corrective action that followed
achieved a significant improvement and a return to 2013 levels for the remainder of the period under review.
Styldrift had no serious injuries during the six months and has been fatality-free for the past three and half
years.
Zero harm remains RBPlat’s primary and most important goal and is key to the achievement of our strategic
objective of operational excellence.
OPERATIONAL PERFORMANCE
Production
At BRPM operational flexibility was maintained with immediately stopable ore reserves (IMS) being maintained at
just over 6km resulting in an IMS panel ratio of 1.57 panels per stoping team. Improved operational flexibility
supports increased productivity, grade management and improved safety performance.
The impact of direct safety stoppages on operations reduced by 20% compared to the corresponding period in 2013
and amounted to a loss of 35kt milled or 4.1koz (4E), highlighting the importance of the continued improvements
in safety performance.
Total tonnes milled increased by 4.1% mainly as a result of a 51kt (25.6%) increase in UG2 production. Merensky
reef contribution remained similar to the corresponding period in the previous year. Built-up head grade of
4.25g/t (4E) was maintained at similar levels to those in the first half of 2013, which combined with the
4.1% increase in tonnes milled yielded a 3% increase in 4E ounce output to 134koz and a 2.1% increase in
platinum ounce output over the reporting period.
The increase in UG2 mining resulted in an increase in toll concentrating volumes from 89.9kt to 170.3kt.
The BRPM concentrator recovery of 86.97% was in line with expectations and previous performance of 86.98%.
Surface stocks have increased by 26.8kt tonnes or 3.2koz (4E) since the start of the year.
The successful mining of the UG2 general facies remains a strategic element of the long-term mining plan at
BRPM. Trial mining of the UG2 at our South shaft progressed well and delivered steadily improving results with
delivered grades peaking at 3.65g/t (4E) in June of this year. RBPlat’s strategy at BRPM remains to maximise
Merensky production and supplement this production with the UG2 reef to increase operational flexibility.
Operating costs
Total cash operating costs increased by 12.2% from R988 million in the first half of 2013 to R1 109 million due
to inflation and volume related increases. The cash operating cost per tonne milled increase was limited to
below mining inflation, increasing by 7.2% from R917 to R983 per tonne, with the higher cash operating costs
being offset by the additional milled volumes. The cash operating cost per platinum ounce ended 9.6% higher at
R12 881 for the first six months of 2014 compared to R11 756 in the first half of 2013.
Capital expenditure
BRPM JV capital expenditure increased by R360 million or 80.7% from R446 million in the first half of 2013 to
R806 million as a result of higher stay-in-business (SIB) expenditure (R28 million), lower expenditure on
replacement projects (R3 million) and higher expenditure on expansion projects (R335 million).
SIB expenditure increased from R49 million during the first half of 2013 to R77 million for the period under
review, primarily due to mill liner replacements, a crusher overhaul and the commencement of the installation of
the water treatment plant. SIB expenditure was at 7% of operating costs and remains within our target range of
between 6% and 8%.
The reduction in our expenditure on replacement capital is attributed to a R7 million reduction in BRPM Merensky
Phase II expenditure due to project completion which is offset by a R4 million increase in BRPM Merensky Phase
III expenditure.
Expansion capital increased by R335 million (107.1%) in line with the Styldrift I project execution schedule
due to expenditure on the major primary mining equipment fleet, mechanical and structural equipment for shaft
equipping and underground infrastructure orders being placed for manufacture. The Styldrift II project
expenditure increased due to progression to the pre-feasibility phase during 2014.
BRPM PROJECT REVIEW
BRPM Phase III Merensky replacement project
Phase III involves the extension of the North shaft Merensky decline system and associated infrastructure from
10 level down to the mining boundary at 15 level. At the end of June 2014 the project was 66% complete against a
planned completion of 59%. Development is 1 237 metres ahead of schedule with 7 182 metres completed against a
plan of 5 945 metres. Overall project completion is forecast to be two months ahead of schedule in 2017. Project
expenditure to date is at R667 million against a budget of R781 million. The project remains well below budget
with an estimated cost at completion of R1.29 billion.
