Last checked at 21 Feb 2014 07:00
21 February 2014
SYLVANIA PLATINUM LIMITED
("Sylvania Platinum", "Sylvania" or the "Company")
(AIM: SLP)
Half Year Results to 31 December 2013
Sylvania Platinum today announces its interim results for the six months ended 31 December 2013. The financial information contained in this announcement is presented in US dollars unless otherwise indicated.
Key Points: Financial
· Revenue increased 7% to $20,532,343 from $19,181,371 for the corresponding period to 31 December 2012
· Group adjusted Earnings before Interest, Tax, Depreciation and Amortisation ("EBITDA") up 37% to $1,256,448 from $919,163 for the corresponding period, largely as a result of reduced General and Administration costs
· Gross Basket Price dropped 11% to $911/ounce from $1,021/ounce and the Net Basket Price dropped 8% to $809/ounce from $880/ounce partially offsetting the increase in revenue resulting from the increase in production
· Sylvania Dump Operations ("SDO") capital expenditure dropped 88% to $809,000 from $7,148,000 as construction of all seven planned plants is complete
· Cash reserves of $3,907,832 as at 31 December 2013 down from $6,564,885 as at 30 June 2013, impacted by the drop in metal prices and the first cash payment of R5,000,000 ($0.5 million) for the acquisition of the Grasvally prospecting right made in December 2013, as well as the unexpected costs of the Tweefontein and Mooinooi stoppages
Key Points: Operational
· Zero Lost Time Injuries ("LTI") from June 2012 to 31 December 2013
· Total operating costs, including depreciation increased 9% to $21,045,792 from $19,388,949
· Plant Feed increased 33% to 1,209,700t from 906,560t but Feed Head Grade down 11% to1.86g/t from 2.09g/t
· PGM Plant Feed tonnes increased 33% to 539,455t from 405,427t but PGM Plant Grade fell 9% to 3.54g/t from 3.91g/t
· PGM Plant Recovery at 41%for the six months to 31 December 2013
· Total 3E and Au ounces increased 17% to 25,189 ounces from 21,479 ounces
· SDO Cash Cost per PGM Feed tonnes decreased 14% to $32/t with a decrease per 3E and AU ounces to $691/ounce (2012: $705/ounce)
· Minor environmental incidents at Mooinooi and Lannex plants immediately rectified and reported
Key Points: Exploration
· The Environmental Impact Assessment ("EIA") for the Volspruit project submitted allowing the Mining Right Application ("MRA") to continue
· Purchase of the prospecting right on the Zoetveld 294KR and Grasvally 293KR farms consolidates mineral rights and surface rights adjacent to the Volspruit Project
Key Points: Corporate
· 1,600,000 options over ordinary shares of $0.10 each awarded to Directors and Senior Operational Management under the Sylvania Platinum Option Plan on 29 August 2013
· 1,700,000 ordinary shares of $0.10 each repurchased at 8.15 pence per share on 4 September 2013 and held in treasury to be issued to senior management as bonus shares for attainment of certain performance criteria
· No further developments in respect of the claim brought by Platmin South Africa (Pty) Ltd, set down for a hearing on 1 August 2014
· Following the period end the Company's Deputy CEO, Nigel Trevarthen announced his retirement effective end March 2014
Commenting on the results Terry McConnachie, CEO of Sylvania Platinum Limited said:
"The first half of FY2014 has been particularly challenging, largely as a result of Eskom power problems and a DMR section 54 stoppage notice being issued. In spite of this, the Group has shown improvements in ounces produced as well as an improved adjusted EBITDA. Unfortunately this good work has been largely nullified by the gross basket price due to Sylvania declining by 11% and our operational level costs escalating by 9%. Nonetheless, having produced over 25,000 ounces, we are on track to achieve the forecasted 52,000 ounces for the full year ending on 30 June 2014.
It is also pleasing to see that even with the strategic purchase of the prospecting right over Grasvally, our combined SDO capex and exploration spend has declined 80% compared to the previous corresponding period. This has taken a lot of careful planning and strict discipline and for that I congratulate our team for their understanding of our strategy of curtailing expansion in favour of generating steady cash growth. The second half of the year is looking promising and with the current positive cash balance and no debt in our Company we are well placed to be a consistent performer in the platinum space going forward.
