RBPlat adopts modest dividend policy as BRPM cost struggles take gloss off buoyant market

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RBPlats Styldrift

ROYAL Bafokeng Platinum (RBPlat) delivered on its promise at the half-year to resume dividend payments, but the policy adopted was modest – 10% of free cash flow before growth capital – reflecting the group’s struggles to contain cost inflation at its Bafokeng Rasimone Platinum Mine (BRPM).

Higher grade Merensky ore at BRPM’s South Shaft had been depleted which has sent the company lower grade (but relatively shallow) UG2 ore at the mine. This has resulted in cost increases and less efficient, lower recovery mining.

The outcome in RBPlat’s 2019 financial year was a 35% increase in cash operating costs to R14,139 per ounce of 4E platinum produced, some 6.3% higher than guided by the company. This was despite increases in tons milled and 4E metals in concentrate produced which were 12.5% and 9% higher year-on-year.

Total 4E metals produced totalled 401,000 oz whilst the company produced 261,000 oz of platinum, a year-on-year increase of 9.2%.

BRPM production was also supplemented by production from Styldrift, RBPlat’s R11.7bn project which was expensed for the first time this year. Styldrift has potential to increase RBPlat’s platinum group metals (PGM) production to about 600,000 oz. However, for the current financial year, production of 450,000 to 485,000 oz has been targeted at a cash operating cost of between R13,300 to R14,400 per 4E oz.

For the year under review, share earnings were 66.3% lower at some 26.3 cents. On a headline level, however, earnings per share came in 101.6% higher at some 50.4 cents. Shares in the company have doubled on a 12-month basis but are down a fifth since February 20.

2019 represented a year of high activity for RBPlat’s balance sheet. Following the announcement in 2018 that it would buy Anglo American Platinum’s 33% stake in BRPM for R2.1bn, the company issued shares totalling R239.9m and settled the balance using cash followed by a gold streaming deal of some $145m.

It earlier unveiled a R1bn rights issue to pay for the $58m upgrade of its Maseve concentrator, bought in 2018 from Platinum Group Metals and advance the second phase of the upgrade of Styldrfit. As of December 31, net debt was R491.3m compared to R832.4m a year earlier. Cash on hand totalled R814.2m (2018: R883.5m).

Commenting on the reinstatement of the dividend, RBPlat said that despite the strain imposed by the development of Styldrift, it expected an underpin of “strong cash flow generation” from BRPM and royalties from Impala Platinum (Implats) which would support “sustainable dividends”. Consideration would also be given to special dividends.


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