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Sedibelo Platinum Mines achieved a record level of production with the lowest per ounce cost since its start of production in 2009.
Sedibelo Platinum Mines recorded more than 3.7million fatality-free shifts.
At its launch in 2007, Pallinghurst identified the platinum group metals (“PGM” or “PGMs”) industry as having attractive long term investment fundamentals. PGMs remain essential to a wide range of industries and do not have any substitutes in their main applications, particularly in automotive catalytic converters. An estimated 20% of consumer products either contain PGMs or use them during the manufacturing process. Demand for PGMs is also driven by their use in high-end jewellery, investments in physical metals and Exchange Traded Funds. Strong demand for PGMs is expected as the global population grows, economies expand and the consuming middle class in emerging markets increases. Given their key application in cleaning exhaust fumes from fossil fueled engines and their essential role in fuel-cells, the success of PGMs are directly linked to a desire for a cleaner and healthier existence.
As has been pointed out many times before, the supply of PGMs is constrained. The Bushveld Complex (“BC”), north of Johannesburg, South Africa, contains approximately 80% of the world’s known PGM resources and accounts for over 80% of the world’s annual output. Significant safety, operating cost and capital expenditure challenges arise from the ever increasing depth of mining, given the operating constraints, and limited global occurrences of PGM bearing reefs, production is likely to remain flat in the near to medium-term. The diverse and solid demand dynamics, combined with ongoing supply pressures and high barriers to entry, should bring stronger future prices.
During 2015, the PGM industry faced depressed metal prices and the consequent refinancing of highly leveraged balance sheets from a number of producers. Sedibelo’s strategy of avoiding debt has proven successful, and whilst it is not immune to those challenges, it remains unleveraged with in excess of US$82 million of net cash on its balance sheet at the year end.
Against this backdrop, Sedibelo achieved record production in 2015 with annual dispatches of almost 175,000 4E PGM ounces. Whilst management has been focused on cost containment, due to the depressed metal prices, Sedibelo is expected to record a loss for the year. Sedibelo continues to maintain its production profile with a firm focus on cost management and the delivery of profitable ounces.
Since the last reporting, Sedibelo has signed agreements with the IDC to partner with LifeZone Ltd in developing and implementing the “Kell technology”, an innovative hydrometallurgical alternative to the smelting of PGM concentrates. Kell is an environmentally friendly process, requiring only a small amount of electricity compared to traditional smelting, and has the potential to increase PGM recoveries. Testing has provided encouraging results with increased recoveries of not only 4E PGMs, but also base metals such as copper, cobalt and nickel.
Sedibelo’s existing open pit operations employ around 2,000 people, most of whom are from the North West Province, and many specifically from the local Bakgatla community. The expansion in the medium term of Sedibelo’s operations is expected to increase the number of sustainable jobs for the Bakgatla, and in turn become a catalyst for community development, providing lasting social benefits for the region. Of paramount importance, Sedibelo maintains a strong emphasis on worker safety, recently reaching 3.7 million fatality-free shifts.
Sedibelo maintains and develops local roads and water supplies, provides training and development programmes to improve mining related skills and also funds scholarships for local community members to attend full-time educational studies. This tangible commitment to, and involvement in, the local community is one of the cornerstones for the successful development of the PGM portfolio.
Whilst we are not immune to the challenges, we remain confident that when the market turns more supportive of PGM investments, Sedibelo will realise its full potential as an important producer.
Having in excess of ZAR1 billion of cash on its balance sheet, and no long term debt, Sedibelo has positioned itself well for this challenging environment.
As significant supply challenges continue for the PGM industry and demand has exceeded supply for the fifth consecutive year, many commentators are predicting stronger PGM prices in 2016. This has been supported by some price improvements in the first three months of 2016, with platinum prices exceeding US$1,000/ounce for the first time since October 2015.
Sedibelo, with its large, sustainable and relatively shallow resource base, is well-positioned to benefit from further price improvements and remains committed to undertake a public listing when market conditions are more favourable.