ROYAL Bafokeng Platinum (RBPlat) said it would pay a maiden dividend for its 2020 financial year of 575 cents per share – about 50% of free cash flow before expansionary capital – and forecast an increase in production of platinum group metals (PGMs) by as much as one quarter this year.
The dividend announcement comes amid a year of buoyant pricing for PGMs. Overall, RBPlat’s average rand basket price of four PGM metals was two-thirds higher year-on-year at some R47,891.70 per platinum ounce. Revenue for rhodium and palladium accounted for 62.5% of the total even though they account for 35% of production.
In addition to higher pricing, production was 4.5% higher at 419,000 ounces despite the 45-day disruption posed by the Covid-19 pandemic. Given the ability of the industry to stem the spread of the virus in mines and communities, RBPlat’s PGM production in the current financial year is forecast to be between 475,000 to 525,000 oz, representing an increase year-on-year of 25% assuming the higher end of the estimate.
The improvement in pricing and expected increase in production – as the firm recovered from Covid-19 lockdown – coincides with the completion of the firm’s R11bn Styldrift project which is expected to absorb R400m this year as ancillary works are finalised.
All in all, total capital expenditure for 2021 is estimated to be R2.2bn versus R1.8bn in 2020 which includes the finalisation of the smelter upgrade of its Maseve facility, due to be completed in the first quarter some three months late owing to last year’s lockdown.
As guided previously, share earnings came in at 1,369 cents compared to 26.3 c in the previous financial year. Headline share earnings were 1,354.4 cents per share compared to 50.4 cents/share previously representing a many-fold year-on-year improvement.
The group ended the year on December 31 with net cash of R2.24bn compared to R814.2m at end-December 2019. Free cash flow before growth capital totalled R3bn.
Commenting on market developments this year, RBPlat expected demand for platinum in vehicle autocatalysts to improve, although the metal would remain in “industrial surplus which will require another year of investment demand”. Its discount to gold and palladium, as well as demand for gasoline autocatalysts would make the metal “attractive”, however.
“The palladium and rhodium markets are both forecast to remain in deficit in 2021, although narrower than in 2020 owing to additional unrefined stocks to be processed in the second half of 2021,” the company said.
The dividend was in excess of RBPlat’s newly adopted payout policy which is to pay annually 10% of free cash flow before expansion capital. Steve Phiri, CEO of RBPlat, said the company had been sober in deciding how to reward shareholders.
Asked how the company will play future dividend payments, Hanré Rossouw, RBPlat CFO, said during a presentation today that despite the “absolute minimum” of the stated policy, the prospect of an interim ‘special’ dividend’ “comes into play in the second half”.
The spot rand-denominated price of the firm’s PGM basket was R60,000 per Pt oz which is 25% above the average basket price in the 2020 financial year.
Commenting on future shareholder returns, Rossouw added that consideration would also be given to a R1.2bn convertible bond which matures in March, 2022. At a strike price of R40,79/share, the bond was “well in the money” – RBPlat is trading at R104/share – so it could be bought back to avoid the dilution of some 29 million shares being issued.
It could also be allowed to convert in order to further boost liquidity after long-term holders of the stock had recently sold into a rising share price, said Rossouw. Shares in RBPlat are about 165% higher on a 12-month basis.