RBPlats To Fund Expansion With Cash

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South Africa's Royal Bafokeng Platinum hopes to fund its expansion projects including one in the pipeline that could cost 10 billion rand ($1.4 billion) mostly through cash generated by existing operations, its CFO said on Tuesday.

RBPlat, a black-controlled, mid-tier producer of platinum group metals (PGMs), said on Tuesday when it released its interim results that its Styldrift II project could cost 10 billion rand and it was readying a concept study for it.

“We are in the very early stages of this ... and probably looking at a 10-year, 10-year-plus timeline,” Chief Financial Officer Martin Prinsloo told Reuters in an interview.

He added the 10 billion rand was a very rough estimate at this stage and would likely be funded mostly through capital generated by its Styldrift I project, which is scheduled to take off in late 2014 and is seen to more than double the group's platinum production to 610,000 ounces per year by 2017.

“Once it is up and more than doubles our production there will be a huge chunk of Styldrift II that will be funded from our existing operations ... over half,” he said.

He said the remainder would be funded from an “optimal” combination of debt and equity.

The Styldrift I project includes a concentrator and has been priced at around 11.8 billion rand and Prinsloo said over half of it was being supported by cash from the business.

Referring to the second phase of the project, he said the 10 billion rand figure just gave an idea of its potential scope.

“It's a 10 billion type project but I don't think you should take the 10 billion as the final cost. There are too many processes to be completed,” he said.


The company said on Tuesday that operating costs remained a challenge when it reported a 20 percent drop in first-half profit and they are expected to rise at a higher rate for the rest of the year, with wage hikes a big driver.

About 60 percent of the group's costs stem from labour, high even by South African mining standards, where they typically make up around 50 percent of the cost base.

Prinsloo said the group was hoping to contain this in the longer run by lifting production without adding significantly to its already high labour costs.

Styldrift 1 is heavily mechanized and so while it is expected to double group output, Prinsloo said it would likely add only about 3,000 workers to the company's current labour force of around 6,400.

The company last week reached a three-year wage deal with the National Union of Mineworkers. The increases per year ranged from 7 to 10 percent, depending on the category of worker.

This is typical of South African wage settlements which have been exceeding the inflation rate of five percent but Prinsloo said RBPlats could now plan with a fixed cost base for the next three years. Most wage deals in mining are for two years.

“We have stability and certainty on costs over the next three years,” he said. - Reuters

This is source I found from another site, main source you can find in last paragraph

Source : http://www.iol.co.za/business-report/companies/rbplats-to-fund-expansion-with-cash-1118966



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