Royal Bafokeng Platinum plans to tackle costly debt by end of 2019
Royal Bafokeng Platinum (RBPlat) will unveil a plan to reduce debt before the end of 2019 after posting an interim loss exacerbated by finance charges.
The plunge into a loss for the six months to end-June came despite record-high production and a strong growth in revenue as costs at its new Styldrift mine shot up and chunky depreciation charges and interest payments were recorded.
RBPlat, which has bought the Anglo American Platinum interests in its operations for R1.8bn, has large debt and interest repayments stemming from the transaction, and CEO Steve Phiri said on Tuesday reducing this debt is receiving attention.
Recently appointed CFO Hanré Rossouw will devise a “most elegant” solution before the end of 2019, Phiri said, declining to give more details on how RBPlat proposes removing the more than R1.6bn of debt to Amplats.
RBPlat has to repay the debt to Amplats in three tranches, one of which will be in cash, Rossouw said, with the first payment due in June 2020. RBPlat is considering the “best way to redeem” the debt, he said.
RBPlat has R3bn in debt facilities, of which it has used R1bn, giving it enough firepower to fund Styldrift and other internal projects to completion as well as pay for working capital, Rossouw said.
RBPlat has cash of R675m, down from the R884m at the end of December. The company’s net debt is R284m.
RBPlat has spent R12.3bn building its new Styldrift mine, south of the Pilanesberg National Park and Sun City. Phiri said despite missing production targets for the interim period to end-June, the mine will still hit steady-state production of 230,000 tons a month in the third quarter of 2020.
RBPlat posted a post-tax loss of R164m for the interim period compared to a R10m profit the year before. Depreciation and amortisation ballooned to R504m from R178m.
“We are not happy with these results,” Phiri said.
Analysts at a results presentation tackled RBPlat’s management on higher-than-expected mining costs, with Citigroup analyst Johann Steyn pointing out “there is a perception in the market that RBPlat was not as disciplined on costs” as it should be.
“When ramping up a mine, your costs will be all over the place until you achieve steady state,” Phiri said.
Revenue nearly doubled to R3.2bn from R1.7bn the year before, but the increased volumes contributed to costs more than doubling and offsetting this benefit. Gross profit was R49m compared with R156m a year earlier.
Lending costs jumped dramatically to R263m in the six months versus the R7m it paid out the year before.
RBPlat posted a 21% increase in output of four platinum group metals, which came in at 199,200oz.