Second Quarter Report to 31 December 2020

A. OPERATIONAL OVERVIEW

Health, safety and environment

The Company is pleased to report that no significant occupational health or environmental incidents occurred during the quarter and both the Tweefontein and Doornbosch operations have remained at a significant industry milestone of eight and a half years Lost-time Injury ("LTI") free achieved during the quarter.

Impact of COVID-19 and South African Government Imposed Lockdown

Having recommenced operations in Q4 FY2020, management implemented various initiatives to safeguard employees from the effects of COVID-19.  The new COVID-19 variant which has emerged in the country, has presented new challenges to the Company with four positive cases being reported during December 2020, and 20 new cases reported during January 2021 after not having any infections during August to November 2020.  The total reported infections since March 2020 to date is 38 of which 31 employees have recovered and returned to work. 

The global COVID-19 pandemic, with SA now at a revised Level 3 status, remains an area of concern and management continue to sustain and enhance the various measures to ensure both the health and safety of all employees and to limit the impact on production.  Access to sites has been restricted to employees and essential services required to sustain operational performance.  Sylvania continues to support the revised Level 3 lockdown measures announced during December 2020 and implemented by the Government.  At present, all plants are operating at full capacity and in accordance with all legislated safety and occupational regulations pertaining to the industry and country as a whole.

Operational performance

SDO produced 18,363 ounces in Q2, a 2% increase compared to 17,972 ounces in Q1 FY2021.  PGM plant feed tons and PGM plant feed grade remained stable quarter-on-quarter and PGM recovery efficiencies increased marginally by 2% from Q1.  Operational performance has continued to stabilise from previous quarters as the operations have embraced the "new normal" way of production post COVID-19 related disruptions experienced during H2 FY2020.   

Total SDO cash costs increased in Rand and Dollar terms quarter-on-quarter by 5% and 14% respectively to ZAR11,779/ounce and $756/ounce (Q1: ZAR11,238/ounce and $665/ounce) due to a combination of the higher Rand cost and 8% stronger ZAR/$ exchange rate. The Rand cost was impacted by higher process consumables and re-mining costs associated with lower grade opencast ROM sources treated at some operations as well as the mineral royalty tax that is calculated on the half year ounces and paid in December 2020.  The Q1 royalty tax expense was adjusted in Q2 and the higher basket price and lower capital allowance in Q2, as it was fully utilised in the prior financial year, resulted in a higher royalty tax percentage over the full period.

SDO incurred capital expenditure of ZAR19.7 million ($1.2 million) during the quarter, a 15% increase which is aligned with planned capital project schedules.

Operational focus areas  

Optimisation of flotation performance and recovery efficiencies remain a focus area at Western operations where lower grade and more oxidised open cast ROM material is currently being treated as a result of the previously announced scale-down at the host mines.

Optimisation of the new milling and upgraded spiral sections at Lannex will continue during the next quarter, after being commissioned during August 2020, enabling the plant to improve processing efficiencies and profitability on the current suite of resources.  Open cast ROM supply from the host mine was inconsistent during the past quarter, but ROM feed is expected to stabilise during Q3.

Although the uncertainty at the national power utility relating to power supply remains a key focus for the Group, there were no significant power disruptions or production losses related to load-shedding by the utility during the past quarter. However, there has been a significant increase in vandalism and theft of copper cables at various sub-stations of the utility that affected power supply and production, especially at Mooinooi and Millsell at the Western Operations, which had approximately 80 hours and 85 hours downtime respectively. Management is currently evaluating the outcomes of a power mitigation study that compared various back-up supply options to determine the best way forward for operations to mitigate the impact of either potential future load-shedding or supply interruptions by the utility.    

Operational opportunities 

The Mooinooi chrome proprietary processing modifications and optimisation project to improve fines classification and fine chrome recovery efficiency, as announced earlier, is on track and is expected to be commissioned towards the end of Q3 FY2021 which will contribute towards improving PGM feed grades and ounces at the plant. 

The proposed MF2 expansion project at the Lesedi Plant to construct a new secondary milling and flotation module to improve the upgrading and recovery of PGMs, similar to successful Project Echo modules rolled out between 2016 and 2020, has commenced and is scheduled to commission towards the end of FY2021.

Based on recent results from the Company's specific fine chrome recovery research and test work initiative that was initiated in late 2019, a circuit configuration and technology has been identified to enable the economic recovery of fine chrome from some existing dumps, that historically was uneconomical to recover. This latest development could enable the Company to re-treat low PGM grade tailings resources, that would otherwise have been sterilised, to extend the operational life of PGM operations at selected sites while adding value to the host mines through increased chrome recovery and production.     

