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20. Bull, Bear & Beyond – Sylvania Platinum: executive interview
10 Plays1 year ago
In this interview, we speak to Jaco Prinsloo, CEO of Sylvania Platinum, the AIM-listed, South African-based platinum group metals (PGM) tailings dump retreatment company and soon-to-be chromite producer. He provides detail on recent production achievements from the Sylvania Dump Operations, comprising six chrome beneficiation and PGM processing plants, and an update on the transformational 50/50 Thaba joint venture (JV). The JV marks the first time the company will generate revenue from the production of chromite concentrate, at a time when chromite prices are strong. Jaco also provides updates on three exploration projects that Sylvania is developing in order to attain sufficient information from which to evaluate various development or disposal options.
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Original interview published on 14/11/2024 and reposted as a podcast
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Transcript
Introduction to Sylvania Platinum
00:00:07
Speaker
Good afternoon, Yaku. um Nice to have you on this hondas program. We're going to be covering Sylvania Platinum today um with the ah with the Edison TV.
00:00:20
Speaker
um There's some questions that we've prepared that we'd like to ask you, and I think without further ado, let's just go straight into it. Thank you for the question.
FY24 Challenges and FY25 Start
00:00:29
Speaker
Sylvania FY24 production was under pressure due to the strike you had last year, but FY25 has started stronger and you have just recently released your Q1 results.
00:00:40
Speaker
Can you please talk us through the main highlights for the past quarter? Thank you, René, and thanks for the opportunity. And the um if we look at the past quarter, I'm very pleased to the progress we've made um so far during this first quarter, which has yielded strong um results in line with our expectations. I think firstly from my production point of view,
00:01:01
Speaker
We achieved a 12% quarter-on-quarter improvement from the last quarter-year, producing about 19,160 ounces. And we also, what's important, managed to achieve it safely. have no significant safety health environmentally, that's reported here in that period.
00:01:19
Speaker
As a result, we maintain our production guidance at 73,000 to 76,000 ounces for the 25th financial year, um and we're confident about production going forward.
Financial Performance and Cost Control
00:01:31
Speaker
On the financial front, although the PGM basket price and has seen an about a 2% decrease in the um ah USD and US dollars and about 5% in RAND terms, for the quarter specifically, it has since in the recent weeks seen a bit of an improvement, and the increased production and contributed for us to still post stronger financial performance. And our net revenue increased about 6% to $21.9 million dollars and for the quarter. And um a group EBITDA increased by about 16% to million dollars for the quarter.
00:02:07
Speaker
On the cost front, we've had and good cost control during the period and also aided by the increased production. Our group cash unit costs um a decreased by about 8% RAM and 5% in dollar terms.
00:02:23
Speaker
um So they're all a good financial performance. And then finally, we just gave updated some of our exploration and growth project, the Taba JV.
Taba JV Project and Production Strategy
00:02:31
Speaker
project is still on on schedule and on track to be commissioned in the second half of the financial year as we indicated earlier. And we also just um updated to investors on the and full spread updated scoping study that was released during August of this year. We'll be seeing an improvement in the project at TV and also in the life of mine for the project. So overall, I think a good set of results, which we are positive about.
00:02:59
Speaker
Excellent. Good start, FY25. Considering both the financial and production improvements during Q1, how did you achieve these and what levers can Sylvania still pull to increase its margin further? That is, is there further upside for the from the mill sale and Lisseti optimization strategy?
00:03:19
Speaker
And is FY25 guidance of 73 to 76k ounces of platinum brook nettles potentially conservative? Yes, thanks I think um you know we we mentioned earlier, um we saw this quarter production levels return to where they were pre-the strike affected levels and following a slower than anticipated ramp up after the strike period, obviously towards the end of 2024.
00:03:41
Speaker
But that you know if this and beyond behind us, so the production is strong and we expect a strong production performance for this year. So um we talk about margins because of our relatively high and fixed cost ratio.
00:03:55
Speaker
You know, the main levers we have to pull to improve margins in Sylvania is, you know, first of all, make sure we get and our production ounces maximized. So have the plants at full capacity and maintain production levels. and Then secondly is making sure we optimize PGM 3 grades into the plant because higher grades gives higher returns and and and also recovery efficiencies and then to maintain tight cost control. Obviously, the the basket price would improve margin significantly as goes up, but we're not in control all that.
