Sylvania Platinum: (SLP.L, AIM All Share, Market Cap £217m, 78.5p, 4.9% of JIC Portfolio, Medium Risk/High Reward = 5.0% target weight. www.sylvaniaplatinum.com
Sylvania Platinum Limited produces platinum group metals (PGMs), including platinum, palladium and rhodium. The Company is engaged in extracting PGMs from chrome dumps and arisings and investing in mineral exploration.
Q1 update for the three months ended 30th September.
Conclusion: A little disappointing. Strong production in line with expectations (the best quarterly production for four years), but 15 per cent lower PGM prices impacted profit for the quarter. To some extent, good cost control mitigated the lower commodity prices. Taken on its own, this was a disappointing number. However, Sylvania Platinum has a strong balance sheet with net cash and plenty of added value developments to come. There has been some evidence of improved PGM prices in October – it would be nice to see that sustained. On current forecasts, the shares are valued at 4.7x June 2024 earnings per share (even at these low PGM prices) and are on a yield of 3.8 per cent. (The dividend is forecast lower given its new dividend policy). It goes ex a 5.0p dividend tomorrow. I’m glad I reduced to 5.0 per cent last week. Should the shares be oversold on today’s update and go ex-dividend badly tomorrow (i.e., fall more than the ex-dividend of 5.0p), it gives me the scope to add in the coming weeks. The share price performance will be all about PGM prices in the short term. If October’s recovery is sustained, then I would be hopeful that August’s low in the share price would be just that. I am looking to add back to my holding-on weakness.
Highlights
Sylvania Dump Operations ("SDO") produced 20,173 4E (25,533 6E) PGM ounces in Q1 (Q4 FY2023: 19,072 4E (24,383 6E) PGM ounces), in line with guidance for the Quarter;
No Lost-Time Injuries ("LTIs") were recorded during the Quarter;
SDO recorded $19.7 million net revenue for the Quarter (Q4 FY2023: $24.4 million);
Group EBITDA of $2.8 million (Q4 FY2023: $7.8 million);
Lannex MF2 flotation circuit commissioned with optimisation well advanced;
Improved recoveries are expected at the completion and commissioning of the Lannex fine grinding circuit; and
The Thaba Joint Venture ("Thaba JV") project execution is progressing as planned and ordering of long-lead time items and first construction packages are in progress.
Outlook
Commissioning of the Lannex fine grinding circuit expected by the end of Q2 FY2024;
Continuous operational performance improvements relating to the optimisation of feed sources, throughput, recoveries, and cost saving initiatives implemented;
An updated Mineral Resource Estimate ("MRE") statement for both Volspruit North and South orebodies is currently under review;
Preliminary Economic Assessment ("PEA") for the entire Volspruit project, along with the results from the metallurgical test-work are expected during H2 FY2024; and
The Group maintains strong cash reserves, which increased 2% in the Quarter to allow funding of expansion and joint venture ("JV") initiatives, process optimisation capital, upgrading of the Group's exploration and evaluation assets with the potential to return value to shareholders.
Commenting on the results, Sylvania's CEO, Jaco Prinsloo, said:
"I am happy with the good start to the new financial year where the SDO achieved 20,173 4E PGM ounces for the Quarter. This performance was achieved on the back of a solid production effort from all operations, with all plants exceeding production throughput targets, as well as the contribution of the new Lannex flotation MF2 circuit that also added to our performance.
"The 15% lower PGM basket price recorded during the Quarter impacted both the 4E revenue as well as the sales adjustment for the Quarter. Consequently, revenues and profits were lower than in Q4 FY2023, nonetheless, the Company maintained a strong cash position.
"On the cost front, SDO cash costs decreased 3% in both rand and dollar terms, benefiting from the higher ounces produced compared with Q4 FY2023. Operations continue to navigate higher global cost inflation impacts and thus operating cost focus remains a top priority for management.
"The Thaba JV announced during the Quarter represents a key milestone in Sylvania's growth strategy and is a significant step forward for Sylvania Metals in expanding our operations and leveraging the Group's expertise in the recovery of chrome and PGM concentrates. The orders of long-lead time items and first construction packages are in progress with civil construction works expected to commence in Q2 FY2024. Additionally, an updated MRE statement for both Volspruit North and South orebodies is currently under review. The PEA for the Volspruit project, along with the results from the metallurgical test-work are expected during H2 FY2024. The optimisation of value from the exploration assets remains a key component of Sylvania Platinum's growth strategy and will aid in supporting the Company's future value proposition for all stakeholders."