North shaft chairlift project
The North shaft chairlift project which involves the development and installation of a chairlift from surface to
5 level ended the reporting period at 95% complete, with all development, surface bulk excavation and civil work
having been completed. Project expenditure for the first half of 2014 amounted to R12.7 million, bringing total
project expenditure to date to R83.6 million. Project activities now focussed on physical underground
construction of the chairlift which includes all civil, mechanical, electrical and instrumentation work related
to drive stations, landings and walkways. Current project forecast indicates that the project will be completed
on schedule at an estimated cost at completion of R116.5 million.
STYLDRIFT I EXPANSION PROJECT
Progress for the mining and infrastructure portion of the project progressed to 46.6% complete against a planned
completion of 47% which is 0.4% behind planned progress. The concentrator portion of the project, the first
phase of which was approved by RBPlat’s board of directors in June 2014 commenced during July 2014 with
completion planned for the second half of 2015. This entails upgrading the current BRPM concentrator from
200ktpm to 250ktpm.
The key project activities during the first half included sinking of the Main and Services shafts to shaft
bottom, raise boring of ore handling infrastructure and No 1 Ventilation shaft as well as the development of
life of mine infrastructure on 600, 642 and 708 levels. Due to the combination of its publicised international
litigation process and the impact of the five-month strike in the platinum sector on projects with other key
clients, our appointed shaft sinking and development contractor’s operating position was compromised. This
impacted negatively on progress, contributing to critical path activities ending the reporting period 26 days
behind schedule. RBPlat has engaged with the contractor and has developed and implemented contingency plans to
mitigate further risk associated with the contractor’s remaining portion of the Styldrift project.
The Main shaft equipping commenced in July 2014 and will conclude in the first quarter of 2015. During this
period the Services shaft will provide all logistical support for underground development and construction work
including rock hoisting, transportation of men and material and all services. The Services shaft capacity has
been identified as a critical constraint as its total capacity is below the level of mining and construction
work planned. A number of optimisation measures are being investigated and implemented and the potential impact
on the project schedule assessed.
Surface construction continues to progress well with the construction of silos, change houses, lamp room and
office infrastructure among the key areas of progress.
Total project capital expenditure increased to R3 138 million of which R627 million was spent during the period
under review, in line with project progress. Cumulative financial commitments have increased to R3 991 million.
The project remains below budget mainly as a result of under-utilisation of escalations and the non-use of
contingencies. The earned value for the project to date amounts to R3 442 million against a capital expenditure
of R3 138 million. The full year capital expenditure for 2014 is forecast at R1 578 million.
FINANCIAL REVIEW
RBPlat’s attributable share of the Group’s earnings increased by R63.5 million from R143.6 million for the six
months ended 30 June 2013 to R207.1 million for the six months ended 30 June 2014 mainly as a result of the
improved average PGM Rand basket price (“the basket price”). Earnings per share increased by 33% from 87 cents
per share to 116 cents per share notwithstanding the impact of the increased weighted average number of shares
issued in respect of the book build and rights offer from the dates that these shares were listed on the stock
exchange managed by JSE Limited.
The improved basket price resulted in normalised earnings increasing by R54.4 million from R182.5 million for
the six months ended 30 June 2013 to R236.9 million for the period under review. Normalised earnings per share
increased by 20% from 111 cents per share to 133 cents per share. Normalised earnings is calculated as earnings
adjusted for an additional after tax effect of amortisation and depreciation charges related to a fair
value adjustment.
Revenue increased by 18% mainly due to a 15.6% increase in the basket price to R21 148 per platinum ounce in the
first half of 2014 compared to R18 294 in 2013 and a 2.1% increase in platinum ounces produced. Revenue from the
production through the BRPM concentrator increased by 11.7% from R1 449.7 million to R1 619.3 million. This was
due to a 3.9% decrease in platinum ounces produced and the 15.6% increase in the basket price. This includes
R5.6 million from Styldrift ounces treated and sold. Revenue from toll concentrating of the UG2 increased by
110.8% from R98.3 million for the first six months in 2013 to R207.2 million for the period under review as a
result of a 89.9% increase in toll concentrating platinum ounces as well as the increase in the basket price.
Gross profit margin improved by 27.6% from 21.0% to 26.8% for the period ended 30 June 2014. This was due to the
18% increase in revenue offset by a 9.4% increase in cost of sales for the six months ended 30 June 2014.
Depreciation charges increased from R158.5 million to R171.1 million primarily due to the ongoing capitalisation
of Phase III until final completion in 2018.