00:04:26
Speaker
If we look in quarter one in particular, and we have saw a 7% improvement in the PGM feed grade, and that we achieved primarily through engagement of our host plants with some of the feed material that is and we received from the host plants at the SIA grade. Now, although we continue engage with them,
00:04:44
Speaker
to optimize the field blends. We don't have direct control over ah you know the exact mining areas, um ah but but we do have, at least can tell you what blends would be better for our process. And then secondly, from a grade point of view, we continue to treat some external higher grade third-party material at our eastern operations that we are buying in, that under the current BGM basket price, it is adding a significant value to our business case.
Initiatives for Efficiency and Quality
00:05:11
Speaker
Otherwise, you know, improvements um ah ah and continue to optimize and increase our general operational efficiencies, plant efficiencies, to ensure we can ah return additional and value. When we look at mill cell at Le Cedi in particular, as you mentioned, I think firstly... and At MillCell, we have progressed well and actually now in the last week commissioned a new column sale at MillCell that is aimed at improving our final concentrate quality and hence therefore our payability achievement. That's another way in terms of maximizing our margins. So we're looking forward as the we we um commission and optimize that column sale to see what returns we can get by improving our overall profitability and and payability on the metal.
00:06:00
Speaker
So um that's very well at Moselle and then at Le Sede in particular, where we um initiated a performance enhancement initiative in August this year. we are also seeing promising results with optimization and initiatives of the plant.
00:06:16
Speaker
I think also as part of the host mine's um a ah drive to improve chrome production, and they have recommissioned the Laceda Rome plant, which is located at our Laceda site. which has been care and maintenance up to now, um you know, since they acquired it back in 2017 from the health IFM unboggling.
FY25 Guidance and Market Strategy
00:06:41
Speaker
And they're recritching that plant, which will secure a higher grade current horizon feed source to our Laceda operation. And that is very positive and would make a significant improvement in Laceda's business case in going forward and and also their profitability.
00:06:58
Speaker
So, um you know, finally touching on on just the the guidance and does it do you think it might be too conservative? I do believe our guidance is currently accurate and well informed.
00:07:10
Speaker
and While Q1 was strong, and we talked about these other improvements, you know, Q2 and Q3 in South Africa are typically lower production quarters because of the host mines and mining industry general in South Africa slowing down over December, January festive period. so um So, you know, we provided our forecast for a bit of slowdown, although we continue 24-7 throughout this period on our plants. and We would treat lower-grade dump material than the higher-grade carotid risings and from feed sources. So we do believe that that at this stage, you know, our guidance is accurate and but we know at this stage we're seeing to change it. Okay, well, hold fingers.
00:07:49
Speaker
um What's quite frustrating sometimes, as the lowest-cost producer, PGM producer, With a 6% dividend yield and rising production, sometimes it's really frustrating to see your share price lagging the bigger producers with far less impressive results compared to you, Sylvania.
00:08:05
Speaker
Why do you think that is? Yeah, René, I... You know, talking about a shared price, unfortunately, you know, we don't have full control over it and especially compared to some of the bigger or primary PGM producers, as you mentioned, there are often, um you know, different listings um or investor sentiments, and implications or impacts. So it's difficult to do a direct comparison. You know, what we obviously try to do always is rather focus on the areas that we are able to control and, you know, which should inform, um you know, the the the value and the shared performance. So, and from that point of view, if we look at the controlling the controllables, I'm very proud of our um our strategy in that regard. And, you know, we um have a very consistent low-cost strategy
00:08:51
Speaker
and very disciplined discipline capital allocation policies and also cash management. And and the success of these strategies have been filtering through in our financial reporting you know over the years. Obviously, I think something that must play a role as well is the PGM basket price performance and trends. And you know that has impacted companies across the sector. And um and and many producers had to, um you know, affect the job cuts, cut some of the production expansion projects.
00:09:24
Speaker
Whereas, you know, we have actually increased our workforce through the expansion of the Taoba and we, you know, the continuing of the Taoba JB project. whilst maintaining our production level stable from existing operations, you know, and also looking at maintaining our exploration investment in the strategically to unlock value where we can there and also, you know, to make sure we fund projects like tower and explore further opportunities similar to that, and you know, all whilst um looking at maintaining our shareholder returns and maintaining our ESG commitments.
