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RBPlat announces 33% increase in headline earnings per share, 18% increase in revenue, 3% increase in production and R2.2 billion cash on hand, against a background of protracted industry strikes.
Royal Bafokeng Platinum (RBPlat; JSE: RBP) today announced its interim results for the six months ended 30 June 2014, a period that included the most protracted five-month labour unrest in the country's history.
RBPlat's performance was, in contrast, marked by operational stability and, on 16 July 2014 the company announced a long-term wage agreement. The company reported a 33% increase (from 87 to 116 cents) in headline earnings per share (HEPS) for the six months under review (compared to the six months ended 30 June 2013). Revenue increased by 18% to R1.8 billion (compared to R1.5 billion for the six months ended 30 June 2013) while production increased by 3% to 134 229 PGM ounces (4E). Although operating costs remain a challenge for the industry – RBPlat's cash operating cost per tonne increased by 7.2% during the period under review to R983 – the company successfully achieved its target of managing cost increases to below 10% - and these costs were largely offset by the additional milled volumes.
The highlight of the six month period was, according to CEO Steve Phiri, the conclusion of a long-term wage agreement with employees, represented by the National Union of Mineworkers (NUM), without any form of industrial action. "Both parties conducted negotiations in a constructive and mature manner and we are grateful to our employees for continuing to focus on the business at hand during this turbulent period for the industry."
Zero harm remains a primary goal at RBPlat and it was therefore disappointing that BRPM started the year with an unusually high safety incident rate, recording seven serious injuries in January. Corrective action was implemented and there were no further incidents during the period under review. Styldrift has been fatality-free for over three years and had no serious injuries during the reporting period.
RBPlat's average PGM Rand basket price increased by 15.6% to R21 148 per platinum ounce compared to R18 294 in the equivalent period in 2013, and this contributed to a number of key features for the period:
33% increase in HEPS
RBPlat's attributable share of group ea
earnings increased by R63.5 million to R207.1 million (R143.6 million for the six months ended 30 June 2013)
normalised earnings increased by R54.4 million to R236.9 million (R182.5 million for the six months ended 30 June 2013)
normalised earnings per share increased by 20% to 133 cents per share (111 cents per share for the six months ended 30 June 2013)
revenue increase of 18% (together with a 2.1% increase in platinum ounces produced)
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 (also adjusted by an increase in cash operating costs and administration costs)
gross profit margin improved by 27.6% to 26.8% (21.0% for the period ended 30 June 2013) due to the 18% increase in revenue offset by a 9.4% increase in cost of sales
at 30 June 2014 the RBPlat Group had cash and near cash investments of R2.2 billion.
At BRPM operational flexibility was maintained with immediately stopable ore reserves (IMS) being maintained at just over 6km. Total tonnes milled increased by 4.1% mainly due to an 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 successful mining of the UG2 general facies remains a strategic element of the long-term mining plan at BRPM. Trial mining of UG2 at South shaft progressed well. Merensky reef contribution remained similar to the corresponding period in the previous year and the strategy remains to maximise Merensky production and supplement this production with the UG2 reef to increase operational flexibility.
Total cash operating costs increased by 12.2% to R1 109 million due to inflation and volume related increases. Cash operating costs 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.
BRPM JV's capital expenditure increased by R360 million (R446 million in the six months to 30 June 2013) to R806 million. Stay-in-business (SIB) expenditure of R77 million increased, primarily due to mill liner replacements, a crusher overhaul and installation of the water treatment plant. At 7% of operating costs, SIB expenditure remains within our 6% to 8% target range. The Phase III North shaft Merensky decline system project at BRPM was 66% complete against planned completion of 59% with overall completion forecast to be two months ahead of schedule. Project expenditure remains well below budget with an estimated cost at completion of R1.29 billion. The North shaft chairlift project is 95% complete with project expenditure of R83.6 million to date. Current forecasts indicate completion on schedule at an estimated cost of R116.5 million. A R7 million reduction in BRPM Merensky Phase II expenditure resulted in a reduction in expenditure on replacement capital while a R335 million increase in expansion capital was in line with the Styldrift I project execution schedule to the pre-feasibility phase during 2014.
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%. The first phase of the concentrator portion of the project – an upgrade to 250ktpm – was approved by the RBPlat board in June 2014 and began in July. Completion is due for the second half of 2015. Key project activities were negatively impacted by the combination of publicised international litigation involving the principal shaft sinking and development contractor as well as the impact of the five-month strike in the platinum sector on the contractor's projects with other key clients. RBPlat has implemented contingency plans to mitigate further risk associated with the contractor's remaining portion of the Styldrift project. The Main shaft equipping began in July 2014 and will conclude in the first quarter of 2015.
Total project capex increased to R3 138 million of which R627 million was spent during the period under review in line with project progress. The project remains below budget mainly as a result of under-utilisation of escalations and the non-use of contingencies. Full year capital expenditure for 2014 is forecast at R1 578 million.
On 2 June 2014, the RBPlat board announced an in principle approval of a R2.8 billion employee home ownership scheme. The scheme, intended to provide all RBPlat's enrolled employees with the opportunity to become home owners over the next five years, is in line with the company's philosophy of More than mining.
We have also successfully completed a range of SLP projects within our door step communities and, in the environmental field, 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 four million litres a day water treatment plant in order to reduce our reliance on potable water from Magalies Water.
CEO Steve Phiri said that both the wage agreement and the home ownership scheme, by contributing to the wellbeing of employees and their families, will contribute to future stability of the company. "These developments will also make the workplace safer," he said. "And because we are committed to keeping our employees safe from any harm, it will help us to build on our much improved 2013 safety record. Ultimately this will benefit our providers of capital and all our stakeholders and we therefore are confident that we will achieve the anticipated 2.3 to 2.4 million tonnes of full year production."