GMP Mining Jamboree
What is the future of the platinum industry?
31 January 2014
> Slide 1
Disclaimer
The information presented in this presentation is of a general nature and the forward looking information,
opinions and beliefs of the Company and its affiliates are based on various market related assumptions.
Changes in market circumstances after the production of the information may impact on the accuracy thereof.
No assurance can therefore be given as to the accuracy of any information after publication.
Before relying on the information, investors or potential investors should carefully evaluate the accuracy,
completeness and relevance of the information and should preferably obtain professional relevant advice.
The Company, its directors, officers, managers or employees, advisers or representatives accept no
responsibility or liability whatsoever for any loss howsoever arising from any use of this presentation or its
contents or otherwise arising in connection with this presentation.
This presentation also includes market share and industry data obtained by the Company from industry
publications and surveys and the Company does not have access to the facts and assumptions underlying the
numerical data, market data and other information extracted from publicly available sources. As a result, the
Company is unable to verify such numerical data, market data and other information. The Company assumes
no responsibility for the correctness of any market share or industry data included in the materials and
presentation.
> Slide 2
Contents
>
Overview of RBPlat
>
Safety and operational performance
>
Growing organically – Styldrift
>
Focusing on core business – Merensky ore processing strategy
>
The industry landscape
>
RBPlat’s competitive position
>
Outlook
> Slide 3
Overview of RBPlat
About Royal Bafokeng Platinum (RBPlat)
>
>
>
>
Black-owned and controlled, mid-tier PGMs producer
•
Compliant with and exceeds the 2014 BEE Mining Charter requirements
•
Community owned at 56.6% by Royal Bafokeng Nation (RBN)
•
Supportive and well capitalised shareholders
•
SLP projects aligned with development plans of RBN and local government
Prime location on Western Limb of Bushveld Complex, South Africa
•
Well-developed infrastructure
•
Ideally positioned for regional consolidation with neighbouring mines
67% interest in Bafokeng Rasimone Platinum Mine (BRPM) unincorporated joint venture
with Anglo American Platinum (BRPM JV)
•
BRPM JV total 4E resource base of 72.4Moz (57.6Moz, measured and indicated) - + 60 year life-of-mine
•
Shallow Merensky producer
•
Producing assets of ca. 280koz of 4E PGM concentrate per annum
•
R11.0 billion Styldrift I expansion project to more than double production by 2019
JSE listed: Market cap of ca. R11 billion – 23 January 2014 and constituent of the SRI Index
> Slide 5
Quality resource with attractive prill splits
Description
Mt
100% Inclusive Resource
4E g/t
4E Moz
Mt
RBPlat 67%
4E g/t
4E Moz
Merensky
BRPM
Merensky
Measured
14.96
7.58
3.64
10.02
7.58
2.44
Indicated
7.66
6.97
1.72
5.13
6.97
1.15
Inferred
7.81
8.03
2.02
5.23
8.03
1.35
30.42
7.54
7.38
20.38
7.54
4.94
Measured
43.91
5.40
7.62
29.42
5.40
5.11
Indicated
16.58
4.82
2.57
11.11
4.82
1.72
Inferred
10.73
4.66
1.61
7.19
4.66
1.08
UG2 Total
71.22
5.15
11.80
47.72
5.15
7.91
Total BRPM
101.64
5.87
19.17
68.10
5.87
12.85
Measured
57.41
7.47
13.79
38.47
7.47
9.24
Indicated
51.06
6.98
11.47
34.21
6.98
7.68
Inferred
23.33
7.72
5.79
15.63
7.72
3.88
131.81
7.33
31.05
88.31
7.33