Finally, the board would like to extend its thanks to our departing deputy CEO Nigel Trevarthen, for his service to Sylvania over the last three years where he has made an invaluable contribution to the Company. After nearly 30 years in front-line production in very challenging mining operations, we understand his desire to start taking things easier and we all wish him well in his retirement."
Group overview
The main operational focus of the Company for the six months to 31 December 2013 has been on further improving production stability and ounce production. The consistent production of over 4,000 ounces per month for the last eight months is indicative of the improved stability of the operations. The Sylvania Dump Operations ("SDO") produced 25,189 ounces for the six months to 31 December 2013 against 21,479 ounces in the six months to 31 December 2012 and 22,616 ounces in the six months to 30 June 2013. The Group adjusted Earnings before interest, tax, depreciation and amortisation ("EBITDA") for the reporting period was $1,256,448 compared to $919,163 (excluding the Ironveld transaction in H1 FY2013) for the corresponding period to 31 December 2012.
Revenue for the reporting period increased to $20,532,343 from $19,181,371 for the six months to 31 December 2012. The gross basket price dropped 11% from $1,021/ounce to $911/ounce and offset the 17% increase in ounce production resulting in a revenue increase of 7%. Total operating costs, including depreciation increased 9%. The increase in costs is attributable mainly to two incidents during the half year; the total failure of the state power utility transformer at Tweefontein in Q1 FY2014 and a section 54 safety stoppage at Mooinooi in Q2 FY2014. During these stoppages, the other plants were able to temporarily increase their performance through the use of higher cost but also higher grade material thus maintaining the steady overall production volumes. SDO cash costs were 2% lower than H1 FY2013 at $691/ounce.
General and administration charges are down 34% to $1,912,642 from $2,900,803. Capital expenditure remains low as construction of all seven planned plants is complete. No further SDO plants are currently planned.
As at 31 December 2013, the Company's cash reserves amounted to $3,907,832 down from $6,564,885 as at 30 June 2013, being impacted by lower than planned metal prices, the first payment of R5,000,000 for the acquisition of the Grasvally prospecting right made in December 2013 and the additional operating cost of the Tweefontein and Mooinooi stoppages described above. As disclosed in the prior financial year, a R15,000,000 loan facility agreement was entered into with Ironveld Holdings (Pty) Ltd ("Ironveld") (repayable on 30 June 2016), as part of the sale agreement for the iron ore assets. Ironveld drew down on the facility to the sum of R10,616,923 (approximately $1 million) over the reporting period. As the majority of cash generated by the Group is SA Rand denominated the 6% drop in the exchange rate since 30 June 2013 made up the final impact to the cash balance reported.
Review of Operations
Health, safety and environment
The SDO reported no significant health, safety or environmental incidents for the six months ended 31 December 2013. Minor environmental incidents occurred at the Mooinooi and Lannex plants, which were immediately rectified and reported, with mitigating and preventative measures being put in place so as to avoid any further occurrences. A section 54 stoppage notice was issued by the Department of Mineral Resources ("DMR") during November/December 2013 at the Mooinooi operations for deviations identified by the Inspector of Mines, and corrective measures were implemented to address the findings. The impact of the section 54 stoppage notice on the Mooinooi production amounted to over 800 ounces during the reporting period, however the strength of production from the other plants allowed Company production volumes to remain on track for attaining the target of over 50,000 ounces for the financial year.
