REG - Sylvania Platinum - Fourth Quarter Report to 30 June 2019
_____________________________________________________________________________________________________________________________
31 July 2019
Sylvania Platinum Limited
("Sylvania", "the Company" or "the Group")
AIM (SLP)
Fourth Quarter Report to 30 June 2019
The Directors are pleased to present the results for the quarter ended 30 June 2019 ("Q4" or the "quarter"). Unless otherwise stated, the consolidated financial information contained in this report is presented in USD.
Achievements
· Record ounce production of 21,789 4E PGM ounces in Q4, to achieve a record of 72,090 ounces for FY2019;
· SDO PGM plant recoveries improved 12% to 54%, boosting ounce production;
· Net revenue increased 10% to $20.2 million;
· Group EBITDA improved 14% to $9.3 million in Q4;
· Group cash costs decreased 21% to $496/ounce;
· Third MF2 module of Project Echo commissioned at Mooinooi in Q4;
· Commissioning of Lesedi chrome section commenced in Q4; and
· Significant safety milestones achieved at Lesedi, reaching eight years Lost Time Injury (LTI) free, and Tweefontein and Doornbosch operations both reaching seven years LTI-free during the quarter.
Challenges
· Although minimal disruptions were experienced during Q4, power supply infrastructure constraints and water availability at certain operations remain focus areas and management continue to explore alternatives to minimise disruptions and mitigate impact on operations; and
· Fluctuations in the average gross basket price and exchange rates impact the earnings and profitability of the Group and are continually monitored even though they remain outside of the Company's control.
Opportunities
· An optimised re-mining strategy, utilising a hybrid mechanical-hydro mining approach, has been developed and is being rolled-out in order to enable more efficient blending, grade control and feed stability; and
· Optimisation of recently commissioned projects at Mooinooi and Lesedi to contribute towards improved process efficiencies.
Commenting on the Q4 results, Sylvania's CEO Terry McConnachie said:
"In April 2019 we set out to achieve a record target for Q4. I am pleased to report that the SDO did not only reach this quarterly production record, but also achieved the annual guidance revised at the Half Year, resulting in an annual Company production record of 72,090 ounces for the financial year ending 30 June 2019.
Following a challenging start to the year, there was significant operational improvement during the quarter and I would like to thank the operations teams and management for their continued dedication and hard work.
The Company concluded the financial year with cash of $21.8 million following the payment of $5.3 million in tax during the quarter as well as the MF2 capital spend and maintains a good cash holding which will enable us to continue to internally fund any further capital expenditure. We are also beginning to see the results from the MF2 and capital project roll-out and these are expected to be sustainable in the coming financial years.
Due to the four-month payment agreement with our off-taker, this quarter's solid performance will contribute to an increase in our cash on hand during FY2020 which, combined with the decreased production costs, means we are in a strong financial position moving forward. I am optimistic about what the next quarter and new financial year will bring for the Company and Shareholders."
