Styldrift I RBPlat
Construction activities at RBPlat's Styldrift I project will be reduced as a result of the weak PGM market

South African platinum major Royal Bafokeng Platinum (RBPlat) has revealed it will reduce construction activities and related capital expenditure at its Styldrift I project as a result of a severely depressed PGM market.

This was announced in the company’s half year financial results to June 2015.

The underground Styldrift I mine, lies about 5 km from the North shaft of RBPlat’s BRPM and is located within the boundaries of the Styldrift and Frischgewaagd farms, one of the last known blocks of shallow Merensky reef deposits.

Until now, the project was expected to reach steady state in the first quarter of 2019.

RBPlat outlined its decision further, saying it is not deemed appropriate to ramp up these high quality Merensky ounces into a currently depressed market at prevailing market prices, and neither is it deemed prudent to burden the balance sheet by raising further funding with its related excessively restrictive and/or dilutive terms and conditions that would apply in the current environment.

The intent is to reduce the level of activities at Styldrift I to such an extent that expenditure could be serviced from excess cash flows generated from operations at RBPlat’s existing BRPM operations as well as from revenue generated from on-reef development at Styldrift I.

Considering the company’s overall weak financial performance (by comparison with previous years and reporting periods), any further movement at Styldrift I will be extremely slow.

Progress at Styldrift I in 2015

As at the end of June 2015 the project had reached an overall completion of 55.8%, which was 0.9% below the planned completion of 56.7%.

Capital expenditure for the period under review amounted to R980 million bringing the total project expenditure to R4.793 billion to date. The focus during the first half of this year has been on the completion of the Main shaft vertical equipping activities which has been commissioned with the rock winder hoisting first rock on 29 June 2015.

Surface silos, offices, change houses and the lamp room have been commissioned and are operational.

Execution of the Styldrift I project progressed through a period during which the principal shaft and sinking contractor on the project (Shaft Sinkers) was unable to perform the work required as a result of its financial constraints.

As a result, RBPlat gave notice of termination in January 2015 to Shaft Sinkers and in order to limit the impact of the termination and ensure as smooth a transition as possible we simultaneously engaged Aveng Mining (Aveng). Aveng took over the balance of the Shaft Sinkers scope of work as of mid-March 2015.

RBPlat financial performance

The first six months of 2015 have proved to be the most challenging since RBPlat took operational control of the BRPM joint venture in January 2010. Its safety and operational performances, which were below expectations, contributed to lower production volumes and ounce output, against the backdrop of significant softening in commodity prices.

RBPlat made a headline loss of 60.4 cents per share for the six months ended 30 June 2015 compared to headline earnings of 116 cents per share for the six months ended 30 June 2014.

66% of this movement was attributable to the reduced average rand basket price (including revaluation of the pipeline) of R18 062 per platinum ounce from R21 148 per platinum ounce in the comparative period in 2014.

Delivered tonnes for the reporting period ended 1.6% higher compared to the first half of 2014. Platinum and 4E ounce production was however, negatively impacted by a 5.2% reduction in the built-up head grade and a 3% reduction in tonnes milled due to two mill-related failures during the second quarter.

Platinum and 4E ounce production amounted to 78 800 oz and 122 000 oz respectively, representing a 9% reduction. The reduction in tonnes milled combined with a 10.7% increase in total cash operating costs resulted in the cost per tonne milled increasing by 13.8% year-on-year.

Gross profit margin reduced by 97.8% from 26.8% to 0.6% for the six month period - or R488.9 million to R8.3 million. This was due to the 22.1% decrease in net revenue and a 5.7% increase in total cost of sales.

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