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ROYAL BAFOKENG PLATINUM LIMITED - Quarterly Review and Production Report for the Period 1 July to 30 September 2016

Release Date: 21/10/2016 08:34
Code(s): RBP     PDF:  
Wrap Text
Quarterly Review and Production Report for the Period 1 July to 30 September 2016

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”)


ROYAL BAFOKENG PLATINUM LIMITED QUARTERLY REVIEW AND PRODUCTION REPORT FOR THE PERIOD

                1 JULY TO 30 SEPTEMBER 2016 AND AN UPDATE ON THE STYLDRIFT I PROJECT

                                CHALLENGING QUARTER WITH STEADY YTD PERFORMANCE

OVERVIEW

    -    No fatal accidents recorded during the quarter
    -    12% increase in tonnes delivered
    -    5% increase in tonnes milled
    -    1% increase in 4E metals in concentrate produced
    -    6% increase in cash operating costs
    -    42% reduction in capital expenditure

SAFETY

No fatal accidents were recorded during the reporting period. Notwithstanding the fact that our total injury and medical
treatment case rates reduced by 63% and 68% respectively in Q3 2016, we recorded a disappointing 92% and 15%
respective increase in our serious and lost time injury frequency rates. However, YTD the serious injury frequency rate
only increased by 43% while the lost time injury frequency rate improved by 28%.

Despite the disappointing safety performance for the quarter under review our key injury frequency rates are below the
industry average and we remain confident that our renewed safety culture will yield the desired results on our journey
to resilience and achieving zero harm.

During the quarter a total of four Section 54 instructions were issued and generally in the past sanctions related to
these instructions have been aligned with the non-conformance identified during on-mine inspections. However, as
widely publicised, the industry has in the past few months experienced a sharp increase in frequency and severity of
Section 54 instructions which do not seem to be aligned with the applicable non-conformance. Contrary to our publicly
declared acceptance and support in the past of Section 54 stoppages in the interest of safety, we are unable to
reiterate the same view with regard to these stoppages and we are very disappointed. During August a single Section
54 instruction issued on our North shaft operation resulted in 17 lost production shifts equating to a loss of an
estimated 59kt or 7koz (4E).

PRODUCTION

BRPM tonnes delivered decreased by 9% during the reporting period mainly due to the impact of Section 54’s issued
during August and the subsequent cautious approach adopted in recommencing normal operational activities. The
increase in Styldrift I tonnes delivered however, more than offset the lower BRPM contribution with Styldrift I delivering
150kt of ore, resulting in total tonnes delivered increasing by 12% to 740kt compared to Q3 2015.

BRPM tonnes milled reduced by 15% due to the lower tonnes delivered and lower opening surface stocks compared
to Q3 2015, with the opening stocks in 2015 amounting to 95kt compared to 26kt in 2016. Styldrift I tonnes milled
increased to 150kt in line with the higher tonnes delivered from current project progress activities resulting in a net


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increase of 5% in total tonnes milled compared to the same period in 2015. The UG2 percentage of total tonnes milled
decreased from 24% in Q3 2015 to 20% in Q3 2016, the reduction being attributable to the higher Merensky
contribution from Styldrift I.

The 4E built-up head grade ended at 4.01 g/t (4E) or 3% lower than the comparative 2015 period. The decrease in
grade is mainly due to the increase in on-reef development contribution from Styldrift I and is in line with expectation
and previous guidance.

The 5% increase in overall tonnes milled combined with the 3% reduction in built-up head grade and marginally lower
recoveries yielded a 1% increase in 4E ounce production to 83.7koz (4E) and 54koz (Pt) metals in concentrate during
the quarter.

CASH OPERATING COSTS

Cash operating costs for the quarter of R746 million amount to a 6% increase compared to the comparative quarter in
2015. The 15% lower milled volumes at BRPM and the 6% increase in cash operating costs have resulted in the unit
cash operating costs for the reporting period per tonne milled, 4E ounce and platinum ounce increasing by 24% and
23% respectively. Unit cash operating costs for the YTD period however, remain within our mining inflation target of
10%.

Achieving planned volumes at BRPM and continued focus on our cost reduction initiatives and cash preservation
strategies remain a key focus to ensure we meet our cost targets.

