Last close As at 05/08/2026
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Research: Metals & Mining
Sylvania Platinum is a low-risk, high-yielding South African platinum group metals (PGM) dump retreatment operation. Despite a 15% fall in the PGM basket in Q124 versus Q423, the company maintained a healthy cash position of US$126.9m at end September 2023. Production in Q124 was better than we estimated. Unit costs were down in every cost category in response to higher ounces produced, but despite this, EBITDA and net profit were sharply lower. The company is controlling capex as capital allocation comes under the spotlight against the backdrop of weak PGM prices.
Written by
Rene Hochreiter
Sylvania Platinum |
Q124 results |
Metals and mining |
2 November 2023 |
Share price performance
Business description
Next events
Analyst
Sylvania Platinum is a research client of Edison Investment Research Limited |
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Sylvania Platinum is a low-risk, high-yielding South African platinum group metals (PGM) dump retreatment operation. Despite a 15% fall in the PGM basket in Q124 versus Q423, the company maintained a healthy cash position of US$126.9m at end September 2023. Production in Q124 was better than we estimated. Unit costs were down in every cost category in response to higher ounces produced, but despite this, EBITDA and net profit were sharply lower. The company is controlling capex as capital allocation comes under the spotlight against the backdrop of weak PGM prices.
Year end |
Revenue (US$m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
06/22 |
152 |
81 |
20.6 |
10.3** |
3.8 |
10.2 |
06/23e |
130 |
67 |
17.0 |
8.0 |
4.6 |
10.2 |
06/24e |
112 |
38 |
10.5 |
3.5 |
7.5 |
3.8 |
06/25e |
134 |
45 |
11.9 |
4.3 |
6.5 |
4.6 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments. **Includes windfall dividend of 2.25p declared in April 2022.
Q124 production results improve on Q423
Q124 saw 4 Element PGM production of 20,173oz in line with guidance and on an annualised basis above the company’s annual guidance of 74–75Koz 4E, noting that Q2 and Q3 are historically lower due to the festive season and fewer production days. Compared to Q423, Q124 4E PGM production was up 5.8%, all-in sustaining costs (AISC) were down 5.8% and all-in costs (AIC) were down 17.3%, a strong performance in USD given the ZAR/USD exchange rate was virtually unchanged. EBITDA and net profits were, however, sharply lower due to a 15% reduction in PGM basket prices over the two quarters.
The Thaba JV and exploration projects are on track
Contractors are on site for the Thaba project and civil works are set to proceed during Q224. Updated draft Mineral Resource Estimate (MRE) statements for the Volspruit projects are being reviewed. Re-logging of 75% of the Far North Project boreholes is 75% complete, with rhodium and ruthenium grades to be included for an updated MRE.
Valuation: Unchanged at 135.4p/share with Thaba JV and exploration
Our valuation and estimates are unchanged. We value the Sylvania Dump Operations (SDOs) at 104.4p/share on a discounted dividend model using a 10% real discount rate. We value the Thaba JV at 17.2p/share and we include exploration assets at book value (13.8p/share), resulting in a total valuation of 135.4p/share. With the inclusion of rhodium in the Volspruit project valuation, this could lift our valuation further, but we will do this after the updated MRE is published in H124.
Good Q124 results with chromite and exploration projects potential
The investment case for Sylvania is based on a low-risk dump retreatment operation to which the bulk of the valuation of the company can be ascribed. Sylvania has entered the chromite production market through the Thaba JV announced in August 2023 where it will see chromite income generated for its own account for the first time. It also has exploration assets in the northern part of the Bushveld Igneous Complex of South Africa which are being steadily progressed with updated MRE statements and a Preliminary Feasibility Study in H224 expected for the Volspruit Projects. Sylvania recently published first quarter results confirming its cash generative ability and strong focus on cost control and capital allocation.
Q124 results: Excellent production quarter
Exhibit 1 shows the quarterly results and the differences between them and our prior forecasts:
■
Essentially, we underestimated PGM production and overestimated PGM prices.
■
Sylvania produced 20,173oz of 4E PGMs in Q124, 5.1% higher than our estimate but in line with Sylvania’s own expectations. However, there are a number of public holidays in Q224 and Q324, which may see production restricted so we have not changed our full year forecast. PGM plant feed was 6.7% higher than our forecasts.
■
Our estimate for the basket price was 7.4% higher than reported by Sylvania. Again, it is too early in the year to change our prices, but we will monitor them carefully as FY24 progresses.
■
Plant feed grade was 8.3% lower than our estimates, but recoveries are expected to improve with the Lannex fine-grinding circuit and so, again, we have not changed our estimates for the year.
