Royal Bafo­keng Plat­inum

Finweek English Edition - - COMPANIES & INVESTMENTS - David Mckay

Roya l Bafo­keng Plat i num ( RBPlat) is some­thing of a rarit y in the cur­rent South African plat­inum sec­tor. Its so­cial re­la­tions are rel­a­tively good, and its de­liv­ery on projects is un­der bud­get. It’s not typ­i­cal of the sec­tor in gen­eral.

“We can’t ex­clude the pos­si­bil­ity of is­sues,” says Martin Prinsloo, CFO of RBPlat, re­gard­ing t he pos­si­bilit y of labour dis­putes on its mine, Bafo­keng Rasi­mone Plat­inum Mine (BRPM).

“But we have a wage agree­ment in place un­til June 2014 t hat pro­vides min­ers with the op­por­tu­nity to dou­ble their pack­ages,” he says.

This com­pares favourably to t he in­dus­try norm re­gard­ing re­cent wage/ pro­duc­tiv­ity agree­ments in which min­ers have 30% wage up­side. The CEO, Steve Phiri, also sits with min­ers to hear their griev­ances.

Phiri told Fin­week of his sud­den re­al­i­sa­tion, in the midst of last year’s labour strife on South Africa’s plat­inum mines, of just how vul­ner­a­ble man­age­ment was in those meet­ings. “You could see where the trou­ble­mak­ers were,” says Phiri. Reg­u­lar meet­ings con­tinue. They are tense but con­struc­tive, says Prinsloo.

Of course, en­gage­ment of this kind is en­tirely pos­si­ble at RBPlat be­cause it man­ages a sin­gle mine. In fact, RBPlat makes the busi­ness case for one as­set min­ing com­pany echo­ing the struc­ture of SA’s gold min­ing com­pa­nies in the Eight­ies – wit hout t he cor po­rate ex­cesses.

RBPlat has bro­ken from share­holder An­glo Amer­i­can Plat­inum’s (Am­plats) pro­cure­ment pro­cesses nar­row­ing the UK group’s 123 sys­tem ap­pli­ca­tions to just 68, said Prinsloo. Con­tracts have also been sim­pli­fied down 100 pages to only 30 pages i n an ef­fort to make t hings sim­pler. “It ’s no crit­i­cism of Am­plats, but we just don’t need t he same things,” says Prinsloo.

There has been cost escalation – cash unit costs in­creased 19% in the year ended De­cem­ber, partly on lower pro­duc t i on – but t he c om­pany has banked R 323m in project sav­ings t o d a t e on its 600 0 0 0 ounce/ year St yldrift 1, a project t hat could dou­ble pro­duc­tion. It also saved R110m on the BRPM re­place­ment pro­gramme.

Prinsloo says the com­pany could yet ask share­hold­ers for funds in 2014 for com­ple­tion of the R11.3bn Styldrift project but given that only R1bn has been tapped means it ’ l l be tol­er­ant of an­other re­quest. “It can go from not re­quired to what­ever num­ber,” says Prinsloo.

Justin Frone­man at SBG Se­cu­ri­ties thinks de­liv­ery on Styldrift re­mains the key to es­tab­lish­ing the f irm’s cre­den­tials as “an at­trac­tive tier-two plat­inum as­set”. For the cur­rent year, a draw­down on some R900m in cash re­serves is l i kely. A R500m bank f ac i l i t y re­mains un­drawn. Given the bal­ancesheet stress of its peer group, this is a de­cent per­for­mance. Mac­quarie Re­search also likes the share. “While t he stock has come off some­what in light of pr e v a i l i ng pl a t i nu m price, it re­mains one of our pre­ferred picks in the space given its growth in Meren­sky pro­duc­tion,” it said in a re­cent note.

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