RBPlat mulls rights issue as it waits to boost Styldrift
WITH the aim of producing 150 000 tons of platinum group metals a month by the end of 2018, Royal Bafokeng Platinum’s Styldrift mine has more than quadrupled its capital-spending plans to R4.75-billion, and could go to the market for those funds.
RBPlat was weighing all its options for funding, finance director Martin Prinsloo said on Tuesday.
Prinsloo said this after the annual results presentation, at which RBPlat reported a profit of R262.7-million in 2016 from a R3.77-billion loss a year earlier.
“We don’t want to be in a position to start and not have sufficient money to complete it. A robust funding plan by its nature will have quite a sufficient buffer built in it to ensure that we don’t run into difficulty. It could be a combination of things.”
The funds needed to boost production at Styldrift is in addition to the R6.09billion spent since the mine was developed in 2010. Plans to produce 150 000 tons a month by 2017 at the shallow, mechanised mine, approved when the commodities cycle was peaking, were put on hold in 2015 when prices fell to record lows. Platinum declined about 42% in the past five years.
The company is also experiencing production declines and rising costs at the South shaft of its Bafokeng Rasimone Platinum Mine, and was questioned on whether Styldrift would be ramped up in time to compensate.
RBPlat defended delays in ramping up production at Styldrift in 2015 as a case of either doing so at the bottom of the cycle, losing money and retrenching people or postponing the project, preserving cash and mining more when the quality metal that Styldrift produces was better appreciated.
“We were always aware that Styldrift was going to be delayed and the decline in production at South shaft was going to catch up with us. The timing was not going to be perfect. We were aware of that,” Steve Phiri, Royal Bafokeng Platinum CEO said.
Thobela Bixa, a Mergence Investment ROCKING AND ROLLING: Workers at RBPlat’s Styldrift Mine in North West celebrate the intersection of the Merensky Reef 600m below the surface Managers analyst, said that although it took longer for RBPlat to build and ramp up Styldrift he agreed with Phiri that it was important for the company to delay because it would not have been fairly compensated for its good quality ounces at the time.
However, at the moment, while ramping up from the current 50 000 tons a month of PGMs to 150 000 tons by the end of 2018, Styldrift is under pressure to speed up the process so as not to drop its production and lose out on the high prices when market conditions improve.
Bixa said RBPlat could not afford another delay because of South’s declines and because the ageing shaft had to go on care and maintenance by the end of 2018.
Hurbey Geldenhuys, an analyst at Vunani Securities, agreed that it was important for RBPLat to get the timing right. He projected that South shaft would be depleted by 2021, although with volumes declining and the inevitability of rising costs the actual closure might come earlier if profitability fell.
“They stand a good chance to get 150 000 [at Styldrift] by the end of 2018. The plan is robust . . . it should be sufficient to replace what we are leaving at South shaft,” Geldenhuys said.
At full capacity, Styldrift was to produce 230 000 tons of PGMs a month. The company was still weighing its options to either buy or build the concentrator — which refines the minerals — needed for Styldrift to reach full capacity. Full capacity would depend on market conditions improving.
RBPlat was still negotiating R2-billion in debt facilities to fund Styldrift, Phiri said, but he would not put any strain on the balance sheet to achieve it.
Geldenhuys said there were other distressed PGM miners in the area in which RBPlat operated, such as Maseve mine, owned by a Canadian-listed company, which could be an opportunity for RBPlat to buy infrastructure instead of building it from scratch. “[This] would put them in a very strong position to rapidly expand to 230 000 tons a month,” he said.
The company would get support from shareholders if it were to do a rights issue, but the question was whether shareholders had the cash RBPlat needed, Geldenhuys said. “If they can secure additional financing that can cover that potential risk of prices going down, they will proceed.”
Bixa said the rights issue had to happen. However, if the company was still cash positive this year, it did not have to do it this year.
Prinsloo said prices would remain unchanged in 2018. Fortunately, RBPlat would also benefit from rising prices of base metals such as nickel, copper and cobalt, which were found in the reef.