Earnings Release • Oct 22, 2019
Earnings Release
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RNS Number : 6701Q
Sylvania Platinum Limited
22 October 2019
_____________________________________________________________________________________________________________________________
22 October 2019
Sylvania Platinum Limited
("Sylvania", "the Company" or "the Group")
AIM (SLP)
First Quarter Report to 30 September 2019
Achievements
· Net revenue increased 54% to $31.2 million ($20.2 million Q4 FY2019);
· Group EBITDA improved 106% to $19.2 million ($9.3 million Q4 FY2019);
· The Company bought back 4.2 million shares during the quarter;
· Sylvania Dump Operations ("SDO") produced 20,797 4E PGM ounces in Q1 FY2020 (21,789 4E PGM ounces Q4 FY2019);
· SDO PGM plant recoveries improved 11% to 59.46%;
· Millsell achieved five years lost time injury ("LTI") free during September 2019;
· Commissioning of Lesedi milling and chrome beneficiation plant completed.
Challenges
· Community protests in the Steelpoort area, related to community demands and expectations of employment and commercial opportunities, resulted in disruptions at the Eastern operations during September 2019;
· Water management is still a focus area, especially due to severe drought in most areas at the end of the dry season, impacting on operations at Lesedi and Tweefontein;
· Managing cash holding in the face of rising costs of doing business such as electricity, labour and taxes.
Opportunities
· Continued optimisation of MF2 modules and Lesedi chrome section to improve process efficiencies;
· Current PGM basket price contributing to higher profits and cash balance.
Commenting on the Q1 results, Sylvania's CEO Terry McConnachie said:
"I am pleased to say that the SDO achieved another solid production performance in the first quarter of our financial year towards our annual guidance of 74,000 to 76,000 ounces. Recovery efficiencies improved well to 59.46% and are attributable to a combination of the Mooinooi MF2 circuit running for a full quarter, improved feed stability and circuit configuration at Lesedi and higher flotation mass pull philosophy at some of the operations.
This recovery figure will taper off to an expected rate of around 52% going forward due to a lower flotation mass pull which will be required to address concentrate quality and payability.
The Company also undertook a share buyback programme during the quarter whereby a total of 4.2 million shares were purchased from both the market and employees so as to fulfil the current shortfall in shares held in Treasury needed to cover the bonus share awards and options, which vest over the next five years.
We continue to maintain a good cash holding due to Q4's pipeline and a healthy basket price. However, we are ever mindful of the payment of tax on revenue which increases in line with our earnings and because of this, we will continue with tight cost controls to ensure the Company can meet its tax obligations as well as continue to internally fund further capital expenditure and the payment of dividends."
| USD | Unit | Unaudited | Unit | ZAR | ||||
| Q4 FY2019 | Q1 FY2020 | % Change | % Change | Q1 FY2020 | Q4 FY2019 | |||
| Production | ||||||||
| 592,511 | 634,525 | 7% | T | Plant Feed | T | 7% | 634,525 | 592,511 |
| 2.58 | 2.47 | -4% | g/t | Feed Head Grade | g/t | -4% | 2.47 | 2.58 |
| 327,635 | 307,946 | -6% | T | PGM Plant Feed Tons | T | -6% | 307,946 | 327,635 |
| 3.85 | 3.55 | -8% | g/t | PGM Plant Feed Grade | g/t | -8% | 3.55 | 3.85 |
| 53.78% | 59.46% | 11% | % | PGM Plant Recovery | % | 11% | 59.46% | 53.78% |
| 21,789 | 20,797 | -5% | Oz | Total 4E PGMs | Oz | -5% | 20,797 | 21,789 |
| 29,210 | 27,633 | -5% | Oz | Total 6E PGMs | Oz | -5% | 27,633 | 29,210 |
| 1,328 | 1,654 | 25% | $/oz | Average gross basket price | R/oz | 32% | 24,557 | 18,659 |
| Financials | ||||||||
| 17,781 | 24,631 | 39% | $'000 | Revenue (4E) | R'000 | 42% | 362,176 | 255,747 |
| 1,749 | 1,827 | 4% | $'000 | Revenue (by products) | R'000 | 7% | 26,857 | 25,150 |
| 644 | 4,694 | 628% | $'000 | Sales adjustments | R'000 | 645% | 69,027 | 9,270 |
| 20,174 | 31,152 | 54% | $'000 | Net revenue | R'000 | 58% | 458,061 | 290,167 |
| 10,424 | 11,435 | 10% | $'000 | Operating costs | R'000 | 12% | 168,100 | 149,892 |
| 475 | 575 | 21% | $'000 | General and administrative costs | R'000 | 24% | 8,445 | 6,829 |