00:09:58
Speaker
So, um and I think that's the other important thing when you look at share price and and and value of Slovenia. We, threw out through the strategy that we have, we've managed to deliver some very significant shareholder returns during the past years. You know, a stable dividend since 2018. In this past financial year, 2024, we've paid out a a dividend significantly higher than our um as dictated by our um a dividend policy. So you know I think we'd we we'd be quite positive and proud about that. And then we've also had some significant share buyback and initiatives over the past couple of years.
00:10:36
Speaker
So I think I'm confident that um investors will see the value in um of a low cost of our low-cost strategy and being a profitable producer despite the market conditions. And we're sure that this will reflect and should reflect in our share price once a more favorable market environment returns. I think we're focusing on that. And i think maybe the last point that I know also investors look at this, continuously looking at and made growth.
00:11:02
Speaker
And you know that's partly the reason why we are looking and sought after to the the projects like the Tarbacheve to diversify our commodity portfolio, and which will give us bigger exposure to your Chrome and alternative revenues that we can maximize our profits.
00:11:23
Speaker
Certainly yeah a good outlook.
Diversification and Market Positioning
00:11:25
Speaker
Could you provide us with an update on the and the progress of your new Taba, the Chrome and PGM joint venture that you're developing? um And also, what's the outlook for PGMs and Chromite and how will it affect this project?
00:11:38
Speaker
no Yes, I think the Taba JV specifically is a very exciting and a transformative project for us as a company. I think um you know it represents a significant um and exciting diversification from our current ah business model and portfolio where we each just benefit from PGMs only at the our host mines. Although we so produce a significant amount of chromat already at our our current operations, and we don't derive benefit from it from the agreement with our host mines. But at Taba, we will see the higher exposure. to chrome revenues.
00:12:13
Speaker
And, you know, it will be quite significant because that's steady state. um Besides the 9% increase in attributable PGM ounces on our production profile, we would also have about 210,000 tons a year of attributable chrome. So certainly and something that um would be very positive for us, especially, you know, if any more favorable market conditions. But talking about the current markets and how that it impacts, because we have both the exposure to Chrome and PGMs, you know, it it it is ah it gives us, besides giving us commodity education, it gives you also and some shielding in the cycles in the in ah in the industry. And it's very rarely, if you look at the historical Chrome and PGM price trends, that both are down at the same time. And I think, you know, as as many PGM producers, the amount of benefit from Chrome.
00:13:00
Speaker
um You know, the Chrome of mine has said a couple of years ago, it benefits from the PGMs. so So we do look at both the the markets, I think, and and we do have a positive outlook still on both Chrome and BGMs. I think and the Chrome market has not seen the same difficult as BGMs in in this last year or two. In fact, they have seen very attractive Chrome devices. And if we look at the fundamentals of Chrome, where they supply yeah um South Africa with a major supplier globally, Stork, stainless steel, the bronze, the line forward. We have a robust outlook on on chrome chrome markets going forward.
00:13:36
Speaker
And then on PGMs, um you know, while we at have seen very low price environment in recent years, you know, we're also um confident that the PGM price will and will improve. You know,
00:13:48
Speaker
PGMs, or platinum, palladium and rhodium, as you know, in the and ah immediate and let's all turn my forecasted to be a deficit. And it's it's actually amazing that it hasn't reacted sooner already.
00:14:00
Speaker
But we do believe that there's strong and um demand and strong price prospects for for the metals. So in in both... um markets will confident. I think maybe just the last point on this chrome and PGM sector is the Tawa JV as it is at current spot prices where you have chrome higher and PGMs lower, you're probably looking at about 70 to 80% of your revenue will be derived from chrome versus PGMs. And if you look at longer term consensus prices, you're probably at 60% to 50% to 60% Chrome versus VGM prices. But it does give you that diversification and shield you in that position. And that's why it's an exciting project in what we believe still two good markets to be in.
00:14:46
Speaker
it's Like you said, I hope i hope they are counter-cyclical, so if the one's down, the other the one's up. um So a good decision anyway. But um just in terms of the market itself, we heard Sibania cutting it back about 200,000 ounces of PGNs at a still water mine in Montana.
00:15:02
Speaker
um Do you think there's going to be more production cuts coming Yeah, I think if you look at specifically the the PGM cost curve and, you know, where ah a lot of producers are under pressure in the current market, and you know, I do believe that there could well be um some further further further cuts in the m industry. And that should, you know, be supportive for overall market conditions if there is is production coming coming up i think... Also, the balance between PGM and Chrome prices, especially for the EGT producers, is is significant.
