Royal Bafokeng Platinum
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.