Sylvania Dump Operations (100%): Statistical Information
Unaudited | Unit | 6 months to Dec 2013 | 6 months to June 2013 | 6 months to Dec 2012 | +/- % H1 2014 on H1 2013 |
Revenue | |||||
Revenue | R'000 | 206,979 | 190,424 | 162,554 | 27% |
Revenue | $'000 | 20,532 | 20,148 | 19,181 | 7% |
Gross Basket Price1 | $/ounce | 911 | 968 | 1,021 | -11% |
Net Basket Price2 | $/ounce | 809 | 840 | 880 | -8% |
Gross Cash Margin: SDO | % | 15 | 24 | 24 | -38% |
Capital Expenditure | R'000 | 8,478 | 10,027 | 60,540 | -86% |
Capital Expenditure | $'000 | 809 | 1,057 | 7,148 | -88% |
Ave R/$ rate | R/ $ | 10.08 | 9.74 | 8.47 | 19% |
EBITDA | R'000 | 30,150 | 43,836 | 33,818 | -11% |
EBITDA | $'000 | 2,991 | 4,692 | 3,991 | -25% |
SDO Cash Cost3 | |||||
Per PGM Feed tonne | R/tonne | 325 | 298 | 317 | 3% |
Per PGM Feed tonne | $/tonne | 32 | 31 | 37 | -14% |
Per 3E & Au oz | R/ounce | 6,969 | 6,417 | 5,978 | 17% |
Per 3E & Au oz | $/ounce | 691 | 659 | 705 | -2% |
Production | |||||
Plant Feed | tonne | 1,209,700 | 1,106,073 | 906,560 | 33% |
Feed Head Grade | g/t | 1.86 | 1.97 | 2.09 | -11% |
PGM Plant Feed tonnes | tonne | 539,455 | 487,559 | 405,427 | 33% |
PGM Plant Grade | g/t | 3.54 | 3.61 | 3.91 | -9% |
PGM Plant Recovery | % | 41 | 40 | 42 | -2% |
Total 3E and Au | Ounces | 25,189 | 22,616 | 21,479 | 17% |
1 The $ per ounce commodity price received from the sales of concentrate as contractually agreed;
2 The gross basket price less smelter penalties, treatment costs and sampling cost as contractually agreed;
3 All direct operating costs per plant (excluding depreciation) plus the direct overhead costs allocated to SDO.
Millsell
The Millsell operation produced 3,997 ounces for the six months to 31 December 2013, 28% higher than the 3,114 ounces produced for the corresponding period to 31 December 2012. Millsell continues to treat a combination of current arisings from the host mine's Millsell plant and dump material from the Waterkloof dump.
The cash cost of production for the six months to 31 December 2013 was $494/ounce against $560/ounce for the previous corresponding period to 31 December 2012. The improved costs are a result of higher production volumes and improved dump feed grades and recovery efficiency.
Mooinooi Dump Operations
The Mooinooi Dump operation produced 3,173 ounces for the six months to 31 December 2013, up 65% from 1,926 ounces produced during the six months to 31 December 2012. The operation was stopped due to a Section 54 safety order issued by the DMR in November 2013. Due to the time taken to remedy the issues identified coupled with delays due to external industrial action both the Mooinooi Dump and ROM plants lost 21 days of production. The Mooinooi Dump plant treats material from the old Mooinooi dumps and current arisings from the host mine. The plant has now returned to full production.
The cash cost for the six months was $774/ounce which was an improvement of 30% from the previous corresponding period in December 2012 of $1,120/ounce.
Mooinooi run of mine ("ROM") Operation
The Mooinooi ROM plant produced 2,345 ounces for the six months to 31 December 2013 compared to 1,719 ounces for the six month to 31 December 2012 and was affected by the same Section 54 stoppage from the DMR as the Mooinooi Dump plant. The Mooinooi ROM plant treats MG2 material from the host mines Mooinooi and Buffelsfontein underground mines which have been increasing their production in recent months. Following the successful implementation and operation of ultra-fine grinding mills on the Mooinooi Dump plant between April and September 2013, a new ultra-fine grinding toll milling facility was installed and commissioned at the ROM plant in December 2013. The toll milling facility is expected to improve PGM recovery efficiencies during the next quarter.
The cash cost for the six months to 31 December 2013 decreased 30% from $1,556/ounce for the previous corresponding period to $1,085/ounce.
Steelpoort
The Steelpoort plant produced 3,631 ounces for the half year to 31 December 2013, an increase of 7% from the 3,403 ounces produced during the half year to 31 December 2012. Steelpoort is the first plant to solely treat second pass dump material and is utilising the low cost hydro-mining method.
The cash cost per ounce of $630/ounce for the six months to 31 December 2013 was 8% lower than the $684/ounce for the corresponding period to 31 December 2012.
Lannex
The Lannex operation produced 3,963 ounces for the six months to 31 December 2013, down 9% from 4,346 ounces for the six months to 31 December 2012. The mining plan of the tailings dam has seen the plant move through a section of
lower feed grades, which has impacted negatively on ounces produced. The Lannex operation treats a combination of dump material from the old Lannex Tailings Dam complex and current arisings from the host mines Lannex operation.