CAPITAL

Total capital expenditure ended 42% (R196.7 million) lower for the period under review when compared to the similar
period in 2015 with expansion and replacement capital expenditure reducing by 39% (R148.6 million) and 99% (R57.5
million) respectively. The lower expenditure is directly attributable to the revised Styldrift I and Phase III construction
programmes adopted as part of our cash preservation strategy announced in August 2015.

Stay-in-business (SIB) capital expenditure increased by R9.4 million to R30.7 million in line with business
requirements and at 4.1% of operating cost remains aligned with our cash preservation strategy target of between 4
and 5%.

PROJECTS

BRPM PHASE III PROJECT (REPLACEMENT)

Project progress and expenditure remains aligned with the current deferment strategy and remains set for completion
in 2017. The project remains below budget with total project expenditure to date amounting to R 1 036 million.

STYLDRIFT I PROJECT (EXPANSION)

Mining and construction activities continued to make steady progress during the quarter and remain aligned with our
revised construction schedule to commence with ramp-up related works in Q1 2017. During the quarter a total of
1.6km of shaft infrastructure development was completed and 150kt of ore delivered at a grade of 3.18g/t (4E) yielding
12.7koz (4E) and 8.3koz (Pt) metals in concentrate.

Capital expenditure for the reporting period amounted to R235.5 million bringing the total capital project expenditure to
date to R6.09 billion.

Styldrift I two-phased ramp up

In August 2015 the company announced that, in the context of sustained depression in the PGM market, it had
decided to materially reduce construction activities and related capital expenditure at Styldrift I in order to maintain a
strong and healthy balance sheet and to prepare the organization to maximize the uplift in the cycle. The stated intent
was to reduce the level of activities at Styldrift I to such an extent that monthly expenditure could be serviced from
excess cash flows generated from operations at the company’s existing BRPM operations and on-reef development
revenue from Styldrift I. The average rand basket price at the time was approximately R16 200 per platinum ounce.

At the beginning of 2016, based upon an improved rand basket price of R17 500 per platinum ounce, the company
committed to R1 billion capital expenditure at Styldrift I for the 2016 year that would facilitate a production rate of up to
50ktpm of on-reef development. Approximately R0.7 billion was to be funded from on-reef development revenue and
excess cash flows from BRPM and a further estimated R0.3 billion from surplus cash resources.

The average rand basket price achieved for the first 9 months of 2016 has been approximately R19 000 per platinum
ounce. The Board therefore, is of the opinion that the industry is progressing from the ‘Zone of Uncertainty’ to the
‘Zone of Progression’, as disclosed in the company’s 2015 Integrated Report. The company has therefore decided to
transition to the next phase of the ramp up of Styldrift I to a 150ktpm operation over the next 2.5 years. The 150ktpm
level represents a “sweet spot” in Styldrift I’s ramp-up profile towards 230ktpm as it secures the optimal level of
Merensky production for the company without the necessity to incur (in the current PGM environment) the significant
expenditure that would be required for a further processing plant and infrastructure development to process production
above this level.

The company’s attributable share of the capital expenditure for this phase of the development is estimated to be
approximately R3.2 billion (of a total R4.75 billion), which the Board believes will deliver a positive internal rate of
return considered to be at an attractive premium to the company’s investment hurdle rates. This amount makes
allowance for the key underground life of mine and surface ore handling infrastructure to support 230ktpm and
includes the overland belt to the BRPM concentrator complex, all underground silos and associated conveyor belt
systems, required water handling and pumping facilities, stores and two ventilation shafts.

The Board has been actively exploring various funding options, including debt and equity funding, although details of
the funding solution for this next phase are yet to be finalised. However, the Board expects that the funding solution
may comprise a combination of surplus cash, operational cash flow, equity capital, and debt facilities of up to R2
billion currently being negotiated. Progressing to this next phase of ramp up at Styldrift I positions the project well for
the ultimate ramp up to a 230ktpm Merensky operation when further investment is warranted by the market
environment.

The information set out in this announcement has not been reviewed and reported on by the company’s external
auditors.


