An em­pow­er­ment story with growth po­ten­tial

Financial Mail - Investors Monthly - - Analysis - Petri Redel­inghuys

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.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.