Sylvania Platinum confident in future despite market difficulties

Sylvania Platinum reported record platinum group metals (PGM) performance from Tweefontein in its first quarter on Tuesday, contributing towards Sylvania Dump Operations (SDO) achieving 15,771 4E PGM ounces in the three months ended 30 September despite the temporary production suspension at Lesedi, though that was down from 16,289 ounces quarter-on-quarter.

The AIM-traded firm said SDO recorded net revenue of $29.8m net revenue for the quarter, down from $48.4m in the prior three months, which the board put down to the impact of a 29% decrease in gross PGM basket prices.

Group EBITDA came in at $13.6m for the quarter, from $28.7m in the fourth quarter, while the firm’s net profit fell to $8.6m from $14.7m.

Sylvania’s cash balances improved to $132.7m from $106.1m.

The board said the temporary suspension of operations at Lesedi extended through the quarter, and would be ramped up to normal capacity towards the end of the second quarter, as hydro-mining of the affected tailings dam facility began at the end of September.

It added that lower-than-planned run-of-mine and current arising PGM feed grades and associated recovery efficiency at Mooinooi impacted ounce production during the quarter, with the company working with host mines to optimise grades at source.

Looking ahead, Sylvania said a higher throughput rate and recovery efficiencies achieved by Tweefontein, which set a new monthly SDO record of 2,209 production ounces during the past quarter, was expected to continue during the financial year, and would assist to mitigate the impact of Lesedi's lower production;

Construction on the new tailings dam facility at Lesedi was underway, with completion scheduled for the third quarter.

The secondary milling and flotation (MF2) projects at Lesedi and Tweefontein, meanwhile, were on track to start contributing towards production as planned during the 2023 calendar year.

Sylvania said it was maintaining strong cash reserves to allow the funding of capital expansion and process optimisation projects, as well as the safeguarding of employees during the ongoing Covid-19 pandemic, and the upgrading of its exploration and evaluation assets, returning value to all stakeholders.

“I am delighted by Tweefontein achieving 2,209 ounces during September 2021, which is a new monthly record on both a plant level and across all operations and contributed towards a solid quarterly performance by the operations to achieve 15,771 ounces for the quarter, despite the interruption at Lesedi,” said chief executive officer Jaco Prinsloo.

“Although the planned precautionary temporary stop at Lesedi has resulted in approximately 1,100 ounces production loss for the plant since early August, I have to commend our management team and consultants in terms of their efforts to ensure we preserve the integrity of the facility and for the measures put in place to resume production.

“The 29% reduction in PGM basket price had a significant impact on the revenue for the quarter and also resulted in a substantial sales adjustment for the previous quarter's production that was forecast at higher metal prices.”

Prinsloo said the global computer chip shortage that was currently impacting new motor vehicle production and autocatalyst demand was “one of the most significant factors” driving the basket price movement.

“Most analysts only forecast this issue to be resolved by late 2021 or early 2022.

“PGM prices are however, still significantly higher than historical levels and by focusing on the areas that management can control, I am sure that we will continue to generate value to shareholders.”

Prinsloo said there was a “steady uptick” in PGM feed source grade and recoveries, despite the receipt of a lower volume of plant feed in this quarter, and that the costs of production were showing some improvement.

“Our capital projects, fully funded from current cash reserves, are progressing well and I am optimistic that the results of these efforts will steadily show themselves as we navigate our way through the 2022 financial year, and we remain confident in attaining our annual production target of 70,000 ounces.”

At 1144 BST, shares in Sylvania Platinum were down 1.01% at 107.9p.