Sylvania Platinum Limited (OTCPK:SAPLF) Q4 2022 Results Conference Call September 8, 2022 7:00 AM ET
Company Participants
Jaco Prinsloo – CEO
Lewanne Carminati – CFO
Conference Call Participants
Operator
Good afternoon and welcome to the Sylvania Platinum Limited Full Year 2022 Results Investor Presentation. Throughout this recorded presentation, investors will be in listen-only mode. [Operator Instructions] The Company may not be in a position to answer every question received during the meeting itself. However, the Company review all questions submitted today and publish responses where it’s appropriate to do so.
Before we begin, I’d like to submit the following part and I’d now like to hand you over to Jaco Prinsloo, CEO, and Lewanne Carminati, CFO. Good afternoon.
Jaco Prinsloo
Good afternoon. And thank you for the introduction Paul. And as Paul said, welcome everyone to our 2022 financial year results presentation. And I’ll be joined today by Lewanne Carminati and our CFO, myself and Lewanne respectively been Sylvania for about 10 and 13 years. So hopefully, we can answer your questions at the end as well about the business, and we’d like to take the opportunity to highlight some of the features of our current year’s performance.
This is our orientation starting off overview of our business is Sylvania have a suite of assets that consists of both our current cash generating assets, which is called our Sylvania Dump Operations, which are situated on the Eastern and Western Limbs of the Bushveld Complex respectively so Africa as well as some own exploration assets for which we own mineral rights up on the Northern Limb of the Bushveld Complex.
So most of our cash and profits currently are generated from the Sylvania Dump Operations and at least proceeds from these operations that we’ve been reinvesting over the years to grow our business from the first single operation in about 2008 with the six operations we have at the moment, it further enables us to reinvest in growth projects and also now to develop and unlock value in our exploration assets. And more importantly, enables us to return value to our shareholders in terms of share buybacks, dividends, and growth, which we’ll discuss in a bit more detail as we go through the presentation.
Just looking at the year past and focusing on some of the highlights. I think, first of all, looking at our 67,000 ounce production for the year. It’s 40 ounce production, which I’m very proud of I think it’s a sterling effort from the guys, especially during the second half of the year after we’ve had some operational challenges in the first half as we’ve discussed and disclosed during our interim presentations and that mainly related to the tailings dam related interruptions at Lesedi mine and then also runoff mine feed grades at our Mooinooi mine.
But nevertheless, a strong performance and especially commendable in that period is our Tweefontein operation that posted record, monthly, quarterly and annual results record results for the operation during the spirit that really assisted us to come through strong at the end of the year. Looking at the basket price of 2008 at $90 an ounce that we realized for the financial year and it’s certainly not at an attractive price compared to historical levels. However, it is unfortunately 23% down on the previous financial year granted that the previous financial year so as he think record PGM prices.
And with the fact that it’s pulled down slightly in this current financial year obviously had an impact on our financial performance and we’ll talk about later. Offering from a sustainability performance probably the biggest highlight for us a year is worth mentioning is that 10-year lost time injury free performance by Doornbosch operation. We’ve achieved that in June and it’s also been recognized by the Mine Metallurgical Managers Association of South Africa as an industry award best-in-class performance so very well.
And then, focusing towards some of the more financial parameters, we’ve been very proud of 0.20 pence to 0.25 pence windfall dividend that we have paid and declared at interims and paid in April this year. We’ve managed to buy back 6.6 million shares during the years as part of the share buyback program. And after the share buybacks, windfall dividend and servicing our capital commitments and other stuff, we ended up with a cash balance for $121 million at the end of the financial year.
And through this, basically, the strong production performance and diligent capital management with the board have been able to declare a further 8 pence dividend that would be payable in December this year in lieu of the annual year performance. So overall, I hope that that would also be very positive for our shareholders. We will get some more detailed operational results, the PGM Feed Tons were slightly down. And as I said, the primary reason for that close to Lesedi tailings dam related disruptions that has since been resolved.
All five of our other operations have either met or exceeded the throughput targets for the year. So, overall, very good performance for the year, recovery was marginally down not because the operations performed poorer, but because of a higher contribution of ounces from one of our lower recovery efficiency operations.
And then finally, the resulted in overall answers in a full year basis being down about 4%. And I think also worth noting, from a recording perspective that the 67,000 ounces for you, production equates to about as almost 86,000 ounces 60 as some of our peers in the market report on a six year basis.
Obviously, because of the basket price reduction, you can see the net revenue, EBITDA, and profit figures all have a year-on-year decline. And Lewanne will touch more on the details of that in the finance section of the presentation. And as a remaining focus area, also the capital after group cash costs that increased about 19% year-on-year and we’ll touch on that primarily. However, we have a large fixed cost base that do that and then the global inflationary pressures that the industry as a whole face, certainly put pressure on this as well.
Finally, again, we’re very proud of the 8 pence dividend, annual dividend that we’ve declared. It’s a 100% increase on the 4 pence dividend declared in the previous financial year. And you know, adding it on to the 2.25 pence windfall earlier it’s over 10 pence return for the year.
From ESG point of view in perspective, I am very proud of the performance of our team this year. And particularly the standalone ESG report, that is the first time that Sylvania will be issuing a standalone ESG report to be published on our website this year alongside these results to give shareholders indication of what exactly it is, we’re doing into ESG and to highlight some of our particular achievements in that regard.
And as I sit down when the team has done a great job, and she’s going to just take us through more details of the specific ESC bonus, later in the presentation. So if we briefly just focused in on the detail, operational analysis of results and looking at how the individual operations performed over the year, I’ve mentioned already the Lesedi and to Mooinooi investment. It’s evident from the graph for the 2022 composition where you can see the lower contribution from Lesedi, the yellow bar at the top and also Mooinooi. And as I said, mostly resolved at the moment and you can see going forward are those two operations proportionally contribute more to our profile going forward.