The cash cost for the reporting period was $745/ounce, compared to $612/ounce for the corresponding six months to 31 December 2012.
Doornbosch
The Doornbosch operation produced 4,320 ounces for the six months to 31 December 2013, an expected decrease from excellent performance of 5,678 ounces produced for the six months to 31 December 2012 when the plant was able to boost production from the high grade Montrose dump. The final scrapings of the Montrose dump were processed during the period and were able to offset the losses from Mooinooi as reported previously. Doornbosch will be focusing on the treatment of current arisings from the host mine augmented by second pass material from the old Doornbosch dump.
The total cash cost for the six months to 31 December 2013 was $592/ounce, 41% higher than the $421/ounce for the corresponding period to 31 December 2012.
Tweefontein
Tweefontein has produced steadily over the design capacity of 750 ounces/month during the latter part of the half year and shows an expected significant increase over the previous period. Having produced its first ounces in September 2012, the plant produced 3,760 ounces for the six months to 31 December 2013 compared to 1,221 ounces for the corresponding six months to 31 December 2012. Eskom power supply problems impacted negatively on the plant's production during Q1 FY2014 however after the main Eskom substation was upgraded during an 11 day shutdown in August 2013, production has improved significantly. Tweefontein is currently treating a blend of MG1-MG4 fines and tailings material from the hosts opencast mine, current arisings from the host mines Tweefontein operation and dump material from the Tweefontein Paddocks.
Work has commenced on the phase 2 portion of the project at a cost of R2,500,000 and this will allow the Tweefontein plant to reach its full originally designed production throughput before the end of the financial year. It should be noted that the capital cost of this project is significantly lower than originally planned as the project now does not require a classification and chrome recovery section as this work will be performed by the host mine.
The cash cost for the six months to 31 December 2013 was $694/ounce, 26% lower than $939/ounce incurred in the corresponding period in the prior year due to higher production volumes and ounce production.
Exploration projects
The EIA for the Volspruit project was submitted post the reporting period in early Q3 FY2014 and allows the MRA for Volspruit to continue.
The Board will decide on the best way to advance these projects only once the mining rights have been received, but have already identified the possible boost in productivity through the collaboration of the Volspruit and future Grasvally projects.
As announced on 3 December 2013, the Company entered into a binding agreement to purchase the prospecting right on the portions of land over which it already holds surface rights at the Zoetveld 294KR and Grasvally 293KR farms which are adjacent to the Sylvania Volspruit project.
The consideration for the acquisition of the prospecting right is to be settled in cash in two instalments of R5,000,000 (approximately $0.5 million) and R20,000,000 (approximately $2 million), the first of which was paid in December 2013 on submission of the section 11 application to the DMR. The second payment is to be made upon transfer of the rights.
Corporate activities
Grant of options
On 29 August 2013, the Company announced that it had granted 1,600,000 options over ordinary shares of $0.10 each in the Company under the Sylvania Platinum Option Plan, as approved by shareholders on 29 December 2011.
800,000 of the options awarded were granted to Directors of the Company and the balance was awarded to senior and operational management. The options have a nil exercise price and vest between 29 August 2015 and 29 August 2017. The options expire on 29 August 2023.
Treasury shares
On 4 September 1,700,000 ordinary shares of $0.10 each in Sylvania Platinum Limited were repurchased at 8.15 pence per share. The shares are being held in treasury to be issued as bonus shares to senior management based on the attainment of performance criteria.
Platmin South Africa (Pty) Ltd summons
There has been no further developments in respect of the claim brought by Platmin South Africa (Pty) Ltd ("Platmin") (previously known as Boynton Investments (Pty) Ltd ("Boynton")), a subsidiary of Platmin Limited, declaring Platmin as the co-owner of the tailings, or alternatively, the co-owner of the PGMs contained in the Lannex Tailings Dam situated on the Farm Grootboom in the District of Lydenburg, Mpumulanga, South Africa.
The Board of Sylvania continues to refute these claims and the matter is being opposed. The matter is set down for a hearing on 1 August 2014.
Nigel Trevarthen, Deputy CEO retiring
As announced in the quarterly update on 28 January 2014, the Deputy CEO, Nigel Trevarthen, has decided to retire from Sylvania and its subsidiaries at the end of March 2014.