| 9,309 | 19,180 | 106% | $'000 | Group EBITDA | R'000 | 111% | 281,947 | 133,869 |
| 313 | 317 | 1% | $'000 | Net Interest | R'000 | 4% | 4,665 | 4,502 |
| 4,849 | 12,534 | 158% | $'000 | Net profit | R'000 | 164% | 184,246 | 69,724 |
| 2,199 | 1,463 | -33% | $'000 | Capital Expenditure | R'000 | -32% | 21,509 | 31,625 |
| R/$ | Ave R/$ rate | R/$ | 2% | 14.70 | 14.38 | |||
| 21,812 | 26,627 | 22% | $'000 | Cash Balance | R'000 | 25% | 391,410 | 313,650 |
| Unit Cost/Efficiencies | ||||||||
| 485 | 550 | 13% | $/oz | SDO Cash Cost Per 4E PGM oz | R/oz | 16% | 8,081 | 6,969 |
| 361 | 414 | 15% | $/oz | SDO Cash Cost Per 6E PGM oz | R/oz | 17% | 6,082 | 5,198 |
| 496 | 573 | 16% | $/oz | Group Cash Cost Per 4E PGM oz | R/oz | 18% | 8,420 | 7,128 |
| 370 | 431 | 17% | $/oz | Group Cash Cost Per 6E PGM oz | R/oz | 19% | 6,337 | 5,317 |
| 538 | 586 | 9% | $/oz | All-in sustaining cost (4E) | R/oz | 11% | 8,615 | 7,734 |
| 606 | 642 | 6% | $/oz | All-in cost (4E) | R/oz | 8% | 9,444 | 8,721 |
The Sylvania cash generating subsidiaries are incorporated in South Africa with the functional currency of these operations being ZAR. Revenues from the sale of PGMs are incurred in USD and then converted into ZAR. The Group's reporting currency is USD as the parent company is incorporated in Bermuda. Corporate and general and administration costs are incurred in USD, GBP and ZAR.
A. OPERATIONAL OVERVIEW
Health, safety and environment
The SDO experienced a good safety quarter, with no LTIs recorded during the period. The Millsell operation reached the significant milestone of five years LTI-free during the quarter, Lesedi reached eight years LTI-free and Tweefontein and Doornbosch operations both remain LTI-free for seven years.
The Company continues to focus on health, safety and environmental compliance and, through the collaborative efforts of management and all employees across the operations, we strive to maintain high safety standards and plant conditions at the respective operations.
Operational performance
The SDO delivered a solid, above guidance, performance of 20,797 ounces for the quarter, the second highest production quarter for the SDO. Whilst PGM plant feed tons and PGM plant feed grade were 6% and 8% lower respectively, PGM recovery efficiencies increased 11% to mitigate the impact and produce a solid production performance for the quarter.
Although front-end plant feed improved 7% during the period, the coarser nature of material being mined from current mining areas impacted negatively on the proportion of fines reporting to the PGM plant and hence a 6% reduction in PGM plant feed tons.
PGM feed grade was negatively affected by lower quantities of higher-grade current arisings received at the Tweefontein operation, after a production disruption at the host mine. Lower grade current arisings received at Mooinooi, related to a temporary change in feed source at the host mine further impacted feed grade.
The significant improvement in the PGM recovery efficiency can be attributed to a combination of the Mooinooi MF2 circuit that has now been running for a full quarter, after being commissioned during mid-Q4 FY2019, improved feed stability and circuit configuration at Lesedi, following the commissioning of the new milling and chrome beneficiation circuit, and higher flotation mass pull philosophy at some of the operations which also improved recoveries. Although the new circuits at Mooinooi and Lesedi will continue to contribute towards recovery efficiencies going forward, flotation mass pull will have to be lower in the coming quarters to address concentrate quality and payability, unfortunately at the expense of recovery. Steady-state PGM recovery efficiency for FY2020 is planned at approximately 52% to 53% 4E going forward.
The total SDO cash costs for the period were within budget, but increased by 16% in ZAR terms to ZAR 8,081/ounce and 13% in USD terms to $550/ounce. Higher re-mining costs associated with additional feed-screening of coarse dump material at Lesedi, and a minus ZAR 8.0 million rehabilitation adjustment that was processed in Q4 FY2019, were some of the most significant contributors to the increase in operating cost.
Capital expenditure at ZAR 21.5 million was in line with the Project Echo roll-out and payment schedule and the stay-in-business capital spend program.
