_____________________________________________________________________________________________________________________________
30 April 2018
Sylvania Platinum Limited
("Sylvania", "the Company" or "the Group")
AIM (SLP)
Third Quarter Report to 31 March 2018
The Directors are pleased to present the results for the quarter ended 31 March 2018 ("Q3" or the "quarter"). Unless otherwise stated, the consolidated financial information contained in this report is presented in USD.
Achievements
· Positive group cash balance for the quarter, increasing 38% from $12.6 million to $17.4 million;
· SDO delivered 16,857 4E PGM ounces for Q3;
· Highest monthly production of 6,631 4E PGM ounces achieved in March 2018;
· Revenue generated for the quarter improved 3% to $14.5 million, net of pipeline sales adjustments on the back of a stronger PGM basket price;
· The Group achieved a net profit after tax of $1.1 million for the quarter; and
· Positive Group EBITDA of $3.4 million for Q3.
Challenges
· PGM ounce production is 3% lower than Q2 after a challenging start in January 2018, however the monthly production trend improved steadily by around 1,000 ounces month-on-month for the quarter;
· Lower PGM feed grades at Millsell and Mooinooi during December 2017 and January 2018, and the decision to delay the construction of the Tweefontein MF2 module due to power supply constraints necessitated the production guidance revision during the quarter, now between 71,000 ounces and 75,000 ounces for FY2018; and
· Group cash costs increased 10% quarter-on-quarter in ZAR terms to ZAR7,916/ounce ($662/ounce), primarily due to lower PGM ounces produced during January.
Opportunities
· Improved gross basket price of $1,141/ounce for the quarter, a 7% increase on Q2 ($1,067/ounce) due to higher Platinum and Palladium prices, mitigated the impact of the lower PGM ounce production during Q3;
· Company remains debt free with a positive Group cash balance enabling the funding of the remaining modules of Project Echo from existing cash resources;
· Cost and PGM recovery optimisation initiatives continue at the Lesedi operation and have resulted in the operation contributing profitable PGM ounces following the take-over by Sylvania in November 2017; and
· PGM grade and recovery optimisation initiatives, incorporating proprietary processing modifications at Millsell, Doornbosch and Tweefontein operations, have been identified to mitigate negative impact on PGM ounce production associated with the Tweefontein MF2 delay, supporting the forecast production profile.
Commenting on the Q3 results, Sylvania's CEO Terry McConnachie said:
"January 2018 was a particularly difficult month due to the impact of the delays with a license at our newly constructed Millsell tailings facility. When the permissions were eventually received to use the new tailings facility, nearly barren waste slime on top of the dump had to be processed first. All credit to our team for overcoming this problem towards the end of the third quarter. Once we migrated down into the higher grade feed the project rapidly started generating increased ounces, resulting in March being our highest ever ounce production month with 6,631 ounces. This record production will help make up ounces in the fourth quarter in order to meet the revised guidance of 71,000 to 75,000 ounces."