20.80
Measured
33.11
5.20
5.54
22.18
5.20
3.71
Indicated
66.98
5.21
11.23
44.88
5.21
7.52
Merensky Total
4.32%
4.23%
Pt%
Pd%
Rh%
Au%
UG2
26.85%
64.61%
Styldrift
Merensky
Merensky Total
UG2
11.03%
0.56%
Pt%
Pd%
Rh%
Au%
UG2
Inferred
31.00
5.45
5.43
20.77
5.45
3.64
131.09
5.27
22.20
87.83
5.27
14.88
262.89
6.30
53.25
176.14
6.30
35.68
Measured
149.39
6.37
30.59
100.09
6.37
20.50
Indicated
142.27
5.90
26.98
95.32
5.90
18.08
UG2 Total
Total Styldrift
BRPM JV
Inferred
Total BRPM JV
29.59%
58.82%
72.87
6.34
14.85
48.82
6.34
9.95
364.54
6.18
72.42
244.24
6.18
48.52
> Slide 6
Performing well against our strategy
>
>
>
>
Achieve operational excellence at BRPM (optimising volumes and reducing costs)
•
Maintained production: YTDQ3 2013 – 196koz 4E (YTDQ3 2012 – 198koz 4E)
•
8% improvement in head grade: YTDQ3 2013 - 4.32g/t 4E (YTDQ3 2012 – 4.02g/t 4E)
•
Cost increase of 3% contained below inflation: YTDQ3 2013 - R7 913/oz 4E (YTDQ3 2012 – R7 650/oz 4E)
Grow organically through Styldrift
•
34.6% complete against planned progress of 33.7%
•
Achieved capital savings of R416 million on actual work done to date
•
Additional savings envisaged of R400 million off the concentrator budget
•
Feasibility studies on Styldrift II underway and progressing well
Build flexibility in the business with co-extraction
•
Improved IMS significantly and achieved desired panel ratio of 1.5
•
UG2 mining platform successfully established - contribution to be contained to max 20% of total production
Pursue value-enhancing acquisitions and synergies
•
Concluded two royalty agreements with Impala Platinum
> Slide 7
Our social licence to operate
>
Employee and organised labour engagement
>
Community engagement
>
SLP commitments
•
Poverty alleviation & job creation
•
Education support
•
Infrastructure
Housing project
Sports fields in 5 local schools
Chaneng community vegetable garden
> Slide 8
Safety and operational performance
Strong safety and operational performance
Description
Unit
Safety
YTDQ3
2013
YTDQ3
2012
Var %
Safety - LTIFR
/200 000
0.605
0.649
6%
Safety – SIFR
/200 000
0.271
0.361
24%
Tonnes milled
kt
1 634
1 760
-7%
Grade (4E)
g/t
4.32
4.02
8%
4E Metals in concentrate
koz
196
198
-1%
Working cost labour
No
6 094
6 648
8%
Cash unit cost/Pt delivered
R/oz
10 179
9 807
-4%
Cash unit cost/tonne milled
R/t
948
859
-10%
Cash unit cost/ Pt oz M&C
R/oz
12 205
11 805
-3%
Cash unit cost/4E oz M&C
R/oz
7 913
7 650
-3%
Total capital
R’m
720.9
904.0
20%
Expansion
R’m
504.0
489.9
-3%
Replacement
R’m
127.0
225.4
44%
SIB
R’m
89.9
188.7
52%
%
5.8%
12.5%
54%
SIB/operating cost
>
LTIFR and SIFR improved by 6% and 24% respectively
>
2.0 million fatality-free shifts achieved 2nd April ’13
>
Regrettably, two fatal accidents in 2013
Production
>
7% lower milled tonnes (concentrator offline for 15 days)
>
8% improvement in head grade (improvement in IMS)
Labour
>
>
Reduction in working cost labour – review of organisational
structures
Capital labour in line with project requirements
Operating costs
>
Below inflation increase in unit cost despite plant shutdown
>
Stope crew efficiency improvements
Capital
>
Lower capital expenditure (20% or R183m) aligned with projects
>
Expansion and replacement projects on track and within budget
> Slide 10
Growing organically - Styldrift
Major surface activities completed at Styldrift I
•
Permanent headgears erected
•
Personnel and material winder - commissioned
•
Rock winder – commisioned
•
Central workshops – completed
•
Main consumer substation – commissioned
•