USD
Unit
Unaudited
Unit
ZAR
Q3 FY2019
Q4 FY2019
% Change
% Change
Q4 FY2019
Q3 FY2019
Production
527,693
592,511
12%
T
Plant Feed
T
12%
592,511
527,693
2.40
2.58
7%
g/t
Feed Head Grade
g/t
7%
2.58
2.40
297,489
327,635
10%
T
PGM Plant Feed Tons
T
10%
327,635
297,489
3.54
3.85
9%
g/t
PGM Plant Feed Grade
g/t
9%
3.85
3.54
48.00%
53.78%
12%
%
PGM Plant Recovery
%
12%
53.78%
48.00%
16,256
21,789
34%
Oz
Total 4E PGMs
Oz
34%
21,789
16,256
22,224
29,210
31%
Oz
Total 6E PGMs
Oz
31%
29,210
22,224
1,383
1,328
-4%
$/oz
Average gross basket price
R/oz
-6%
18,659
19,868
Financials
15,739
17,781
13%
$'000
Revenue (4E)
R'000
17%
255,747
219,425
1,726
1,749
1%
$'000
Revenue (by products)
R'000
5%
25,150
24,061
882
644
-27%
$'000
Sales adjustments
R'000
-25%
9,270
12,295
18,347
20,174
10%
$'000
Net revenue
R'000
13%
290,167
255,781
9,774
10,424
7%
$'000
Operating costs
R'000
10%
149,892
136,262
434
475
9%
$'000
General & administration
R'000
13%
6,829
6,052
8,172
9,309
14%
$'000
Group EBITDA
R'000
17%
133,869
113,933
260
313
20%
$'000
Net Interest
R'000
24%
4,502
3,629
4,960
4,849
-2%
$'000
Net profit
R'000
1%
69,724
69,145
2,119
2,199
4%
$'000
Capital Expenditure
R'000
7%
31,625
29,548
23,725
21,812
-8%
$'000
Cash Balance
R'000
-5%
313,650
330,753
R/$
Ave R/$ rate
R/$
3%
14.38
13.94
Unit Cost/Efficiencies
599
485
-19%
$/oz
SDO Cash Cost Per 4E PGM oz
R/oz
-17%
6,969
8,353
438
361
-18%
$/oz
SDO Cash Cost Per 6E PGM oz
R/oz
-15%
5,198
6,110
624
496
-21%
$/oz
Group Cash Cost Per 4E PGM oz
R/oz
-18%
7,128
8,699
456
370
-19%
$/oz
Group Cash Cost Per 6E PGM oz
R/oz
-16%
5,317
6,363
644
538
-17%
$/oz
All-in sustaining cost (4E)
R/oz
-14%
7,734
8,981
756
606
-20%
$/oz
All-in cost (4E)
R/oz
-17%
8,721
10,536
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
In terms of safety, three of our operations reached significant milestones during the quarter, with Lesedi achieving eight years LTI-free and both Tweefontein and Doornbosch operations achieving seven years LTI-free. Unfortunately, Mooinooi suffered one LTI in June 2019, when an artisan experienced a laceration to his upper leg caused by a sharp edge of a structure during a lifting operation.
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 Company record of 21,789 ounces for the quarter, a 34% increase on Q3's 16,256 ounces. The increased production was due to a combination of a 10% improvement in PGM feed tons and a 12% improvement in recovery efficiencies, as well as a 9% increase in PGM feed grade.
Improved running times at Lesedi, which experienced less water shortages than in the previous quarter, and increased and more stable re-mining performance at Doornbosch in particular, assisted to increase the PGM feed tons for the period. PGM feed grade was assisted by improved current arisings and ROM fines at operations, which increased approximately 12% compared to Q3, when fresh feed sources had been impacted by the host mines' operating schedule after the Christmas break. Higher grade feed material was also treated at both Lannex and Lesedi during the quarter.
The significant improvement in the PGM recovery efficiency can be attributed to a combination of more stable feed into operations at Lesedi and Doornbosch in particular, as well as the improved efficiencies associated with the commissioning of the MF2 module at Mooinooi during May and June 2019, as well as better-quality feed material being treated at Lannex since May 2019. The improved stability associated with the change in re-mining philosophy and operation, with the ability to have more efficient blending of dump material, as well as an increase in the fresh current arisings received from the host mine, assisted to boost recovery particularly at Doornbosch. Recovery efficiency at Lannex again improved based on higher quality 1st Pass dump material being treated from the neighbouring Tweefontein operation since May 2019, compared to the final batch of historic 2nd Pass dump material from Lannex treated during Q3. Finally, the Mooinooi operation's recovery efficiency improved significantly due to a combination of improved plant stability and the commissioning of the MF2 during May and June 2019, which should continue to add value into the future.
The total SDO cash costs for the period decreased 17% in ZAR terms to ZAR 6,969/ounce and decreased 19% in USD terms to $485/ounce. The capital expenditure was ZAR 31.6 million for the quarter, a 7% increase quarter-on-quarter and is aligned with the planned and forecast Project Echo roll-out and project schedule.
Operational focus areas
Based on the challenges experienced with the water shortages at Lesedi during the past financial year and re-mining challenges at Doornbosch where the current dump reached its end of life during Q2/Q3, significant management focus went into exploring and implementing alternative measures to supplement water to operations and to optimise the current re-mining strategy for historical dumps.