■
4E revenues were 9.6% lower than we forecast resulting in total revenues 19.6% lower. Total operating costs were 4.4% higher than our estimates resulting in EBITDA being 66.6% lower than our estimates. Gross margin was 50.5% lower than we forecast.
Although our forecasts for PGM prices for FY24 are higher than the Q124 actuals, we lowered our forecasts significantly in our update following August’s Q423 results. In our view it is too early to react at this stage and we have left our forecasts unchanged for FY24.
Exhibit 1: Comparison of Q124 results with Q423
|
Q423 |
Q124 |
Q124e |
Q124 vs Q423 |
Q124 vs Q124e |
FY24e |
Production |
|
|
|
|
|
|
Plant feed (t) |
702,236 |
666,824 |
693,142 |
(5.0%) |
(3.8%) |
2,782,643 |
Feed head grade (g/t) |
1.81 |
1.93 |
6.6% |
|||
PGM plant feed (t) |
359,658 |
358,602 |
336,174 |
(0.3%) |
6.7% |
1,375,513 |
PGM plant feed grade (g/t) |
2.89 |
2.94 |
3.20 |
1.7% |
(8.3%) |
3.05 |
Total 4E PGMs (oz) |
19,072 |
20,173 |
19,189 |
5.8% |
5.1% |
75,987 |
Total 6E PGMs (oz) |
24,383 |
25,533 |
24,734 |
4.7% |
3.2% |
98,063 |
Basket price ($/oz) |
1,581 |
1,344 |
1,451 |
(15.0%) |
(7.4%) |
1,681 |
Financials (US$m) |
||||||
4E Revenue |
21.8 |
19.6 |
21.7 |
(10.1%) |
(9.6%) |
100.3 |
By-product revenue |
3.5 |
3.3 |
2.8 |
(4.4%) |
16.4% |
12.1 |
Total revenue before sales adjustment |
25.3 |
22.9 |
24.6 |
(9.3%) |
(6.6%) |
112.4 |
Sales adjustment |
(0.9) |
(3.2) |
0.0 |
N/A |
N/A |
0.00 |
Total revenue |
24.4 |
19.7 |
24.5 |
(19.2%) |
(19.6%) |
112.4 |
Total operating costs (ZARm) |
289.8 |
300.5 |
291.7 |
3.7% |
3.0% |
1,295.9 |
Total operating costs |
15.5 |
16.1 |
15.4 |
3.8% |
4.4% |
68.7 |
Other costs |
0.70 |
0.70 |
0.65 |
(0.3%) |
6.9% |
2.91 |
EBITDA |
7.8 |
2.8 |
8.4 |
(63.9%) |
(66.6%) |
36.2 |
Net interest |
1.78 |
1.64 |
1.26 |
(8.0%) |
30.6% |
5.41 |
Net profit |
3.1 |
1.8 |
(42.5%) |
27.8 |
||
Gross margin (%) |
36.5 |
18.3 |
37.1 |
(49.7%) |
(50.5%) |
38.9% |
Basic EPS (USc) |
1.2 |
0.7 |
(41.7%) |
10.6 |
||
CapEx |
6.2 |
3.2 |
(48.0%) |
10.8 |
||
Cash Balance |
125.0 |
126.9 |
1.5% |
88.4 |
||
Average ZAR/US$ rate |
18.68 |
18.65 |
18.89 |
(0.2%) |
(1.3%) |
18.68 |
Spot ZAR/US$ rate |
18.89 |
18.94 |
18.89 |
0.3% |
0.3% |
18.94 |
Unit cost (US$) |
||||||
SDO cash cost /4E PGM oz |
660 |
639 |
(3.2%) |
|||
SDO cash cost /6E PGM oz |
516 |
505 |
(2.1%) |
|||
Group cash cost / 4E PGM oz |
824 |
782 |
(5.1%) |
|||
Group cash cost / 6E PGM oz |
645 |
618 |
(4.2%) |
|||
All-in-sustaining cost (4E) |
881 |
830 |
(5.8%) |
|||
All-In cost (4E) |
1,159 |
959 |
(17.3%) |
Source: Edison Investment Research, Sylvania Platinum accounts
Valuation
Our valuation remains 135.4p/share. We value the operating assets at 104p/share, the Thaba JV at 17.2p/share and the exploration assets at book value (13.8p/share), bringing the total value to 135.4p/share. We will update our valuation if our PGM price outlook changes and as and when the new MRE is published (expected in H124).
Financials
Exhibit 2 shows our forecasts to FY26. Our forecasts are unchanged since we published our FY23 year-end report on 14 September 2023, as detailed above.
