REG - Sylvania Platinum - First Quarter Report to 30 September 2018
_____________________________________________________________________________________________________________________________
31 October 2018
Sylvania Platinum Limited
("Sylvania", "the Company" or "the Group")
AIM (SLP)
First Quarter Report to 30 September 2018
The Directors are pleased to present the results for the quarter ended 30 September 2018 ("Q1" or the "quarter"). Unless otherwise stated, the consolidated financial information contained in this report is presented in USD.
Achievements
· 19,137 4E PGM ounces produced in Q1;
· Group EBITDA of $7.1 million;
· Total operating costs down 2% in ZAR terms and 12% in USD quarter on quarter;
· Cash balance up 26% quarter on quarter to $17.7 million from $14.0 million;
· Capital expenditure in line with planned expansion for Project Echo;
· Millsell operation achieved four years lost time injury (LTI) free during the quarter; and
· Completed the non-UK Shareholders buy-back program on 24 August 2018 and a total of 2,407,481 shares were cancelled.
Challenges
· Utility infrastructure and supply of power continues to present challenges to existing operations and the execution of expansion projects;
· The consistently low Platinum price continues to put pressure on the gross basket price, although weaker ZAR and strong Palladium and Rhodium prices are mitigating factors; and
· Lower recovery efficiencies at Millsell MF2 module, due to challenges with fines flotation mechanisms, are currently being upgraded.
Opportunities
· Project Echo MF2 module for Mooinooi on track for commissioning in H2 FY2019;
· Relocation of redundant Steelpoort chrome circuit to Lesedi in progress to improve chrome removal ahead of flotation and to enable higher PGM feed; and
· Company continues to generate sufficient cash reserves to fund capital expansion projects.
Commenting on the Q1 results, Sylvania's CEO Terry McConnachie said:
"The SDO teams have once again performed consistently by producing 19,137 ounces this quarter, the second highest quarterly production in the history of the Company. Preceded by last quarter's production record, this period was impacted by some operational instability and 'teething' issues at Doornbosch and Mooinooi, which have since been resolved and Management continues to focus on optimisation initiatives on operations. As promised, we have endeavoured to keep costs controlled and our cash reserves remain at a level which will enable the Company to continue to fund capital projects and Project Echo moving forward."
USD
Unit
Unaudited
Unit
ZAR
Q4 FY2018
Q1 FY2019
% Change
% Change
Q1 FY2019
Q4 FY2018
Production
643,019
635,051
-1%
T
Plant Feed
T
-1%
635,051
643,019
2.46
2.44
-1%
g/t
Feed Head Grade
g/t
-1%
2.44
2.46
338,167
328,127
-3%
T
PGM Plant Feed Tons
T
-3%
328,127
338,167
3.75
3.75
0%
g/t
PGM Plant Feed Grade
g/t
0%
3.75
3.75
49.67%
48.39%
-3%
%
PGM Plant Recovery
%
-3%
48.39%
49.67%
20,278
19,137
-6%
Oz
Total 4E PGMs
Oz
-6%
19,137
20,278
27,062
25,723
-5%
Oz
Total 6E PGMs
Oz
-5%
25,723
27,062
1,167
1,149
-2%
$/oz
Average gross basket price
R/oz
5%
16,263
15,509
Financials
16,243
14,230
-12%
$'000
Revenue (4E)
R'000
-3%
200,032
205,372
1,653
1,634
-1%
$'000
Revenue (by products)
R'000
10%
22,964
20,905
2,195
1,370
-38%
$'000
Sales adjustments
R'000
-31%
19,261
27,756
20,092
17,234
-14%
$'000
Net revenue
R'000
-5%
242, 257
254,032
11,052
9,726
-12%
$'000
Operating costs
R'000
-2%
136,754
139,732
615
464
-25%
$'000
General & administration
R'000
-16%
6,524
7,773
8,600
7,075
-18%
$'000
Group EBITDA
R'000
-8%
99,477
108,682
65
182
180%
$'000
Net Interest
R'000
212%
2,560
820
3,914
3,785
-3%
$'000
Net profit
R'000
8%
53,220
49,489
1,508
1,205
-20%
$'000
Capital Expenditure
R'000
-11%
16,942
19,070
14,017
17,719
26%
$'000
Cash Balance
R'000
41%
249,126
177,217
R/$
Ave R/$ rate
R/$
11%
14.06
12.64
Unit Cost/Efficiencies
553
508
-8%
$/oz
SDO Cash Cost Per 4E PGM oz
R/oz
2%
7,137
6,996
415
378
-9%
$/oz
SDO Cash Cost Per 6E PGM oz
R/oz
1%
5,310
5,242
562
531
-6%
$/oz
Group Cash Cost Per 4E PGM oz
R/oz
5%
7,461
7,101
421
395
-6%
$/oz
Group Cash Cost Per 6E PGM oz
R/oz
4%
5,551
5,323
550
540
-2%
$/oz
All-in sustaining cost (4E)
R/oz
9%
7,592
6,953
612
593
-3%
$/oz
All-in cost (4E)
R/oz
8%
8,338
7,740
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
During the past quarter, the Millsell operation achieved the significant safety milestone of being LTI- free for four years, and all SDO operations performed well without any significant health or environmental incidents during the period. Lesedi remains seven years LTI-free, while Tweefontein and Doornbosch plants both remain more than six years LTI-free.
Operational performance
The SDO delivered a solid performance of 19,137 ounces for Q1 which is the second highest quarterly performance for operations. While PGM plant feed grade remained static quarter on quarter, the PGM plant feed tons and recovery efficiency were both 3% lower, resulting in a 6% decrease in PGM ounces compared to the Q4 FY2018 record performance.