Nigel joined the Company in September 2010 to assist with the growth of the company and its subsidiaries. During his time the number of operational plants has increased from four to seven, production volumes have consistently increased and the Company has reported significant improvements in safety performance. A young management team is now well established and is capable of running the operations. The Board has decided not to fill the position vacated until circumstances warrant. Nigel has played a key role in many achievements and following his retirement has agreed to be available to the Company to provide advisory and consultancy services on an ad-hoc basis.
Condensed Consolidated Statement of Comprehensive Income
for the half year ended 31 December 2013
31 December 2013 | 31 December 2012 | |||
Note | $ | $ | ||
Revenue | (i) | 20,532,343 | 19,181,371 | |
Cost of sales | (ii) | (21,045,792) | (19,388,949) | |
Gross loss | (513,449) | (207,578) | ||
Other income | 57,215 | 20,188 | ||
Profit on disposal of iron ore assets | - | 9,999,314 | ||
Losses on sale of property, plant and equipment | (3,833) | (1,788) | ||
Foreign exchange loss | (19,308) | (6,898) | ||
Impairment of available-for-sale financial assets | - | (18,031) | ||
(Loss)/gain on revaluation of financial assets at fair value through profit and loss | (12,897) | 8,310 | ||
Impairment of exploration and evaluation assets | (iii) | (1,444,000) | - | |
Impairment of investment in associate | (iv) | (1,328,091) | - | |
Share of equity accounted entities net loss | (v) | (53,485) | (123,909) | |
General and administrative costs | (vi) | (1,912,642) | (2,900,803) | |
Finance revenue | 102,601 | 205,320 | ||
Finance costs | (89,770) | (70,938) | ||
(Loss)/profit before income tax | (5,217,659) | 6,903,187 | ||
Income tax benefit/(expense) | 9,594 | (34,581) | ||
(Loss)/profit for the period | (5,208,065) | 6,868,606 | ||
Other comprehensive income | ||||
Items that may be reclassified subsequently to profit and loss: | ||||
Unrealised gains reserve | 37,936 | - | ||
Foreign currency translation | (4,633,380) | (1,347,593) | ||
Other comprehensive income | (4,595,444) | (1,347,593) | ||
Total comprehensive income for the period | (9,803,509) | 5,521,013 | ||
(Loss)/profit attributable to: | ||||
Owners of the parent | (5,208,065) | 6,868,606 | ||
Non-controlling interest | - | - | ||
(5,208,065) | 6,868,606 | |||
Total comprehensive income attributable to: | ||||
Owners of the parent | (9,803,509) | 5,521,013 | ||
Non-controlling interest | - | - | ||
(9,803,509) | 5,521,013 | |||
(i) | Revenue increase reflects higher ounce production. Adversely affected by the lower basket price. | |||
(ii) | Operating costs (including depreciation) up 9% due to Tweefontein power costs and Mooinooi section 54 safety stoppage. | |||
(iii) | Impairment of Everest North exploration costs previously capitalised. | |||
(iv) | Impairment of CTRP. | |||
(v) | Sylvania's share of the care and maintenance costs of CTRP for the reporting period. | |||
(vi) | General and administration costs down 34% from the previous corresponding period. | |||
Condensed Consolidated Statement of Financial Position
as at 31 December 2013
31 December 2013 | 31 December 2012 | 30 June 2013 | ||
Note | $ | $ | $ | |
ASSETS | ||||
Non-Current Assets | ||||
Investments in associates | (i) | 11 | 2,065,322 | 1,698,542 |
Financial assets | (ii) | 2,547,183 | 1,635,670 | 1,547,514 |
Exploration and evaluation assets | (iii) | 64,558,091 | 76,698,479 | 67,276,715 |
Property, plant and equipment | (iv) | 54,092,241 | 69,041,891 | 60,289,304 |
Total non-current assets | 121,197,526 | 149,441,362 | 130,812,075 | |
Current Assets | ||||
Cash and cash equivalents | 3,907,832 | 9,515,793 | 6,564,885 | |
Trade and other receivables | (v) | 12,607,722 | 12,591,677 | 11,860,948 |
