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Royal Bafokeng milled production down 8.8%: Steve Phiri – CEO, Royal Bafokeng Platinum

Interims to end-June. Outlook to December not too promising.

SIKI MGABADELI: Royal Bafokeng Platinum has swung into a loss, reporting headline earnings down 152.1% to a negative 60.4c in the six months to June. RB Platinum also noted that the first half of the year had proved the most challenging since they took operational control of the Bafokeng Rasimone Platinum Mine Joint Venture in the North West in January of 2010. Delivered tons for the reporting period ended 1.6% higher compared to the first half of 2014, but its production output was 8.8% lower due to operational constraints.
    Steve Phiri is CEO and joins us now. Steve, thanks for your time this evening. This is your first loss since you started trading in 2010. What do you attribute it to?

STEVE PHIRI: This is the first loss. Quite a number of factors contributed to this loss but, in the main, it is the revenue basket price which has gone down quite exponentially.
    No 2, it is a revaluation of the stock – in the pipeline stock. Remember that we get paid after four months of the stock getting into the pipeline, because we have a single customer which is Anglo Platinum. They also treat the material, refine it and put it in the market. So during that four months you are exposed to the market’s ups and downs. So if the market goes up you benefit quite a lot, say, for month number one to month number four.
    In the circumstances the market went down and therefore we suffered quite a great deal. All in all, it was about 42c out of the whole earnings per share which brought us down compared to the similar period last year.
    And the third aspect is the tax settlement which took us down 67c. So all in all, we took in 74c, 42c, as well as 57c. If you look at the impact of all these three factors – one set, one set, one set – it’s more than 70% of the headline loss itself. And these are things that are beyond our control.
    But, even more, although we had carnages, production was higher that the comparative period last year. We were unable to mill all those toms because we had intermittent breakdowns of the plant. Remember that you produce the tons from underground and therefore you incur those costs. If you do not convert those tons into ounces, which then convert into revenue, you cannot account for those tons that you did not mill because you sell the ounces, you don’t sell the tons. So that also contributed to the loss we had.
    So, all in all, the mining production was quite good because it was better than the similar period last year, but we did not have the concomitant ounces which convert into revenue strength.

SIKI MGABADELI: Okay, so that inability to convert the tonnage was the problem. Was it load-shedding?

STEVE PHIRI: No, it was the plant, actually. With the breakdown of the plant quite a number of contributing factors with the rains, breaking down, and the gap of virtually breaking down. You could attribute it to quite a number of things, not the load-shedding, but the tripping of power as a result of overload because with load-shedding you reduce the load, and therefore there is no damage. But the problem comes when the power trips and …the whole plant stops, and that causes damage. So it did contribute to that.

SIKI MGABADELI: Is that part of the operational constraints that we were talking about?

STEVE PHIRI: Absolutely.

SIKI MGABADELI: What’s your outlook just in general, for yourself?

STEVE PHIRI: In the short term, and I’m talking of the next six months from now until the end of the year, the outlook is not quite promising. We see the prices remaining as flat as they are. We only hope that they don’t get worse than where they are now. It is a survival mode. We have engaged a gear of survival. We are moving quite slowly and tightening the belt.

SIKI MGABADELI: All right, we’ll leave it there. Thanks for your time today, Steve Phiri.

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