Royal Bafokeng Platinum Ltd. (RBP), a South African producer of the metal, may resort to using surplus cash for the first time to fund its Styldrift I project after prices weakened and costs climbed.
This year will be “challenging, from both a market and operational perspective,” the Johannesburg-based company said today in a statement. The cost of sales rose 50 percent in 2011 from a year earlier, including a 38 percent increase for labor, its biggest single expense. Platinum prices have lost 6.2 percent in the past six months to $1,708.13 an ounce.
Platinum companies in South Africa, which has the largest reserves of the metal, have suffered from a jump in electricity costs and worker demands for above-inflation pay increases. Anglo American Platinum Ltd. (AMS), the biggest producer, has frozen recruitment and may sell or shut mines in the country. Cost cuts will be a “key focus” this year, Royal Bafokeng said today.
The company, known as RBPlat, reported a decline in net income to 410.8 million rand ($55 million) last year from 3.17 billion rand a year earlier. The stock rose 2.4 percent to 61.71 rand at the close of trade in Johannesburg.
Mine Design Changes
RBPlat is completing revisions to the design of its Styldrift I mining project to meet government safety requirements. The company will reduce bord widths, increasing operating costs, Chief Operating Officer Nico Muller said in a speech in Johannesburg today. The rate of startup and the pace of extraction may also be affected by design changes, he said.
Styldrift I, near Rustenburg in the North West province, will reach a depth of 594 meters (1,950 feet) by September, a “major milestone,” RBPlat said. The company will complete a concept study on an expansion of Styldrift II this quarter, and is also considering a 360 million-rand conversion of a concentrator at its Bafokeng Rasimone mine, Muller said.
The cost of sales and profit numbers are based on RBPlat owning 67 percent of the Bafokeng Rasimone mine for 10 months and 100 percent for two months in 2010, compared with full ownership throughout 2011.
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