Inventories | (vi) | 935,960 | 565,298 | 612,866 |
Current tax asset | 24,831 | 303,836 | 49,846 | |
Total current assets | 17,476,345 | 22,976,604 | 19,088,545 | |
Total assets | 138,673,871 | 172,417,966 | 149,900,620 | |
EQUITY AND LIABILITIES | ||||
Shareholders' equity | ||||
Issued capital | 29,515,534 | 29,542,290 | 29,515,534 | |
Reserves | 66,756,763 | 87,256,943 | 71,055,566 | |
Retained profits | 15,639,824 | 23,347,263 | 20,847,888 | |
Equity attributable to the owners of the parent | 111,912,121 | 140,146,496 | 121,418,988 | |
Non-controlling interest | - | - | - | |
Total equity | 111,912,121 | 140,146,496 | 121,418,988 | |
Non-current liabilities | ||||
Interest bearing loans and borrowings | (vii) | 142,538 | 268,064 | 170,287 |
Provisions | (viii) | 2,486,036 | 1,267,521 | 2,578,036 |
Deferred tax liability | 17,607,751 | 22,814,069 | 18,728,253 | |
Total non-current liabilities | 20,236,325 | 24,349,654 | 21,476,576 | |
Current liabilities | ||||
Trade and other payables | 6,358,529 | 7,729,952 | 6,828,169 | |
Interest bearing loans and borrowings | (vii) | 159,597 | 182,846 | 169,151 |
Current tax liability | 7,299 | 9,018 | 7,736 | |
Total current liabilities | 6,525,425 | 7,921,816 | 7,005,056 | |
Total liabilities | 26,761,750 | 32,271,470 | 28,481,632 | |
Total liabilities and shareholders' equity | 138,673,871 | 172,417,966 | 149,900,620 |
(i) | Impairment of CTRP net of R2,875,000 surplus funds received in February 2014. |
(ii) | Funds advanced to Ironveld in terms of the facility agreement from Sylvania Metals of R10,616,923 ($1,031,004) and exchange rate movement. |
(iii) | Impairment of Everest North exploration and evaluation costs of $1,444,000. |
(iv) | Additions to property, plant and equipment of $945,078, depreciation for the reporting period of $3,714,849 and exchange rate movement of $3,293,196. |
(v) | Increased ounce production resulting in higher debtors. Adversely affected by the weaker Rand at reporting date. |
(vi) | Spare parts and consumable held at the plants. |
(vii) | Instalment sale agreements on plant vehicles and equipment. |
(viii) | Rehabilitation and decommissioning provision for the SDO. |
Condensed Consolidated Statement of Cash Flows
for the half year ended 31 December 2013
| 31 December 2013 | 31 December 2012 | |
Note | $ | $ | |
Net cash inflow from operating activities | 128,786 | 2,170,550 | |
Net cash outflow from investing activities | (i) | (2,488,810) | (7,637,910) |
Net cash outflow from financing activities | (ii) | (330,804) | (419,795) |
Net decrease in cash and cash equivalents | (2,690,828) | (5,887,155) | |
Cash and cash equivalents at the beginning of reporting period | 6,564,885 | 15,716,680 | |
Effect of exchange fluctuations on cash held | 33,775 | (313,732) | |
Cash and cash equivalents at the end of the reporting period | 3,907,832 | 9,515,793 |
(i) | Net cash outflow from investing activities includes acquisition of property, plant and equipment of $889,311, exploration expenditure of $546,910 and the advancement of funds to Ironveld of $1,052,589. |
(ii) | Net cash outflow from financing activities includes repayment of instalment sale agreements $100,301 and purchase of shares held in treasury of $220,654. |
For the complete Condensed Consolidated Interim Financial Report for the half year ended 31 December 2013 please visit the Company website www.sylvaniaplatinum.com.
CORPORATE INFORMATION
Registered office: Sylvania Platinum Limited
Clarendon House
2 Church Street
Hamilton HM11
Postal address: PO Box 524
Wembley WA 6913
Australia
CONTACT DETAILS
For further information, please contact:
Terence McConnachie (CEO)
Nigel Trevarthen (Deputy CEO)
+27 (11) 673 1171
Nominated Adviser and Broker
Liberum Capital Limited
Tom Fyson/Ryan de Franck
+44 (0) 20 3100 2000
Communications
Newgate Threadneedle
Graham Herring/Adam Lloyd
+44 (0) 20 7653 9850