Operational focus areas
As in previous quarters, water constraints were, and remain, a concern and management continue to both explore technologies to reduce water losses and consumption, and explore and implement alternative measures to supplement water supply to the operations. Additional trial boreholes are being drilled at Lesedi in consultation with water and environmental experts, in order to recover seepage from tailings dam facilities that could potentially be rolled out to other sites if proven to be successful.
Management continues to focus on improving communication and to engage with mandated and recognised forums from neighbouring communities in order to identify potential commercial opportunities and to manage expectations regarding employment and procurement spend. The relationship with these forums is critical, especially when their assistance is needed to manage community members that threaten to interrupt operations, as various neighbouring mines have experienced during the past year.
Operating costs continue to be a focus area, especially with re-mining costs and PGM concentrate penalties to be optimised during coming quarters.
Operational opportunities
Further optimisation of the recently commissioned MF2 module at Mooinooi and the new milling and chrome beneficiation circuit at Lesedi should continue to contribute towards higher PGM recoveries and PGM ounces.
Flotation circuit configuration and optimisation across operations, especially Doornbosch and Lesedi, to address PGM concentrate quality, should contribute towards lower smelter penalties and higher PGM payability in the future.
B. FINANCIAL OVERVIEW
Financial performance
Net revenue for the quarter increased 54% from $20.2 million to $31.2 million. The increase is due mainly to Q4 FY2019's pipeline payment and the increase in commodity prices with the resultant improvement of 25% in the gross basket price quarter-on-quarter from $1,328/ounce to $1,654/ounce. The sales adjustment of $4.7 million is as a result of the adjustment to sales recognised in Q4 FY2019, but only invoiced in this quarter at the higher basket price.
The total operating costs, which are incurred in ZAR, increased 12% to ZAR 168.1 million, compared to the ZAR 149.9 million in Q4 FY2019 largely due to employee-related costs. The changes to the re-mining strategy initially resulted in higher costs and combined with the increase in feed tons, increased the total mining costs during the quarter resulting in higher operating costs. Electricity costs were also higher as the Mooinooi MF2 module was fully operational during the quarter after commissioning in Q4 FY2019. General and administrative costs are incurred in USD, GBP and ZAR and are impacted by exchange rate fluctuations over the reporting period. These costs increased 21% quarter-on-quarter from $0.5 million to $0.6 million due to annual employee cost increases and an escalation in travel costs.
Group cash costs increased 18% from ZAR 7,128/ounce to ZAR 8,420/ounce as a result of the increased costs detailed above as well as the slightly lower ounces this quarter compared to the previous quarter. In dollar terms the Group cash costs increased 16% from $496/ounce to $573/ounce.
The all-in sustaining cost ("AISC") and all-in cost ("AIC") increased during the quarter to ZAR 8,615/ounce (Q4 FY2019: ZAR 7,734/ounce) and ZAR 9,444/ounce (Q4 FY2019: ZAR 8,721/ounce) respectively.
The Group EBITDA increased 106% from $9.3 million to $19.2 million during the quarter and the net profit increased 158% to $12.5 million as a result of the increase in revenue.
The Group cash balance at 30 September 2019 was $26.6 million (including guarantees), a $4.8 million increase on the previous quarter's cash balance of $21.8 million. Cash generated from operations before working capital movements was $19.3 million with net changes in working capital amounting to a decrease of $9.7 million due mainly to the increase in trade and contract debtors recorded at the current basket price. An amount of $1.5 million was spent on capital during the quarter and 4.2 million shares were bought back at a cost of $2.2 million. The impact of exchange rate fluctuations on cash held at the quarter end was a decrease of $1.3 million. The cash balance is before the payment of dividends and SA income tax on companies at 28% of taxable profits in Q2 FY2020.
C. MINERAL ASSET DEVELOPMENT AND OPENCAST MINING PROJECTS
The Company has continued to maintain the value of its mineral asset development activities during the quarter, so as to be able to continue to defend title, however, there are no further developments to report for the quarter.
Grasvally Chrome Exploration
Following the announcement of the conditional cash sale of Grasvally Chrome Mine (Pty) Ltd ("Grasvally") to Forward Africa Mining (Pty) Ltd ("FAM"), the parties are still within the eight-month period from the date of acceptance of the offer to fulfill the standard conditions precedent. At this time there are no further developments to report.
D. CORPORATE MATTERS
Share buybacks
As announced on 24 and 30 September 2019, the Company bought back 3.0 million shares ordinary shares of $0.01 ("Ordinary Shares") in the market and 1.2 million ordinary shares from employees at the 30-day value weighted average price ("VWAP") of 41.68 pence, as at the close of day on 20 September 2019.
