Royal Bafokeng Platinum (RBPlat) CEO Steve Phiri said, as he released the firm’s financial results for the year ended December 31, 2022, that the risk of doing business in South Africa had increased significantly.
“In 2022, the unreliability of electricity supply impacted our production and consequently increased our unit costs, which were also affected by an increase in our overall mining inflation of 10.3%.
“Our costs will be further impacted by the recently approved 18.65% increase in the electricity tariff,” he said.
Production of 4E - platinum, palladium, rhodium and gold, decreased by 3.9% to 449 000 ounces.
And as metal prices weakened and operational challenges prevailed, RBPlat reported a 46.3% drop in annual headline earnings in 2022 to R3.48 billion, down from R6.48bn the prior year.
Despite this the board still declared a gross cash final dividend of R5.35 per share, roughly R1.5bn. This is in addition to the interim dividend of R711 million declared in August 2022.
RBPlat’s overall operating performance in 2022 was hit by its Styldrift operation's weak performance. It was also hampered by high inflationary pressures, supply chain disruptions, safety-related stoppages, Eskom electricity supply disruptions and production constraints.
RBPlat also highlighted the uncertainty caused by the delay in finalising the takeover bid as Impala Platinum (Implats) and Northam Platinum face off for its hand.
This was becoming a risk in its operations and the bidding battle for its hand has gone on for over a year.
“We are unable to formulate a long-term strategy and implement aspects of our current strategy, which includes growth. Our capital allocation abilities are constrained. Our ability to create further sustainable enterprise value for our stakeholders is impacted.
“Uncertainty prevails in the minds of our stakeholders, especially in those of our employees and suppliers, potentially causing instability in the business,“ it said.
As of the date of finalisation of these results, Northam had not yet made a formal offer following its firm intention of an offer in November 2022, while Implats made a mandatory offer to all RBPlat shareholders in January 2022.
Implats is now its biggest shareholder with a 40.71% stake, while its rival Northam, owns almost 35%.
Anchor Capital investment analyst Seleho Tsatsi said the corporate action (bid for its control) had helped RBPlats’ share price compared to peers over the past year or so.
“Earnings nearly halved in 2022. As we’ve seen from other platinum group metal (PGM) miners, the impact of declining PGM prices, particularly palladium and rhodium, very strong cost inflation, and challenging production volume figures all combined to reduce earnings sharply,” he said.
Tsatsi said these challenges look set to continue in 2023 for the PGM sector.
The group yesterday also released its integrated report - which might be its last report as a listed entity - and said global refined platinum production was forecast to increase marginally in 2023.
“Platinum supply in South Africa is set to increase modestly this year as most of the stockpiled material built up last year is expected to be processed.
“However, the operating environment in South Africa remains challenging, with Eskom predicting that some degree of load shedding will remain necessary during 2023. Depending on the frequency and severity of the load shedding, it is possible that PGM production could be negatively impacted,” it said.
The World Platinum Investment Council also said in a quarterly report yesterday a global deficit of platinum in 2023 would be deeper than previously expected due to strong industrial demand, which could persist for years, Reuters reported.
A worsening of electricity supply shortages in South Africa and sanctions-related operating challenges in Russia were among downside risks to the global supply, it said.
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