Earnings before interest, tax and depreciation and amortisation (EBITDA) increased from R482.2 million to
R620.6 million and as a percentage of revenue increased from 31.2% to 34.0% in the first half of 2014 largely as
a result of the increase in the basket price adjusted by an increase in cash operating costs and administration
costs.
Other income reduced by R23.5 million from R31.7 million in the first half of 2013 to R8.2 million for the
period under review. The decrease is due to the reduction in the Impala royalties from R36.4 million in the
first half of 2013 to R2.2 million for the six months ended 30 June 2014 as a result of industrial action at
Impala during the period under review. In addition, other income for the six months ended 30 June 2013 included
a negative fair value adjustment of the equity linked deposits for the Environmental trust of R4.9 million
compared to a positive adjustment of R4.7 million during the first half of 2014.
Finance income increased by R18.9 million to R41.2 million due to the increased cash on hand as a result of the
book build and rights offer completed in March 2014.
Finance cost increased from R1.8 million to R3.0 million due to R0.8 million interest paid on the RBPlat housing
facility during the six months ended 30 June 2014.
Administration expenses increased by R16.5 million to R77.9 million compared to the same period last year. The
main reasons for the increase relate to the inclusion of R3.6 million relating to the RBPlat housing project,
an increase of R1.6 million in the revolving credit facility commitment fees, an increase in legal fees of
R2.2 million mainly due to the Royal Bafokeng Resources tax contingency and an increase of R4.3 million in gross
bonuses paid in 2014 compared to 2013 as a result of improved profitability.
The current income tax charge reduced to R6.7 million primarily due to the reduction in the Impala royalty
income. Deferred tax increased by R48.5 million from R79.9 million for the six months ended 30 June 2013 to
R128.4 million in 2014 due to higher BRPM JV profits.
Employee housing assets, classified as current assets, increased to R93.4 million at 30 June 2014.
During the six months ended 30 June 2014 the Group increased its cash and cash equivalents by R1 437 million.
This increase is mainly due to R1 478.5 million (net of costs) raised by the book build and rights offer
completed during the first half of 2014. At 30 June 2014 the RBPlat Group had cash and near cash investments of
R2 209.9 million and utilised R12.9 million of the housing facility for the RBPlat employee housing project with
the remainder of the housing project costs funded from RBPlat cash resources in order to minimise the interest
cost on the Group.
The housing facility forms part of the RBPlat Group’s R458 million working capital facility. At 30 June 2014,
the R1 billion revolving credit facility was undrawn and the guarantees issued in respect of the housing
facility reduced to R93.5 million compared to R200 million at 30 June 2013.
BUSINESS SUSTAINABILITY
We believe that our commitment to engagement has played a key role in the achievement of labour stability at
RBPlat. To enhance and support our efforts in this regard we began implementing our Sustainability and
Stakeholder Engagement Framework during the first half of this year through awareness and information sharing
workshops. The Framework is also intended to ensure the continual integration of matters key to the
sustainability of our business in the day-to-day management of our operations.
Our board approved in principle an employee home ownership scheme to the value of R2.8 billion following the
completion of the initial pilot housing project consisting of 422 housing units. The scheme will ensure that all
RBPlat’s enrolled employees will have the opportunity to become home owners over the next five years as part of
our overall commitment to our philosophy of More than mining. We are in the process of finalising funding of at
least R2.2 billion for the housing development with a developmental institution, in addition to our own
contribution.
Execution of our Social and Labour Plan (SLP) responsibilities continues. Our current SLPs will be completed at
the end of 2014. We have successfully completed a range of SLP projects which have been handed over to our door
step communities. The stakeholder engagement process for the drafting of our new SLPs began in the first half of
this year, with completion and submission planned for the fourth quarter of 2014.
As part of our commitment to environmental management, we have completed and submitted the Water Disclosure
Project and Climate Change Programme to CDP, an international, not-for-profit organisation providing the global
system for companies and cities to measure, disclose, manage and share vital environmental information.
We are in the process of constructing a water treatment plant in order to reduce our reliance on potable water
from Magalies Water. The plant is designed to treat four million litres a day.