Emergency generators – commissioned
> Slide 12
Styldrift I on schedule and below budget
Description
Unit
Plan
Actual
Var
Overall progress
%
33.7
34.6
0.9
Main shaft sinking
m
708
708
-
Service shaft sinking
m
642
642
-
Progress
Progress
Expenditure
Project to 30 Sep 2013
R'm
-
2 304
-
Earned value
R'm
-
2 438
-
Commitment to 30 Sep 2013
R'm
-
2 861
-
Project budget
R'm
11 386
11 386
-
Styldrift Cashflow
3 500
Service shaft sink to 642 level
>
Main shaft sink to 708 level
>
1 730m of lateral development completed to end
Q3 2013 on 600, 642 and 708 levels
>
Raiseboring of 1st ventilation hole underway
>
Surface workshops – complete
>
Major surface civils commenced – Q3 2013
12 000
11 386
3 000
2 500
Capital expenditure
10 000
8 000
2 000
6 000
1 500
4 000
1 000
2 000
500
-
-
R’million
R’million
>
>
Capital cash flow aligned with optimisation schedule
>
Expenditure inline with current progress
>
Project expenditure to 30 Sep ‘13 – R 2.30 billion
>
Project commitment to 30 Sep ‘13 – R 2.86 billion
>
Remain confident about saving at project completion
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Mining & Infrastructure
Concentrator
Concetrator
Optimised cumulative cashflow
* Concentrator cashflow reflected is for 230ktpm standalone concentrator
> Slide 13
Significant planned increase in progress for 2014
>
Primary trackless mining fleet
• Supplier selected
• Contract for manufacturing of primary fleet placed in Q1 2013
• Fleet delivery planned in advance of ramp-up schedule
• Artisan and operator training programmes initiated
>
Mining contract
• Preferred mining contractor selected
• Finalisation of contractual terms Q1 2014
• Early contractor resource mobilisation for integration with operations
team
>
Utilities
• Permanent Eskom power supply scheduled for commissioning in Q1 2016
• Magalies Water allocation secured
>
Operational readiness
• Significant planned increase in progress for 2014
–
Operational team increased to support ramp-up
–
Key strategic partnerships with contactor and fleet supplier
–
Integration of RBPlat shared services to support Styldrift
–
Skills development to ensure availability of strategic skills
> Slide 14
Styldrift II study work progressing well
Key facts
>
Resource area ± 24 million m2
>
40% of BRPM JV resource base
>
Average depth 1 150m at average 90 dip
>
Underlain by the Swartklip Facies
Studies
Approximate
SD II #
Position
>
Concept study completed in May 2012
>
Pre-feasibility study in progress (completion Q4 2014)
Pre-feasibility study focus
>
Primary access strategies and shaft location options
>
Production rate (200ktpm – 240ktpm)
>
Mining method selection
>
Synergies with neighbouring properties
>
Optimise resource boundary between SD I and SD II
Exploration drilling
>
77 drillholes completed in SD II PTD (30 Sep 2013) = 107 000m
>
Improve resource confidence to meet feasibility study
requirements
> Slide 15
Focusing on core business- Merensky
ore processing strategy
Strategic considerations
Market conditions
>
Global economic slowdown
>
Metal prices remain relatively flat in near term
>
Recycling of PGMs set to grow
>
Operating cost escalation
UG2
>
Central high facies – North shaft: robust operating margins
>
General facies – South shaft: low operating margins
>
Trial mining
• Verify mine design parameters and test various mining layouts
• Improve grade and reduce costs
Industry opportunities
>
Co-operation and sharing of infrastructure with neighbouring mines
>
Industry excess concentrating capacity