                                                                                                                                       YTD 2016
                                                                                     Q3 2016 vs.
                                                                                                                                           vs.
Description                                Unit      Q3 2016          Q3 2015         Q3 2015          YTD 2016         YTD 2015
                                                                                                                                        YTD 2015
                                                                                     % Change
                                                                                                                                        % Change

Safety
  SIFR (/200,000 hrs)                      rate        0.25             0.13             (92)             0.20             0.14             (43)
  LTIFR (/200,000 hrs)                     rate        0.30             0.26             (15)             0.31             0.43                 28

Production
Tonnes delivered to concentrators           kt          740             662               12             2 036            1 840                 11
  Tonnes delivered - BRPM                   kt          590             651               (9)            1 746            1 817             (4)
  Tonnes delivered - Styldrift              kt          150              12             1 150             290               23             1 161


Total tonnes milled                          kt         763             725                5             2 055            1 832                 12
  Tonnes milled - BRPM                       kt         608             713              (15)            1 758            1 810             (3)
  Tonnes milled - Styldrift                  kt         155              12             1 191             297               22             1 250
  % UG2 of total tonnes milled              %          20.0             23.7              16              21.0             26.0                 19
4E built-up head grade                      g/t        4.01             4.15              (3)             4.01             4.08             (2)
   4E built-up head grade - MER             g/t        4.07             4.21              (3)             4.08             4.17             (2)
   4E built-up head grade - UG2             g/t        3.76             3.96              (5)             3.75             3.81             (2)
   4E built-up head grade - BRPM            g/t        4.24             4.18               1              4.18             4.11                 2
   4E built-up head grade - Styldrift       g/t        3.14             2.70              16              3.18             1.68                 89
Opening stocks                              kt          26               95              (73)              19               24              (21)
Recovery – 4E total concentrating           %          85.0             85.6              (1)             85.2             85.3             (0)
Recovery – 4E BRPM concentrator             %          85.6             86.4              (1)             85.6             86.2             (1)

Metals in concentrate produced*
   4E**                                     koz        83.7             82.9               1             225.6            204.9                 10
    Platinum**                              koz        54.0             53.4               1             145.6            132.2                 10
    Palladium                               koz        22.4             22.0               2              60.4             54.3                 11
    Rhodium                                 koz         4.8              4.8               0              13.1             12.4                 6
    Gold                                    koz         2.4              2.5              (4)             6.6              6.0                  10
  4E + Ruthenium and Iridium                koz        93.8             90.3               4             252.5            230.2                 10
  Nickel                                    kt         0.536            0.511              5             1.359            1.123                 21
  Copper                                    kt         0.336            0.330              2             0.842            0.718                 17

Cash operating costs***
Cash operating cost                        R’m          746             703               (6)            2 075            1 931             (7)
Cash operating cost / tonne milled          R/t        1 227            987              (24)            1 181            1 067             (11)
Cash operating cost / 4E oz                R/oz       10 520            8 585            (23)            10 336           9 479             (9)
Cash operating cost / Pt oz                R/oz       16 307           13 310            (23)            16 033           14 688            (9)




Capital expenditure
Total capital                               R'm        266.9            463.6             42              743             1604                  54
  Expansion                                 R'm        235.5            384.1             39              613             1379                  56
  Replacement                               R'm         0.7             58.2              99               44              150                  71
  Stay-in-business (SIB)                    R'm        30.7             21.3             (44)              86               75              (15)
  SIB as a percentage of operating cost     %           4.1              3.0             (37)             4.1              3.9              (5)
*Metals in concentrate produced include Styldrift I on-reef development ounces
** Includes ounce contribution from Styldrift I for Q3 2016 of 12.7koz (4E) and 8.3koz (Pt) and for YTD 2016 of 24.9koz (4E) and 16.2koz (Pt)
*** Costs are calculated excluding Styldrift I on-reef development tonnes, ounces and costs


Johannesburg
21 October 2016

JSE Sponsor:
Merrill Lynch South Africa (Pty) Ltd

For further information, please contact:
Investors:
Lindiwe Montshiwagae
Executive: Investor relations
+27 (0) 10 590 4510
lindiwe@bafokengplatinum.co.za


Media:
Mpueleng Pooe
Executive: Corporate Affairs
+27 (0) 10 590 4515
mpueleng@bafokengplatinum.co.za



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