Wrap Text
Short form: Condensed Consolidated Results for the Six-Month Period Ended 31 December 2019
Bauba Resources Limited
Incorporated in the Republic of South Africa
(Registration number 1986/004649/06)
JSE share code: BAU ISIN: ZAE000145686
("Bauba" or "the company" or "the group")
Short form: condensed consolidated results for the six-month period
ended 31 December 2019
Highlights
- Revenue increased by 122,7% to R201,228 million (31 Dec 2018: R90,363 million).
- Basic loss and headline loss per share of 0,01 cents, up 99,6% (31 Dec 2018:
loss of 2,55 cents).
- Investment in property, plant and equipment decreased by 37,0% to R26,599
million (31 Dec 2018: R42,235 million).
- Total comprehensive profit for the period increased by 118,9% to R1,842
million (31 Dec 2018: loss of R9,753 million).
- Acquisition of 22% interest in Nuco Chrome Bophuthatswana Proprietary Limited.
Commentary
Chrome pricing review
Bauba experienced a challenging six-month period ended 31 December 2019 driven
by a weak chrome ore market. The CIF China price for 44% chrome concentrate
(Cr2O3) moved from US$160 per tonne (t) at the start of the financial period
to US$143/t at 31 December 2019 (according to FerroAlloyNet). During this
period, the price peaked at US$172/t. The CIF China price for 44% Cr2O3
decreased from an average of US$189/t in the six- month period ended
31 December 2018 to US$162/t for the current six-month period. After supply
chain costs (which remained flat), and the movement in average US$/ZAR exchange
rates, our ZAR FCA Mine Gate revenue realised per tonne decreased by 23%.
Furthermore, our revenue was impacted by a greater proportion of our sales
tonnages being realised during the November and December 2019 months at an
average of US$150/t compared to US$168/t for the months July 2019 to
October 2019.
Financial and operational review
Significant progress continues to be made in the development of Bauba's
underground Moeijelijk Mine. For the current period, Bauba incurred R27,055
million in capital expenditure on the development of our trackless declines
which have now been holed and are on track to achieve steady state production
of 30,000t of stoped ore per month during the 2nd quarter of the 2020 calendar
year. The timing of the achievement of steady state production may be
negatively impacted by the three-week national lockdown emanating from the
COVID-19 pandemic. The production ramp up to steady state is steep and this
will significantly lower Bauba's operating costs per tonne and increase our
revenues going forward, as proportionately more speciality grade concentrates
will be produced from underground material than from lower grade development
and opencast feed. Bauba's revenue increased by 122,7% from the prior period
to R201,228 million despite the significantly weaker pricing environment.
Bauba incurred higher operating costs given that the underground mine is not
yet at steady state production. In addition, lower yield development tonnes
processed through the wash plant, and significantly lower prices realised
per tonne sold, led to Bauba's gross profit margin decreasing from 26,3% in
the six-month period ended 31 December 2018 and 37,0% in the year ended
30 June 2019 to 19,1% in the current period.
These results however demonstrate Bauba's resilience and ability to operate
profitably even in a very depressed market. The industry cost curve for
primary production is currently reported to be between US$160/t and
US$180/t for 42% chrome ore concentrate which averaged US$145/t over the
six-month period ended 31 December 2019. Although our cost base remains
far from optimal until the underground operation achieves steady state
production, Bauba was able to operate profitably below the industry
cost curve.
Outlook
Current market prices are below the industry's cost of supply driven by an
oversupply of chrome ore, ferrochrome and excessive stainless steel stocks.
The stainless steel market is weak, impacted last year by the "US China
Trade Wars" and now in the current year by the coronavirus ("COVID-19").
On 23 March 2020, President Cyril Ramaphosa announced a 21-day lockdown of
South Africa, due to the rapid rise of the COVID-19 pandemic, beginning
midnight on Thursday, 26 March 2020. Bauba may cease all operations over
this three-week period and re-commence on 17 April 2020. The impact on our
stakeholders is being assessed and mitigating procedures being implemented
to ensure minimal impact on the business in the medium- to long-term.
The market outlook is difficult to predict due to the uncertainties created
by the impact of COVID-19, but the medium- to long-term fundamentals for
chrome ore remain strong and prices must increase significantly for the
market to stabilise over this period.
Changes to the board
Mr Sholto Dolamo resigned from his position as an independent non-executive
director on 5 December 2019. During the period under review, no other
changes were made to the board.
Short form announcement
This short form announcement is the responsibility of the directors and is
only a summary of the information in the full announcement. The full
announcement is available at:
https://senspdf.jse.co.za/documents/2020/jse/isse/bau/interim20.pdf and
can be found on the company's website http://www.baubaresources.co.za.
This short form does not contain the complete or full announcement details.
Any investment decision should be based on consideration of the full
announcement, copies of which are available for inspection at no charge
from Monday to Friday, during office hours, at the company's registered
office and the office of the sponsor.
Johannesburg
27 March 2020
Board of Directors
NPJ van der Hoven# (Chairman), M Luyt*, DS Smith*, Dr NM Phosa#,
King TV Thulare (Alternate), Ms T Makgala*, NW van der Hoven, JA Knowlden
#Non-executive *Independent non-executive
Sponsor
Merchantec Capital
13th Floor, Illovo Point, 68 Melville Road, Illovo, Sandton, 2196
(PO Box 41480, Craighall, 2024)
Registered Office
Cube Workspace, 1 Wedgewood Link, Bryanston, Johannesburg, 2191,
South Africa (PO Box 1658, Witkoppen, 2068)
Company Secretary
Merchantec Proprietary Limited
Transfer Secretaries
Computershare Investor Services Proprietary Limited, Rosebank Towers,
15 Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Auditors
BDO South Africa Incorporated
22 Wellington Road, Parktown, 2193
Date: 27-03-2020 04:00:00
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