New ore processing strategy for RBPlat
> Slide 17
Styldrift I concentrator options investigated
>
>
RBPlat internal ore processing:
•
Stand alone 230ktpm concentrator plant at Styldrift I (R2.4 billion)
•
Investigate upgrading the existing BRPM concentrator to accommodate Styldrift Merensky ore
(R2 billion)
Consolidated regional ore processing capacity:
•
•
Evaluated opportunities with Anglo Platinum
>
Rail : R1 032 million, opex R55/t, system ready Q1 2017
>
Road: R152 million , opex R91/t, system ready Q4 2015
Evaluated opportunities with Impala Platinum
>
Conveyor: Styldrift to Impala 20 shaft (R846 million, opex R40/t, system ready Q4 2016)
>
Rail: Impala rail extension to Styldrift (R958 million, opex R35/t, system ready Q1 2017)
>
Road train: Styldrift to Impala 20 shaft (R759 million, opex R41/t, system ready Q4 2016)
>
Rope conveyor: Doppelmayr from Styldrift to Impala 20 shaft (R1 398 million, opex R36/t, system ready
Q1 2017)
>
Hybrid: Combination of conveyor and rail to Impala 20 shaft (R814 million, opex R38/t, system ready
Q1 2017)
>
Additional R800 million required to upgrade Impala concentrator to be suitable for Styldrift ore
> Slide 18
Styldrift concentrator options investigated (continued)
>
Joint concentrator option with neighbouring mine:
•
>
Joint concentrator with Wesizwe (460 ktpm)
>
Phase 1 (280ktpm, system ready Q3 2016)
>
Phase 2 (180ktpm, system ready Q4 2018)
>
Total cost R4 756 million, opex R103/t, system ready Q3 2016
Studies predominantly related to:
•
Logistics movement of ore from Styldrift
•
Social and community impacts
•
Environmental approvals
•
Commercial terms
> Slide 19
Key outcomes of treatment of ore at neighbouring mines
>
Capital requirements to deliver Styldrift ore to neighbouring mines is significant
•
R750 million to R1.4 billion (excluding Impala concentrator plant upgrade)
•
Increases treatment cost per tonne by between R35/t to R55/t
>
No added value as a result
>
The risk profile of RBPlat is increased
>
•
Third party reliance/involvement
•
Risk of delay in meeting ore-processing schedule
•
More complex environmental approvals
•
Increased impact on communities
•
Commercial risk
Concluded that internal ore processing strategy is appropriate
•
Construct Styldrift concentrator or
•
BRPM plant upgrade
> Slide 20
Decision to upgrade BRPM plant
Description
Unit
Standalone 230ktpm concentrator
BRPM concentrator upgrade to co-process UG2
R’m
300
-
Blending facility for UG2 at BRPM
R’m
50
-
Styldrift I concentrator
R’m
2400
-
Conveyor from Styldrift to BRPM
R’m
-
332
Upgrade BRPM concentrator to 250ktpm
R’m
-
370
100ktpm module
R’m
-
1 298
Total capital estimate
R’m
2 750
2 000
Capital reduction
R’m
-
750
Standalone 230ktpm concentrator
BRPM concentrator upgrade
BRPM concentrator upgrade
>
Commits RBPlat to mining UG2 at BRPM
>
Capital reduction of R750 million
>
Requires a significant stockpile (± 900kt) of high grade
Merensky ore
>
Requires a significantly smaller stockpile (± 300kt) of
high grade Merensky ore
>
Provides less flexibility to the business
>
Potential to destroy value mining UG2 in adverse
conditions
•
>
250ktpm upgrade matches initial Styldrift ramp-up
profile
Flexible with respect to exploiting UG2 under
favourable conditions
> Slide 21
Styldrift I revised capital
Description
Unit
Total (mining and concentrating)
R'm
Optimised
Current
11 386
Variance
11 014
>
372
Revised capital cost
•
Project budget reduced from R 11.38 billion
to R 11.01 billion
•
Cash flow in accordance with revised project