Exhibit 2: Financial summary
US$m |
2021 |
2022 |
2023 |
2024e |
2025e |
2026e |
Year ending 30 June |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
PROFIT & LOSS |
|
|
|
|
|
|
Revenue |
206 |
152 |
130 |
112 |
134 |
165 |
Cost of Sales |
(55) |
(62) |
(61) |
(74) |
(85) |
(100) |
Royalties Tax |
(8) |
(7) |
(5) |
(5) |
(7) |
(8) |
Gross Profit |
143 |
83 |
64 |
34 |
43 |
57 |
EBITDA |
145 |
83 |
66 |
36 |
46 |
60 |
Operating Profit (before amort. and except.) |
142 |
80 |
62 |
31 |
40 |
54 |
Intangible Amortisation |
0 |
0 |
0 |
0 |
0 |
0 |
Exceptionals |
0 |
0 |
0 |
0 |
0 |
0 |
Other |
(5) |
(7) |
(6) |
(9) |
(10) |
(10) |
Operating Profit |
142 |
80 |
62 |
31 |
40 |
54 |
Net Interest |
1 |
1 |
5 |
8 |
6 |
6 |
Profit Before Tax (norm) |
143 |
81 |
67 |
38 |
45 |
60 |
Profit Before Tax (FRS 3) |
143 |
81 |
67 |
38 |
45 |
60 |
Tax |
(43) |
(25) |
(22) |
(11) |
(14) |
(19) |
Profit After Tax (norm) |
100 |
56 |
45 |
28 |
31 |
41 |
Profit After Tax (FRS 3) |
100 |
56 |
45 |
28 |
31 |
41 |
Average Number of Shares Outstanding (m) |
272 |
272 |
267 |
263 |
263 |
263 |
EPS – normalised (c) |
36.7 |
20.6 |
17.0 |
10.5 |
11.9 |
15.8 |
EPS – normalised fully diluted (c) |
35.9 |
20.4 |
16.7 |
10.5 |
11.9 |
15.8 |
EPS – (IFRS) (c) |
35.9 |
20.4 |
16.7 |
10.5 |
11.9 |
15.8 |
Dividend per share (p) |
4.0 |
8.0 |
8.0 |
3.5 |
4.3 |
12.0 |
Gross Margin (%) |
69% |
55% |
49% |
30% |
32% |
35% |
EBITDA Margin (%) |
70% |
54% |
49% |
32% |
34% |
37% |
Operating Margin (before GW and except.) (%) |
69% |
52% |
47% |
27% |
29% |
33% |
BALANCE SHEET |
|
|
|
|
|
|
Fixed Assets |
86 |
93 |
101 |
153 |
159 |
160 |
Intangible Assets |
45 |
46 |
46 |
42 |
43 |
46 |
Tangible Assets |
40 |
46 |
49 |
65 |
68 |
67 |
Investments |
0 |
0 |
6 |
46 |
48 |
47 |
Current Assets |
188 |
187 |
168 |
142 |
159 |
161 |
Stocks |
4 |
4 |
5 |
2 |
2 |
3 |
Debtors |
69 |
53 |
36 |
37 |
42 |
44 |
Cash |
106 |
121 |
124 |
96 |
107 |
111 |
Other |
9 |
8 |
3 |
8 |
7 |
3 |
Current Liabilities |
14 |
11 |
14 |
8 |
9 |
9 |
Creditors |
14 |
11 |
14 |
8 |
9 |
9 |
Short term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
Long Term Liabilities |
16 |
18 |
17 |
20 |
21 |
20 |
Long term borrowings |
0 |
0 |
0 |
0 |
0 |
0 |
Other long term liabilities |
16 |
18 |
16 |
20 |
21 |
20 |
Net Assets |
244 |
251 |
239 |
268 |
288 |
293 |
CASH FLOW |
|
|
|
|
|
|
Operating Cash Flow |
114 |
92 |
78 |
32 |
42 |
58 |
Net Interest |
2 |
2 |
5 |
8 |
6 |
7 |
Tax |
(47) |
(24) |
(20) |
(10) |
(14) |
(18) |
Capex |
(8) |
(16) |
(14) |
(22) |
(10) |
(6) |
Acquisitions/disposals |
0 |
0 |
0 |
(19) |
0 |
2 |
Financing |
(4) |
(20) |
(11) |
(1) |
0 |
0 |
Dividends |
(20) |
(23) |
(35) |
(17) |
(11) |
(36) |
Net Cash Flow |
39 |
20 |
7 |
(29) |
14 |
7 |
Opening net (debt)/cash |
56 |
106 |
121 |
124 |
96 |
107 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
Other |
12 |
(5) |
(4) |
1 |
(2) |
(3) |
Closing net (debt)/cash |
106 |
121 |
124 |
96 |
107 |
111 |
Source: Company accounts, Edison Investment Research. Note: *Excludes windfall dividend.
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