The lower PGM plant feed tons were primarily due to the downtime and feed instability associated with the commissioning of a new process circuit at Doornbosch during the quarter as well as some operational challenges at Mooinooi during September 2018 that have since been resolved. PGM recovery efficiencies were impacted by a lower percentage of fresh current arisings feed to some operations compared to the previous quarter as well as oil-contaminated feed material received at the Mooinooi operation that negatively impacted the PGM flotation process.
The SDO cash costs for the period in ZAR terms increased 2% to ZAR7,137/ounce, which was attributable to lower ounce production as a result of lower than planned current arisings supplemented with lower grade dump tons. In USD terms, cash costs decreased by 8% to $508/ounce, assisted by an 11% weakening of the ZAR in the ZAR/USD exchange rate during the period. Capital expenditure reduced 20% quarter-on-quarter based on the current capital project schedule and in line with Project Echo construction plan.
Operational focus areas
Operational challenges experienced at Millsell after the commissioning of the Millsell MF2 module earlier this year resulted in some design changes and upgrades to flotation mechanisms which will enable improved PGM recoveries during Q2.
Process circuit modifications, utilising enhanced fine screening technology for more efficient upgrading of PGMs, at Doornbosch, Millsell and Tweefontein will be completed in Q2, and optimisation of these new circuits will be done post-commissioning in order to further improve PGM feed grades and ounce production.
Operational opportunities
The Project Echo MF2 module for Mooinooi, which is being fast-tracked to counter the previously communicated delay in the execution of the Tweefontein MF2 module of Project Echo, is progressing well and is planned to enable SDO to deliver on the Group production forecast of 76,000 to 78,000 ounces as announced in the Annual Report in August 2018.
The Lesedi chrome plant project, comprising of the dismantling and relocation of the redundant Steelpoort chrome circuit, has commenced and is expected to be completed in the second half of the financial year. This will enable chrome removal ahead of Lesedi's PGM plant, aligned with the standard SDO operating model employed at existing operations in the Group, and will contribute towards higher PGM feed grades and ounce production at the operation.
B. FINANCIAL OVERVIEW
Financial performance
The gross basket price for PGMs for the quarter was $1,149/ounce, a 2% decrease on Q4 FY2018 $1,167/ounce. The decrease in ounces quarter on quarter as well as the slightly lower basket price resulted in the net revenue dropping 14% to $17.2 million. This is however in line with the Board's expectation for the quarter.
The total operating costs decreased 2% in ZAR terms (the SDO functional currency) to ZAR137.0 million compared to the ZAR140.0 million in Q4 FY2018. However, SDO cash costs per ounce increased 2% in ZAR terms from ZAR6,996/ounce to ZAR7,137ounce. The Group cash cost increased 5% from ZAR7,101/ounce in Q4 FY2018 to ZAR7,461/ounce, due to lower ounces in Q1 compared to Q4 FY2018.
The all-in sustaining cost for the Group increased by 9% against Q4 FY2018 to ZAR7,592/ounce (Q4: ZAR6,953/ounce). The Group all-in cost for the quarter is ZAR8,338/ounce, an 8% increase on the ZAR7,740/ounce recorded in Q4 FY2018 due again to the lower production quarter on quarter.
The Group general and administrative costs decreased 16% quarter on quarter in ZAR terms from ZAR7.7 million to ZAR6.5 million.
The surplus cash held and invested in ZAR earned interest at an average rate of 7%. This cash will be used to fund the balance of Project Echo and other production optimisation projects. The increase in cash invested resulted in an increase in the net interest earned for the quarter.
The Group cash balance at 30 September 2018 was $17.7 million (including guarantees), a $3.7 million increase on the previous quarter's $14.0 million. Cash generated from operations before working capital movements was $7.1 million with net changes in working capital amounting to a decrease of $1.9 million due mainly to the increase in trade debtors which have a four-month payment pipeline. An amount of $1.2 million was spent on capital and the impact of exchange rate fluctuations on cash held at the quarter end was a reduction of $0.3 million.
Financial management
Sylvania reports and generates its revenues in USD, however the operations' functional currency is ZAR. This requires strict cashflow controls and management to ensure ongoing growth in cash reserves. The Company remains committed to funding all planned capital projects and expansion from internal cash reserves.
Platinum has remained in the $800 range during the quarter, however Palladium has continued its steady increase over the quarter, increasing 15% from July 2018 and averaging $951 for Q1. Rhodium increased 10% from June to September 2018, and appears to be continuing this upward trend. The increase in the by-product metal prices has also assisted in keeping the basket price at a favorable level, albeit lower than for the previous quarter.
In light of the current South African political environment, the ZAR/USD exchange rate remains just as volatile trading above ZAR14.00 to the USD for most of the quarter. Although not under management's control, the metal prices and the ZAR/USD exchange rate continue to be monitored.
C. EXPLORATION AND OPENCAST MINING PROJECTS
Northern Limb Projects
The Company has not pursued its exploration activities during the quarter, but will continue to defend title as and when this becomes necessary, until an improvement in market conditions warrants further development.
D. CORPORATE ACTIVITIES
Share buy-back programme
The Share Buyback Programme (the Programme) closed on 24 August 2018. The Company purchased 2,407,481 Ordinary $0.01 Shares (Ordinary Shares) from small non-UK based shareholders at a price of A$0.1619 per Ordinary Share, representing 57.6% of the shares on offer under the Programme.
The shares purchased under the programme have been cancelled bringing the Company's issued share capital to 290,241,404 Ordinary Shares, of which a total of 4,206,885 Ordinary Shares are held in treasury. The total number of Ordinary Shares with voting rights in Sylvania is 286,034,519 Ordinary Shares.
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 / Chris Britton
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
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