schedule
Project schedule
Start date
Date
Mar-08
Mar-08
-
Service shaft: Sink to 708L
Date
Nov-13
Nov-13
-
Main shaft equipped & commissioned
Date
Dec-14
Dec-14
-
Service shaft equipped & commissioned
Date
May-15
May-15
-
>
Revised schedule
Production ramp-up
Ramp-up start
Date
Jul-15
Jul-15
-
Steady state
Date
Jun-18
Jun-18
-
Concentrating
Standalone 230ktpm concentrator
Date
Sep-16
-
-
250ktpm upgrade
Date
-
Jul-15
-
100ktpm module
Date
-
Jan-17
-
BRPM 250ktpm upgrade
•
–
Construction commence Q3 2014
–
Completion Q3 2015
100ktpm module
•
–
Construction commence Q3 2015
–
Completion Q1 2017
> Slide 22
The industry landscape
Industry facing short-term headwinds
>
Challenging macro economic conditions have resulted in constrained balance sheets
•
Costs have tripled since 2003 - (ca. 14% p.a. since 2007)
•
Producers forced to cut back capital expenditure
•
Mine closures in the past two years
>
S54 stoppages
>
Instability in the labour force – unprecedented levels of industrial action
•
Union rivalry
•
Increased levels of indebtedness among employees (rising living costs)
>
Shortage of water and power as well as escalating power costs
>
Threats to mining licences being revoked – Mining Charter requirements
>
•
26% BEE ownership still a challenge for some companies
•
Social and labour plan commitments
Uncertainty in regulatory environment
•
>
Implications for resource nationalism
Platinum mining companies have lost ca. 29% or R75.8 billion in market capitalisation during
2013 (Source: PWC SA Mine, 5th edition)
> Slide 24
Widening disparity between Merensky and UG2 Reef profitability
>
Majority of mines are getting deeper, industry average depth > 1 000 mbs within 10 years
>
Reserve depletion from 2015 – project delays
>
Merensky output and industry average head grades are declining
>
•
2000: 70% Merensky 30% UG2 ; 2012: 30% Merensky 70% UG2
•
Average head grade down 20% since 2004 with UG2 dominance
•
Production and productivity on the decline – per ounce produced
Widening disparity between Merensky and UG2 Reef profitability
> Slide 25
Base metals in Merensky provide margins
Producer revenues (Southern Africa), 2012 ($/4E oz)
1 800
100% MER or MSZ
[1.8 moz 4E]
1 600
Zimbabwean operations
Base metal revenue
Mixed reef or
UG2 with high Pt:Pd ratio
[3.6 moz 4E]
PGM (6E) revenue
75-100% UG2
[2.4 moz 4E]
1 400
1 200
1 000
800
Total revenues
(PGMs + by-products)
average $1,450/4E oz
Total revenues (PGMs + by-products)
average $1,368/4E oz
Total revenues (PGMs + by-products)
average $1,282/4E oz
600
400
200
0
Production (4E oz)
Note: MSZ – Main Sulphide Zone
Source: SFA Oxford
> Slide 26
Automotive industry remains major driver of platinum demand followed by demand for
jewellery in China
>
European demand for PGMs still subdued
•
Slow economic recovery
•
Sizable amount of above-ground stocks
>
Jewellery demand up slightly by ca. 1.2% during 2013
>
Weak PGM price environment
•
Despite strong offtake by platinum ETF investors (ABSA’s Newplat ETF having accrued ca. 910koz in 2013)
>
Chinese car market lifted global palladium usage in autocatalysts by ca. 4.9% during 2013
>
Palladium primary supply declined to ca. 6.27 Moz mainly due to lower Russian stock sales
>
Growth in the Chinese car market is having a positive impact on the demand for rhodium
•
Rhodium demand rose 4.5% to 960koz in 2013
> Slide 27
RBPlat competitively positioned
Competitive position on the industry cost curve
J.P. Morgan Cazenove Platinum Industry Break-even Analyser (cash cost + SIB)
