[miningmx.com] – ROYAL Bafokeng Platinum (RBPlat) could reduce the capital expenditure of its R11.4bn Styldrift project by R2.4bn if it decides not to build a standalone concentrator on the premises.
“The cost of that concentrator is not far from the market capitalisation of Aquarius Platinum. It doesn’t feel right to spend that on a concentrator,” said Martin Prinsloo, CFO of RBPlat. “What we’re saying is that from a cash point of view, we can be smarter,” he added.
Prinsloo was speaking on the sidelines of the firm’s interim results presentation in which RBPlat said it had more than doubled headline interim earnings and generated R88m in surplus cash taking total cash on hand to R992m.
Commenting on its options for the concentrator, RBPlat said it could expand the capacity of its existing concentrator at the Bafokeng Rasimone Platinum Mine (BRPM) which the company shares with Anglo American Platinum (Amplats) – a decision that has its own capital demands but not in the same quantum as a new concentrator.
Alternatively, it could enter into a toll-treating arrangement with an existing platinum company, or share a concentrator new build with other platinum companies, although that option had its own complexities, said Prinsloo.
RBPlat CEO, Steve Phiri, said the company would have “a feel by November” regarding an outcome on the concentrator.
“We have been speaking to a number of peers who have capacity. But a lot of technical work that has to take place. We could increase the capacity of the existing plant. But I’m loathe to talk to the details,” he said.
The discussion about the concentrator serves further evidence that RBPlat is getting its hands around Styldrift which was conceptualised by Amplats before it was vended in to RBPlat.
Prinsloo said that R4bn of the project cost was actually escalation of which about R1bn was not expected to be utilised. A change in the technical planning of the mine had also resulted in a R400m reduction in its projected capex.
Nonetheless, the scale of the project was long been a source of nervousness for RBPlat’s shareholders which are expecting a capital call sooner or later.
“If we have a better concentrator solution, it will affect the capital call on shareholders,” said Prinsloo. “The last thing you want is for market to see you coming,” he said of equity-funding a portion of the project.
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RBPlat doubled the size of its credit facility with Nedbank to R1bn which Prinsloo said was intended to provide flexibility. “It means we can come to market when it’s opportune, and at the right price,” he said.
“It [the capital raising] won’t be significant potion of our market capitalisation, about 10% to 20-%. It won’t be material,” he said. Peak funding for Styldrift is planned for 2016. “It’s doable numbers for our size of business,” he said.
In addition to debt, RBPlat also has some R870m of cash (it’s share of the R992m), R105m in working capital, and a share of cash held in BRPM leaving it with total cash availability of about R2bn.
In respect of the firm’s debt levels, it was possible gearing could increase to 25% or 30% but Prinsloo said the project would deliver quickly once it started operating. The mine is expected to double RBPlat’s production to some 600,000 ounces a year of platinum group metals.
“Potentially for a year or two, the gearing can touch the 30% level,” said Phiri during the results presentation.