Media Allegations
The Company has become aware of references in the media to the company and its relationship with Samancor Chrome Limited ("Samancor"). It appears that these allegations have emerged from a court application by the Association of Mineworkers and Construction Union ("AMCU") which seeks to compel Samancor to produce accounting records for a number of transactions entered into over a period of time.
The Board and Management of Sylvania would like to reassure its stakeholders that all agreements and share transactions entered into by Sylvania have been conducted lawfully, and in compliance with all regulations. Details relating to these transactions were fully disclosed at the time. Should there be further developments in this regard, the Board and Management will continue to keep stakeholders informed.
CORPORATE INFORMATION
| Registered and postal address: | Sylvania Platinum Limited |
| Clarendon House | |
| 2 Church Street | |
| Hamilton HM 11 | |
| Bermuda | |
| SA Operations postal address: | PO Box 976 |
| Florida Hills, 1716 | |
| South Africa | |
Sylvania Website: www.sylvaniaplatinum.com
CONTACT DETAILS
| For further information, please contact: | |
| Terence McConnachie (Chief Executive Officer) | +44 777 533 7175 |
| Nominated Advisor and Broker | |
| Liberum Capital Limited | +44 (0) 20 3100 2000 |
| Richard Crawley / Ed Phillips | |
| Communications | |
| Alma PR Limited | +44 (0) 7580 216 203 |
| Josh Royston / Helena Bogle |
This announcement is released by Sylvania Platinum Limited and contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.
For the purposes of MAR and Article 2 of Commission Implementing Regulation (EU) 2016/1055, this announcement is being made on behalf of the Company by Terence McConnachie.
ANNEXURE
| GLOSSARY OF TERMS FY2019 | |
| The following definitions apply throughout the period: | |
| 4E PGMs | 4E PGM ounces include the precious metal elements Platinum, Palladium, Rhodium and Gold |
| 6E PGMs | 6E ounces include the 4E elements plus additional Iridium and Ruthenium |
| AGM | Annual General Meeting |
| AIM | Alternative Investment Market of the London Stock Exchange |
| All-in sustaining cost | Production costs plus all costs relating to sustaining current production and sustaining capital expenditure. |
| All-in cost | All-in sustaining cost plus non-sustaining and expansion capital expenditure |
| ASX | Australian Securities Exchange |
| Current risings | Fresh chrome tails from current operating host mines processing operations |
| DMR | Department of Mineral Resources |
| EBITDA | Earnings before interest, tax, depreciation and amortisation |
| EA | Environmental Authorisation |
| EIA | Environmental Impact Assessment |
| EIR | Effective interest rate |
| EMPR | Environmental Management Programme Report |
| GBP | Great British Pound |
| IASB | International Accounting Standards Board |
| IFRIC | International Financial Reporting Interpretation Committee |
| IFRS | International Financial Reporting Standards |
| I&APs | Interested and Affected Parties |
| Lesedi | Phoenix Platinum Mining Proprietary Limited, renamed Sylvania Lesedi |
| LSE | London Stock Exchange |
| LTI | Lost time injury |
| MF2 | Milling and flotation technology |
| MPRDA | Mineral and Petroleum Resources Development Act |
| MRA | Mining Right Application |
| MTO | Mining Titles Office |
| NOMR | New Order Mining Right |
| NWA | National Water Act 36 of 1998 |
| Option Plan | Sylvania Platinum Limited Share Option Plan |
| PGM | Platinum group metals comprising mainly platinum, palladium, rhodium and gold |
| PAR | Pan African Resources Plc |
| Phoenix | Phoenix Platinum Mining Proprietary Limited, renamed Sylvania Lesedi |
| Pipeline ounces | 6E ounces delivered but not invoiced |
| Pipeline revenue | Revenue recognised for ounces delivered, but not yet invoiced based on contractual timelines |
| Pipeline sales adjustment | Adjustments to pipeline revenues based on the basket price for the period between delivery and invoicing |
| Programme | Sylvania Platinum Share Buyback Programme |
| Project Echo | Secondary PGM Milling and Flotation (MF2) program announced in FY2017 to design and install additional new additional fine grinding mills and flotation circuits at Millsell, Doornbosch, Tweefontein and Mooinooi. |
| Revenue (by products) | Revenue earned on Ruthenium, Iridium, Nickel and Copper |
| RoM | Run of mine |
| SDO | Sylvania dump operations |
| Shares | Common shares |
| Sylvania | Sylvania Platinum Limited, a company incorporated in Bermuda |
| USD | United States Dollar |
| WIP | Work in progress |
| WULA | Water Use Licence Application |
| UK | United Kingdom of Great Britain and Northern Ireland |
| ZAR | South African Rand |
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [email protected] or visit www.rns.com.
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