Mechanised operations
Source: J.P. Morgan Cazenove – 25 September 2013
> Slide 29
8%
3%
4%
5%
5%
9%
11%
90%
14%
100%
UG2 (30%)
16%
MERENSKY (70%)
15%
2000
15%
High quality, shallow Merensky assets
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2012
MERENSKY (30%)
UG2 (70%)
Source : Chamber of Mines – 21 January 2013, RSA PGM Mining Sector Briefing Note
BRPM JV
>
Merensky : UG2 %
80%
•
Long-term Merensky contribution > 80%
•
High grade Merensky
•
Pt:Pd ratio of 2.3:1
•
High base metal revenue contribution
•
Low cost mechanised mining – 50% of production from 2018
70%
60%
50%
40%
30%
20%
10%
0%
Merensky BRPM
Merensky Styldrift
UG2 BRPM
Metres below surface (mbs)
0
500
1 000
1 500
Source: SFA Oxford
2 000
2 500
> Slide 30
R’million
Spending to grow
Expansion capital
>
Styldrift I expenditure for 2013 is forecast at R728 million
>
Conveyor belt linking Styldrift to BRPM concentrator (2014/2015)
>
BRPM concentrator upgrade to 250ktpm in 2015
>
BRPM concentrator 100ktpm module commission in 2017
Replacement capital
>
Phase III : Expenditure forecast at R200 million in 2013
SIB capital
>
Forecast SIB at 8% -9% of operating cost for 2013-2014
>
R2 billion of funding available to RBPlat
>
Cash flow from existing operations (BRPM)
>
Capital raising in 2014/2015 when opportune
> Slide 31
Outlook
Engagement with various stakeholders is key
>
Safety is paramount
>
Social partnerships to be strengthened
>
Regular and meaningful engagement with labour and the communities
•
>
To ensure stability
Collaboration with other PGM players in order to implement social and labour plan programmes
that will achieve significant social upliftment in the neighbouring communities
>
Producers need to invest in development and flexibility to sustain production
>
Investment required in finding new ways of doing business
•
Could mechanisation be part of the solution?
•
Alternative sources for water and energy
•
Smarter and more efficient technology in extraction and processing
•
More efficient ways of reducing costs of production
> Slide 33
Long-term PGM fundamentals remain strong
>
South Africa’s PGM supply expected to drop in the short term
>
Platinum market (excluding investment demand) expected to be in balance in the short term
while the deficit in the palladium market expected to increase
>
Introduction of Euro 6 in September 2014 set to lift demand albeit not substantially
>
More regions such as China and India to “catch up” with the strict emission regulations currently
present in Western economies
•
Bodes well for PGM demand in the medium to long term
>
Growth of European and Chinese platinum recycling expected to lift global recycling rates to 5%
p.a.
>
Positive momentum in palladium demand expected during 2014 with the launch of ABSA’s new
palladium ETF
>
Significant industry production not sustainable at current PGM prices
>
•
Industry needs a minimum rhodium price of $2,000/oz with the increased UG2 production
•
However, industry to be wary of pushing consumers (automakers) to look for alternatives
Long-term PGM fundamentals remain strong despite short-medium term headwinds
•
RBPlat well positioned to benefit and the timing of Styldrift’s production is opportune
> Slide 34
Thank You
Contact details
Lindiwe Montshiwagae
Investor Relations Manager
Royal Bafokeng Platinum
The Pivot, No 1 Monte Casino Boulevard,
Block C, Floor 4, Fourways, 2021
Tel: +27 (0) 10 590 4517
Fax: +27 (0) 86 219 5131
Mobile: +27 (0) 82 920 7803
Email: [email protected]
> Slide 36