USD |
|
|
|
ZAR |
Q2 2018 |
Q3 2018 |
% Change |
Unit |
Unaudited |
Unit |
% Change |
Q3 2018 |
Q2 2018 |
|
|
|
|
|
|
|
|
|
573,064 |
561,973 |
-2% |
T |
Plant Feed |
T |
-2% |
561,973 |
573,064 |
2.47 |
2.50 |
1% |
g/t |
Feed Head Grade |
g/t |
1% |
2.50 |
2.47 |
309,993 |
318,808 |
3% |
T |
PGM Plant Feed Tons |
T |
3% |
318,808 |
309,993 |
3.56 |
3.53 |
-1% |
g/t |
PGM Plant Feed Grade |
g/t |
-1% |
3.53 |
3.56 |
46.43% |
46.53% |
0% |
% |
PGM Plant Recovery |
% |
0% |
46.53% |
46.43% |
17,302 |
16,857 |
-3% |
Oz |
Total 4E PGMs |
Oz |
-3% |
16,857 |
17,302 |
23,199 |
22,017 |
-5% |
Oz |
Total 6E PGMs |
Oz |
-5% |
22,017 |
23,199 |
|
|
|
|
|
|
|
|
|
1,067 |
1,141 |
7% |
$/oz |
Average gross basket price |
R/oz |
-4% |
13,503 |
14,084 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Financials |
|
|
|
|
12,331 |
12,759 |
3% |
$'000 |
Revenue (4E) |
R'000 |
-9% |
152,634 |
167,752 |
891 |
1,302 |
46% |
$'000 |
Revenue (by products) |
R'000 |
28% |
15,576 |
12,123 |
834 |
407 |
-51% |
$'000 |
Sales adjustments |
R'000 |
-57% |
4,872 |
11,349 |
14,056 |
14,468 |
3% |
$'000 |
Net revenue |
R'000 |
-9% |
173,082 |
191,223 |
|
|
|
|
|
|
|
|
|
8,787 |
10,587 |
20% |
$'000 |
Operating costs |
R'000 |
6% |
126,648 |
119,543 |
4,876 |
3,363 |
-31% |
$'000 |
Group EBITDA |
R'000 |
-40% |
39,996 |
66,329 |
58 |
143 |
147% |
$'000 |
Net Interest |
R'000 |
117% |
1,708 |
788 |
2,707 |
1,111 |
-59% |
$'000 |
Net profit |
R'000 |
-64% |
13,292 |
36,827 |
|
|
|
|
|
|
|
|
|
2,687 |
2,016 |
-25% |
$'000 |
Capital Expenditure |
R'000 |
-34% |
24,119 |
36,550 |
- |
- |
- |
R/$ |
Ave R/$ rate |
R/$ |
-12% |
11.96 |
13.60 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unit Cost/Efficiencies |
|
|
|
|
507 |
615 |
21% |
$/oz |
SDO Cash Cost Per 4E PGM oz |
R/oz |
7% |
7,355 |
6,903 |
378 |
471 |
25% |
$/oz |
SDO Cash Cost Per 6E PGM oz |
R/oz |
9% |
5,631 |
5,148 |
528 |
662 |
25% |
$/oz |
Group Cash Cost Per 4E PGM oz |
R/oz |
10% |
7,916 |
7,177 |
393 |
507 |
29% |
$/oz |
Group Cash Cost Per 6E PGM oz |
R/oz |
13% |
6,061 |
5,353 |
574 |
682 |
19% |
$/oz |
All-in sustaining cost (4E) |
R/oz |
4% |
8,154 |
7,812 |
683 |
781 |
14% |
$/oz |
All-in cost (4E) |
R/oz |
1% |
9,343 |
9,285 |
1 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
There were no significant health or environmental incidents during the quarter, and the Lannex operation reached a three year LTI-free milestone in January 2018. Lesedi, Tweefontein and Doornbosch operations, already more than five years LTI-free, continue their excellent performance.
Operational performance
After a challenging start to the quarter, most operations performed well during March 2018, which delivered the highest monthly PGM ounce production to date, and we are now well positioned to meet our revised guidance.
The recently commissioned MF2 modules at Millsell and Doornbosch stabilised during the last quarter, with Lesedi also improving on the previous quarter's production, contributing approximately 2,181 ounces towards the combined SDO production of 16,857 ounces for Q3.
Although PGM feed was 3% up compared to the previous quarter, and PGM plant feed grades and recoveries remained consistent, the Q3 declared PGM ounces were approximately 3% lower due to a work in progress that was delivered in Q2.
The SDO cash costs for the period in ZAR terms increased approximately 7% to ZAR7,355/ounce, mainly as a result of lower PGM ounce production. In USD terms cash costs increased by 21% to $615/ounce, due to the additional impact of a 12% strengthening in the ZAR/USD exchange rate during the period.
Operational challenges
There were primarily two factors that had a negative impact on PGM ounce production during the quarter:
· The Millsell operation experienced lower PGM feed grades and feed instability following the new tailings dam commissioning delay and temporary hydro-mining upset which occurred between July 2017 and January 2018 and which only started to normalise during February 2018. This situation was a result of the delayed water use licence authorisation by authorities which was announced in the half-year results.