B. FINANCIAL OVERVIEW

Financial performance

Revenue, after applying the payability and smelter costs, for the quarter increased 5% from $41.5 million to $43.7 million as a result of the combination of the 2% increase in 4E PGMs delivered and the increase in the basket price.  The gross basket price for the quarter increased 17% from $2,834/ounce in Q1 to $3,323/ounce as a result of the continued increase in the rhodium price during the past quarter. 

General and administrative costs increased quarter-on-quarter from $0.51 million to $0.61 million which includes the non-cash share-based payment expense on bonus share awards. These costs are incurred in USD, GBP and ZAR and are impacted by the exchange rate fluctuations over the reporting period.

The Group cash balance increased from $60.9 million to $67.1 million during the quarter. Cash generated during the quarter from operations before working capital movements was $29.4 million with net changes in working capital amounting to a decrease of $7.1 million mainly due to the increase in trade and contract debtors as a result of the increase in the gross basket price. $1.3 million was spent on capital and 1,448,075 million shares were bought back at a cost of $1.1 million.  $5.9 million was paid out in dividends and provisional South African income tax for the six months to 31 December 2020 of $15.1 million was paid.   The impact of exchange rate fluctuations on cash held at the quarter end was an increase of $7.1 million due to the strengthening of the ZAR against the USD. The Group is obliged to hold a large portion of its cash in ZAR and will convert this to USD as and when the opportunity arises.

Group cash costs increased 3% in ZAR from ZAR11,818/ounce ($699/ounce) to ZAR12,153/ounce ($780/ounce), Group EBITDA increased from $28.8 million to $29.1 million and net profit increased to $20.3 million from $20.2 million.  Provisional income tax and royalty tax payments made in December 2020 resulted in a cash outflow of $18.01 million.

D. MINERAL ASSET DEVELOPMENT AND OPENCAST MINING PROJECTS

As previously announced, new studies of the Volspruit and Northern Limb projects were initiated and continue to assist in developing the most suitable strategy for these projects in the changing economic landscape.

Volspruit Platinum Opportunity

Detail design for the Permitting Applications has been completed. Specialist work for updating the EIA and Water Use License will commence during Q3 as part of the overall process to conclude the final project authorisations.

In terms of the new technical study that was announced earlier, technical consultants have been engaged since mid-2020 to evaluate and optimise mine designs and evaluate the process design and update metallurgical performance parameters through additional test work. Preliminary mining design information has been received already, but the last metallurgical test work was concluded during December 2020, with the final test work report expected during H2 FY2021.

Northern Limb Projects

The specialist consultants employed to assist Sylvania in evaluating the resources and exploring the economic potential of the respective deposits on the Northern Limb, have completed initial studies and identified specific higher-grade portions along the ore body that could potentially be attractive for shallow, low risk open cast extraction and PGM processing.

In order to confirm initial findings and to improve the current resource estimate, a concept level mining study for the project has been scoped, which will include infill drilling and additional assays, which will start during Q3 and continue until late 2022.  

Grasvally

The sale of Grasvally to Forward Africa Mining (Pty) Ltd ("FAM") to acquire 100% of the shares in and claims against Grasvally Chrome Mine (Pty) Ltd for a total consideration of ZAR115.0 million is still ongoing and the Option Agreement as negotiated and reported in the Company's FY2020 report is still valid.

CONTACT DETAILS

CORPORATE INFORMATION

Sylvania Website: www.sylvaniaplatinum.com

About Sylvania Platinum Limited

Sylvania Platinum is a lower-cost producer of platinum group metals (PGM) (platinum, palladium and rhodium) with operations located in South Africa. The Sylvania Dump Operations (SDO) comprises six chrome beneficiation and PGM processing plants focusing on the retreatment of PGM-rich chrome tailings materials from mines in the Bushveld Igneous Complex. The SDO is the largest PGM producer from chrome tailings re-treatment in the industry. The Group also holds mining rights for PGM projects and a chrome prospect in the Northern Limb of the Bushveld Complex.

For more information visit https://www.sylvaniaplatinum.com/ 

The information contained within this announcement is deemed by the Company to constitute inside information as stipulated under the Market Abuse regulation (EU) no.596/2014 as amended by the Market Abuse (Amendment) (EU Exit) Regulations 2019.

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 Jaco Prinsloo.

ANNEXURE