An empowerment story with growth potential
Royal Bafokeng Platinum (RBPlat) is a key component of the Royal Bafokeng National Development Trust, which aims to provide more than 100,000 people with stable incomes by making high-quality investments.
The mining group was formed in 1999 by way of a joint venture, which was restructured in 2010 when RBPlat was created and obtained a 67% majority
interest. In 2018 RBPlat entered into a transaction to acquire the remaining 33% interest in the joint venture that Anglo American Platinum (Amplats) owns. Phase 1 of this transaction has been completed and the second and final phase is pending regulatory approval.
RBPlat’s mining operations are in the platinum belt around Rustenburg in the North West. This region accounts for most of the world’s platinum and platinum group metals (PGMs) reserves, and the land on which RBPlat has mining rights and operations has some of the shallowest reserves in the area.
RBPlat also has rights to untapped deposits of mineable ore that lie between 800m and 1,500m deep, though at this stage there are no plans to sink shafts to access them because there is still plenty to mine in the existing shafts (which have total mining-life expectancy of more than 60 years).
Mining is taking place in two locations. The first is the Bafokeng Rasimone Platinum Mine, which operates at less than 500m below ground and has produced 200,000t of milled ore a month. This has yielded about 180,000oz of PGM concentrate a year since 1999. A recent extension project gives this mine access to another 1.4-million ounces of potential PGM concentrate and many more years of operation.
The second is the Styldrift Mine, which was established in 2009 and is more modern and mechanised. In 2018 a project was completed to ramp up production at this mine to 150,000t of milled ore a month and there are plans to increase output to 230,000t a month (which explains the recent capital-raising exercises).
All of RBPlat’s current 350,000t a month goes to two concentrating facilities that it owns: the Bafokeng Rasimone Platinum Mine Concentrator, which has recently been upgraded to handle 250,000t of ore a month; and the Maseve Concentrator plant, with a monthly capacity of 110,000t.
The ore is crushed and put through a flotation process where PGM concentrate is collected and sold in an offtake agreement with Amplats’ Rustenburg Refineries.
These processes resulted in revenues for RBPlat topping R3.6bn in 2018 with a net profit of R255m for the year (up from a net loss of R657m in 2017).
The considerably better performance in 2018 was due in part to impairments of R864m incurred in financial 2017 that were not repeated.
From a valuation perspective, RBPlat is not the greatest investment prospect. There are probably more appealing
options available in the broader commodity sector.
But there are some “growth stock” characteristics at RBPlat because the group has the ability to ramp up production significantly should market conditions turn more favourable. The timing of the buyout of the remaining 33% Amplats stake may also prove inspired.
One matter to note is that RBPlat arguably represents one of the most successful land claim stories in SA. Just over 48% of the company is owned by a community of 100,000 previously disadvantaged people.
While this is a great empowerment story, RBPlat’s share price — since listing in late 2010 — has been under pressure as sentiment buckled under unfavourable PGM market conditions.
The market has warmed to RBPlat again, and a solid interim performance (to end-June) might well see it enjoying a deserved day in the sun.