· Production issues at the host mines, following a slow ramp-up after their Christmas break which resulted in lower-than-planned current arisings at Millsell and Mooinooi, as well as lower-than-planned RoM feed during the quarter, impacted negatively on PGM plant feed grades and ounce production. Our operations responded by increasing dump feed to the plants, but due to the typical lower PGM grade and recovery potential of the dump material compared to that of current arisings and RoM, the PGM ounce production was negatively impacted at these sites.
B. FINANCIAL OVERVIEW
Financial performance
The Gross basket price for PGMs for the quarter was $1,141/ounce, a 7% improvement on Q2's $1,067/ounce. Despite the lower ounce production, the Group recorded a 3% increase in revenue from $14.1 million to $14.5 million (including the sales adjustment for the quarter) due to the increase in the basket price.
The cost of sales for the quarter was in line with the Group's budget and amounted to ZAR127 million (including depreciation). The increased Group cash cost of ZAR7,916 per 4E ounce, up 10% on the previous quarter, is a result of the lower ounces produced. The benefit of the Millsell and Doornbosch MF2 modules has been seen in the March 2018 Group cash cost per ounce with a 16% improvement on that of January 2018.
The all-in sustaining cost for the Group was 4% higher than the Q2 cost at ZAR8,154/ounce (Q2: ZAR7,812/ounce) due to the higher production costs per ounce during the quarter. The Group all-in cost of ZAR9,343/ounce for Q3 remained constant against Q2.
Interest is earned on surplus cash invested in South Africa at an average interest rate of 7% per annum. Cash is held in ZAR to fund the remainder of Project Echo and other strategic production optimisation projects as and when identified.
The Group cash balance at 31 March 2018 was $17.4 million (including guarantees), a $4.8 million increase on the previous quarter's $12.6 million. Cash generated from operations before working capital movements was $2.9 million with net changes in working capital amounting to an increase of $6.4 million. An amount of $2.02 million was spent on capital expenditure projects including Project Echo. The impact of exchange rate fluctuations on cash held at the quarter end was $2.4 million.
Financial management
The main challenges that are within management's control remain prudent control of costs and ensuring that cash reserves are effectively utilised. Both of these are monitored closely and strict internal controls continue to ensure that Shareholders will receive the best possible return on their investment.
Although the Dollar denominated Platinum price remains below $1,000/ounce, the Palladium and Rhodium prices have continued to increase over the last nine months. The strengthening of the ZAR against the USD has resulted in the PGM basket price remaining fairly constant in ZAR terms. Both the PGM price and the USD:ZAR exchange rate are impacted by factors outside the control of Management.
C. EXPLORATION AND OPENCAST MINING PROJECTS
Northern Limb Projects
The Company received consent in terms of section 11 of the MPRDA from the DMR to cede the rights to mine heavy minerals, iron ore and vanadium ore on the farms Nonnenwerth, La Pucella and Altona to Lapon Mining (Pty) Ltd, a subsidiary of Ironveld Plc. The Company shall commence with the approved cession which will conclude the agreement dated 14 March 2012 relating to the acquisition of the Ironveld Group from Sylvania by Mercury Recycling Group Plc (now Ironveld Plc), wherein dividends in specie were distributed to Sylvania shareholders on 16 August 2012.
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 |
Neil Elliot / Richard Crawley |
|
|
|
Communications |
|
Alma PR Limited |
+44 (0) 77 8090 1979 |
Josh Royston / Helena Bogle / Hilary Buchanan |
|
ANNEXURE
GLOSSARY OF TERMS FY2018 |
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 |
Bonus Shares |
Sylvania Platinum Limited Bonus Share Award Plan |
CGU |
Cash generating unit |
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 |
Ironveld |
Ironveld Plc |
IRR |
Internal Rate of Return |
JV |
Joint venture |
LEDET |
Limpopo Department of Economic Development, Environment and Tourism |
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 |