Although minimal disruptions were experienced during Q4 due to water shortages, water availability at certain operations remain a concern and an ongoing focus area. While the water supply system to Lesedi has already been upgraded, more boreholes are being drilled in consultation with water and environmental experts and process options are being explored to minimise consumption which could mitigate the impact of availability.
In order to address challenges with re-mining of dumps, especially those that are close to end of life at certain operations, an optimised re-mining strategy, utilising a hybrid mechanical-hydro mining approach, has been developed and is being rolled-out in order to enable more efficient blending, grade control and feed stability to plants. The hybrid system deviates slightly from a pure hydro-mining approach where water guns are required to be moved constantly on the dumps to maintain acceptable grade blends and consistent production rates. We now utilise a central hydro-mining sump and pump station, mechanically delivering the dump material to this sump to be pulped and pumped to the plant with improved stability but at a similar cost.
Operational opportunities
With the third project Echo MF2 module now commissioned at Mooinooi and the new chrome beneficiation circuit commissioned at Lesedi the respective management teams will now focus on optimising these circuits to unlock the full potential of these projects going forward.
The Mooinooi MF2 module will assist to further improve PGM recovery efficiencies on the operation, while the Lesedi chrome plant project, utilising the dismantled and relocated redundant chrome circuit from the old Steelpoort operation, will enable chrome removal at Lesedi's PGM plant, in line with the standard SDO operating model employed at the Group's existing operations. This circuit will enable the operation to have more flexibility in terms of types and quality of feed material that can be treated in the plant and will contribute towards higher PGM feed grades and ounce production at the operation.
B. FINANCIAL OVERVIEW
Financial performance
Revenue for the quarter increased 10% to $20.2 million from Q3's $18.3 million. The increase is due mainly to the increase in ounces produced at the SDO, however this was negatively impacted by the 4% drop in the gross basket price from $1,383/ounce to $1,328/ounce.
The total operating costs, which are incurred in ZAR, increased 10% to ZAR 149.9 million, compared to the ZAR 136.2 million in Q3. The increase was not unexpected and falls within the Q4 forecast costs. Higher production in Q4 resulted in higher lab costs and concentrate transport costs. Transport costs at the Lannex plant increased due to the change in feed source and the annual electricity increase which was effective as of April 2019. All four of these cost increases combined contributed to the increase in operating costs. 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 9% quarter-on-quarter from $0.434 million to $0.493 million.
Group cash costs decreased 18% from ZAR 8,699/ounce to ZAR 7,128/ounce as a direct result of the higher ounce production. In dollar terms the Group cash costs decreased 21% from $624/ounce to $496/ounce.
The all-in sustaining cost ("AISC") and all-in cost ("AIC") also decreased during the quarter to ZAR 7,734/ounce (Q3: ZAR 8,981/ounce) and ZAR 8,721/ounce (Q3: ZAR 10,536/ounce) respectively. This decrease can also be attributed to the higher ounce production in Q4.
The Group EBITDA increased 14% from $8.1 million to $9.3 million in Q4, however the net profit decreased 2% to $4.8 million as a result of the $5.3 million (ZAR76.2 million) paid in income tax in South Africa.
The Group cash balance at 30 June 2019 was $21.8 million (including guarantees), a $1.9 million decrease on the previous quarter's cash balance of $23.7 million. Cash generated from operations before working capital movements was $9.2 million with net changes in working capital amounting to a decrease of $3.8 million due mainly to the increase in trade and contract debtors which have a four-month payment pipeline resulting in the cash inflows from the production in Q4 only being received in the new financial year. An amount of $2.2 million was spent on capital and income tax of $5.3 million was paid in South Africa. The impact of exchange rate fluctuations on cash held at the quarter end was an increase of $0.01 million.
The Company remains committed to funding all planned capital projects and expansion from internal cash reserves.
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, until an improvement in market conditions occurs, this will result in very limited spend. As such, there are no further developments to report for the quarter.
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 rns@lseg.com or visit www.rns.com.ENDDRLLIFIRDSILVIA
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