00:15:38
Speaker
But, um you know, we saw Chrome slightly pulling back this last few weeks and and that might put additional pressure on on on some of the major PGM suppliers. So I do think, you know, there is still definitely production under pressure in the current market. So so they could well be it. um You know, the but from our point of view, luckily, the the size of our production, where we are positioned in the lower um third or quarter out of third of the cost curve, we fortunately don't have to consider these um drastic steps. And um we we have announced a program, v steady we we're looking at optimizing of the operations, but we do believe that that is under control. And we don't anticipate any and specific cuts on on our side. And, and you know, we we, with the projects we have at hand, like the Talmadge AV, actually, as I said, we continue to invest in and making sure that they're important for us is to get that commission then operating as soon as possible, because then we can benefit from the current markets.
00:16:37
Speaker
ah You're in a verdic you're on very good spot on my cost curve anyway, on the quite close to the left-hand side.
Exploration and Future Potential
00:16:43
Speaker
um Just finally, Sylvania has three exploration projects on the northern limb indicating potential good value add, and your recent force-grade scoping study showed a significant increase in pre-tax NPV to $69 million. dollars What is the significance of this to the future of the false grade project, which is closer to smelters compared to Aurora, the other project that you have, with this potentially shallow higher grade reefs, Aurora that is. and What signal will you need to press the trigger to bring them into into production?
00:17:16
Speaker
Yeah, thanks. I think we're excited by the prospect of our exploration ah projects so with all the ongoing programs showing but potential and prospectivity for these projects to add value to our portfolio.
00:17:28
Speaker
app You have mentioned the full spread project. We have in just in August presented up updated scoping study on it. And as you mentioned, there was a significant increase in the in the NPV on it.
00:17:40
Speaker
I think, though, when you compare the returns to the existing dump progression or a project like a surface project, which is low-risk surface project like a Taba JV, then, you know, we believe it would be not on Champa yet.
00:17:55
Speaker
And it's, at the moment... and for us less attractive than and those kind of projects. However, um again, what are the levers to improve profitability on those projects? It is an attractive resource. We know um what the pipeline for PGM projects look like going forward.
00:18:11
Speaker
So I think it is a good good asset. And um the way is to improve that there is to make sure you improve metallurgical efficiencies so that you can get better concentrate grade and payabilities off your of your resource.
00:18:24
Speaker
of your resource And also, you know, to minimize your cost. And to that effect, we're currently busy with some optimization studies um on false spray to see, okay, from the NPV, which is favorable, and the the scoping study that we've done, how do we improve that? How do we make that more attractive um and more robust project? um in at even at the current PGM prices.
00:18:48
Speaker
as So that's where we are with Forskrat. And we have some promising results and that both in terms of constant quality and also at improving the digital performance that they we are working on and will, you know, throughout this financial year will be communicated to the market.
00:19:05
Speaker
Falsberg obviously from a regulatory permitting point of view and everything is closer to development if you want to would decide to develop it than the Aurora project which um we we have not done a scoping study yet. We have done MRE on a portion of the Aurora ore body but which indicated some very attractive and high grade trees.
00:19:27
Speaker
so um So our focus currently on Aurora is to prove the continuity of the resource along the entire strike deck because that would help us to say are the overall size of resources and then that potential. But I think from a sequencing point of view, you're probably full spread slightly ahead of Aurora.
00:19:46
Speaker
Well, I think talking about signals, I think certainly a um stronger PGM-baster price would it would help. Those projects don't have any chrome content to it, so it's reliant purely on the PGMs. It has quite a attractive base metal content compared to our current resources, which is very low in in base metals. So, know, copper and a nickel exposure those projects are also, you know, byproducts are significant.
00:20:08
Speaker
so um So, yeah, overall PGM and also base metal prices would certainly improve. And then the other a marker for us is to get the metallurgical performance. And then it will give you a better indication as this project can be developed.
00:20:22
Speaker
Thank you very much, Yaku.
Conclusion and Investor Appeal
00:20:24
Speaker
I think with the lowest cost in the business, I think, I'm pretty sure, um with the lowest labour complement per ounce produced and with the highest dividend in the ah in the sector, 6%, I mean, that's really quite high at this point in time in the in ah and the PGM cycle.
00:20:42
Speaker
I really hope that some investors will start focusing attention on on Sylvania. But thanks very much. Thanks very much, Yoko. Thank you, Rene. Thanks the opportunity. Thank you.
00:20:54
Speaker
thank you