MARKET REVIEW
The five-month strike in the platinum industry had a limited impact on the platinum price resulting in the
platinum price increasing by 9% over the first six months of the year, compared to 19% for palladium and 14% for
rhodium. However, platinum Exchange Traded Fund (ETF) holdings accumulated a further 334koz, to total
approximately 2.87Moz at the end of June with the Absa and Standard Bank funds said to have accumulated
298koz over the period. Palladium ETF holdings grew by approximately 811koz to 2.85Moz, with the Standard Bank
ETF accounting for the majority of this growth, which assisted in driving palladium prices to above $800/oz in
April.
The strike resulted in production losses of almost 1.2Moz of platinum which is likely to result in South African
production dropping to below 3Moz for the year, from the 4.17Moz recorded in 2013. Primary supply in the rest of
the world is forecast to increase in 2014, but this growth will not be sufficient to offset losses in local
platinum production.
The Rand averaged R10.70:$1 during the first half of the year, weakening to over R11:$1 in late January as the
strike commenced. However, the South African PGM basket price has risen 11% to R12 632/4E PGM ounce in the first
half of 2014 compared to the same period last year.
Demand growth in 2014 will be driven primarily by the automotive sector. Vehicle sales data has been positive
for the first half of the year. European sales grew for the tenth month in a row with rebates and discounts
lifting sales in Southern Europe. Improved sales data, combined with higher PGM catalytic converter loadings
associated with Euro 6 emissions legislation promulgated this year, should lead to higher platinum demand in
2014. Meanwhile, US car sales look set to return to pre-financial crisis levels this year of over 16 million
units having achieved a seasonal average annual selling rate of over 16 million units for the last four months.
Sales into China continue to be positive and sales in Japan returned to growth after falling for three months
following a tax increase in April. However, PGM loadings are still relatively low in these regions and so will
have a limited impact on the bottom line for platinum demand.
Catalytic converter recycling of platinum is forecast to continue to grow in 2014 as more platinum-rich diesel
catalysts are scrapped in Europe owing to the ongoing change in the fuel mix of end of life vehicles being
recycled. Nonetheless, the fundamental market balance for platinum is forecast to move into deficit in 2014,
with demand rising and the five-month strike leading to lower supply. Platinum prices are unlikely to accelerate
from current levels in 2014 as industrial demand pull is diluted by price sensitive jewellery, which makes up a
larger share of end use at approximately 37% than it did in 2008 when prices rose to $2,000/oz. The palladium
market remains in structural deficit and combined with the sharp rise in ETF holdings and the contraction in
local supply suggests that prices will continue to rise steadily from current levels and outperform other PGMs.
CHANGES TO THE BOARD OF DIRECTORS
RBPlat welcomed Mr David Wilson as a non-executive director to its board of directors with effect from 29 May
2014 as contained in the announcement made on 30 May 2014. Mr Wilson is a Chartered Accountant and is currently
an Investment Manager for strategic investments at Royal Bafokeng Holdings.
OUTLOOK
The long-term wage agreement we concluded on 16 July 2014 provides RBPlat and its various stakeholders with a
critical measure that will be a major contributor to our stability over the next five years. We also believe
that the implementation of our employee home ownership scheme by contributing to the safety and wellbeing of our
employees and their families will also help us achieve a safer workplace.
We remain committed to keeping our employees safe from any harm and plan to build on the much improved safety
record that we achieved in 2013.
Full year production of between 2.3 and 2.4 million tonnes milled is anticipated in 2014 with a UG2 contribution
of between 20 and 22%, subject to no material impact from strike action in the industrial sector. The upgrading
of the BRPM concentrator plant to 250ktpm is not expected to impact on concentrator throughput during 2014.
Cost containment at BRPM and improving on the Styldrift I critical path schedule are the core focus areas for
management for the remainder of the year.
The platinum market is forecast to continue to destock and this should lead to higher prices in future. However,
for now there are stocks available and this may limit meaningful price increases in the near term.
Steve Phiri Kgomotso Moroka
Chief Executive Officer Chairman
31 July 2014
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
Board of directors
Advocate Kgomotso Moroka SC Chairperson (Independent)
Steve Phiri Chief Executive Officer
Nico Muller Chief Operating Officer
Martin Prinsloo Chief Financial Officer
Linda de Beer Non-executive director (Independent)
Robin Mills Non-executive director (Independent)
David Noko Non-executive director (Independent)
Francis Petersen Non-executive director (Independent)
Lucas Ndala Non-executive director
Mike Rogers Non-executive director (Independent)
David Wilson Non-executive director
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
5 August 2014
Date: 05/08/2014 08:00:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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