RBPlat battens down hatches by dropping dividend 54% amid hike in unit cost guidance

RBPlats Styldrift

ROYAL Bafokeng Platinum (RBPlat) said uncertainty related to its proposed takeover by Impala Platinum (Implats) played a role in a reduced interim dividend even though its cash balance at year end was a relatively healthy R4.9bn.

The conservatism underpinned significant cost inflation during the period in which cash operating costs increased 15.2%. RBPlat has consequently adjusted its unit cost guidance 10% to 12% higher for the remainder of the year to R18,500 and 19,000 per 4E oz compared to a previous estimate of R16,500 to 17,200/4E oz.

Declining platinum group metal (PGM) prices, an uncertain outlook for metal demand, and concerns about recession had also informed the payout which totalled R711m, equal to 245 cents a share – a year-on-year reduction of just over 54%.

Implats currently owns 37.93% of RBPlat after announcing earlier this year a mandatory offer to shareholders of R90 per share in cash and 0.3 Implats’ shares per RBPlat share.

Northam Platinum owns just under 35% of RBPlat but has an option over additional shares that, if exercised, could result in it making its own mandatory offer. The Public Investment Corporation (PIC), the government-owned pensions manager, is yet to make a decision on whether to vend its 9.3% stake in RBPlat into Implats’ offer.

In comments to its short form interim announcement, RBPlat said the first half of its financial year was characterised by “uncertainty and geopolitical tensions”. After scaling record highs, the palladium price sank back.

“The war in Ukraine has affected global supply chains resulting in inflationary cost pressures impacting profit margins and raising fears of a global recession,” the company said. “The Covid-19 lockdown in China further exacerbated supply chain challenges.”

The outcome for RBPlat was a 16.4% decline in the rand denominated basket price for PGMs to R35,599 per ounce. Revenue consequently fell 14.7% year-on-year to R8.1bn. After the cash operating cost hike earnings came out at 765.4 cents/share – a decline of 58.4% compared to the first six months in 2021.

In addition to external market factors, RBPlat also registered a poor set of interim results for Styldrift, its newly commissioned mine, where unit costs increased 22% following a one per cent decline in production.

“Certainly we have not attained what we said we were going to do at Styldrift,” said Neil Carr, COO of RBPlat during a presentation of the firm’s results. “It’s about maturing the mine, getting the skills set and equipment availabilities … the quality of mining … It’s just taking longer than we anticipated.”

“All indications are there that Styldrfit will close the gap from what we see today and we’ll see the kind of performance and efficiencies required to meet its steady state in production and costs,” Carr added.

Solar plant

RBPlat also announced it was assessing the feasibility of building a 98MW solar plant at an estimated cost of R1.6bn.

“We are in detailed design of technical parameters for solar plant and we are getting the EIA (environmental assessment authorisation) approvals over the next six months,” said Carr. “We have the land available for the 98MW capacity.

“It will be an off balance sheet spend. We will go to third party funding who will construct and operate the plant and that will be in process fairly soon,” he said.

The prospect of another mining related solar plant going up will be a boost to South African president Cyril Ramaphosa who last week indicated the government was finally loosening its iron grip over control of electricity generation in the country.

He announced the removal of licences required for self generation which are currently in place for up to 100MW in output, and said measures would be taken to open the floodgates to private sector investment in the renewable energy market.

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