In addition to the operational challenges being resolved, we continue in terms of our gross efficiencies and unlocking potential in our current operations and the addition of our secondary milling and flotation circuits, the MF2 projects at both Tweefontein and Lannex during the next two financial years is certainly going to contribute significantly to us even improving that profile further. Tweefontein forecasting commissioned by about at the end of this year from December onwards and Lannex in the — about the same time in the next calendar year. So that would bring us to about — the ounces from 2024 to 2025 financial years to be between 72,000 and 75,000 ounces, which I think a very good progress.
Without touching on other detail that we already mentioned, I think maybe worth just noting on this slide where I’ve tried to give a bit of a comparison of the previous financial year challenge as compared to what’s going on. I think we haven’t touched too much on the tailings dams at the moment. We are adding to get new tailings deposition facilities at both Mooinooi and Doornbosch constructed and commissioned during the next two financial years. And that’s primarily to cater for the increasing production from our host mines.
And as our response continue to generate current horizons and runoff mine material we need to create additional space for the tailings. It obviously has the benefit that we then get more material recruiting in extent the life of mine for our operations. So we have to cater for that and as part of our obligation in terms of our contracts and just focus on that. And then secondly, just also our remaining cost focus on across our operations to make sure we can address the current inflationary pressures.
So turning our eye a bit to the basket, our prill split and basket prices, I think, first of all, as many as you are aware, Sylvania had quite an attractive exposure to the rhodium plus where our currently close to 11.5% average for this first half financial year and I think just over 12% in the previous financial year, but compared to typical UG3 and Merensky ores is quite attractive rhodium exposure.
In saying that, as much as it’s attractive and giving us the upside in the up cycle in the market, when we saw record rhodium prices in the rhodium from one financial year. It does also explain the significant movement and decline of the basket price of the past financial year and you can see at the gross to the bottom line, it’s primarily the rhodium decline that has been drilling it.
I think analysts across the sector are all grapple with the difficulty where we are not just dealing with pure supply demand fundamentals in Europe also to take a view on the social political issues, war and conflict between Russia and Ukraine. You have to take the impact of the recent COVID lockdowns in China and general global fears about.
And then, it becomes difficult to forecast the metal prices going forward. However, if we look at demands and supply fundamentals going forward, we believe those are still robust and strong. The palladium and rhodium still lead in terms of their role as auto catalysts should improve going forward to the moment that you have car sales increasing again and improving that demand for that would certainly grow again and then from a platinum point of view is the hydrogen economy, and the demand for platinum in those industries going forward is certainly very attractive and looking forward. So, I think overall, we believe that PGM prices supported the short to medium term and because of the combination of the robust amount and also supply side precious.
Just to give you an indication of our various institutions view our or forecast the market. We’ve included the free institutions. we use frequently Standard Bank Securities as our in-house bank and banker. Nedbank Capital was doing extensive coverage of the betting industry in South Africa and then also Liberum Capital as our nominated adviser and broker. We looked at their views and you can see how they view the different metals over different years and as expected, and depending on what view you take on the geopolitical impacts.
And on the supply and demand, these views vary and for that same reason, we, in our forward looking financial, some of the indicative values in terms of EBITDA, we’ve given the presentation use August average as a base case, but then include the sensitivities, assuming this different price forecasts. To just give you an indication of how EBITDA for instance can change by applying the different forecasts and we’ll discuss that later in one of those slides as we go through the presentation.
So, yes, just saying that, I’m going to end over to Lewanne in terms of the financial section, and I’ll close off with some forward-looking slides at end.
Lewanne Carminati
As you’ve already mentioned, the drop in the 2022 basket price versus the previous financial year has impacted our revenue and profit for the year. We’ve recorded $152 million revenue on 67,000 for the answers, plus iridium, ruthenium, copper and nickel. Cost of sales increased 13% to $61.8 million and includes both direct and indirect operating costs as well as non-cash items such as depreciation and share-based payments.
The royalty tax is the mineral royalty tax on the royalty attracting ounces which decreased in line with the lower revenues and EBIT and income tax included flexible, tax on taxable profits generated by the ACO movement in the deferred tax and dividend withholding tax on dividends declared by the Sylvania metals operating entity in South Africa to so the new platinum. Net profit for the year is $56 million and earnings per share $0.0206.
If we look at revenue in a little more detail and comparing it to the revenue recorded in the prior year, the variance is made up mostly of the lower basket price received, which had a $45 million impact. The lower ounces reduced revenue by $8.7 million. The pie chart at the bottom of the slide illustrates the percentage six year revenue generated from the various metals with rhodium still generating the largest portion at 56% of our revenue, platinum 21%, palladium 15% and gold, iridium and ruthenium the balance.
Moving on to operating costs, all of our operating costs are incurred in South African rand and converted to U.S. dollars at the average exchange rate for the reporting period. The cash cost per ounce increased 11% year-on-year in rand terms and 12% in dollar terms. The increase per ounce is mainly as a result of the lower ounces produced in 2022 as well as higher electricity costs with a 9% increase in April as well as higher usage as the MF2 came on rand. Higher increase reagent costs and the increase in spend on community upliftment projects.
The forecast cash cost for 2023 to 2025 is converted at the 60 rand 70 to the dollar. Despite our increasing costs, the Company still remains in the lowest quartile of the industry cost curve. And we’ve included the Nedbank cost curve graph in the appendix for your information. It should however be noted that the cost reflected in this graph includes all capital. So, it includes the spirit capital spend on the upgrade of our mining assets and not just our SDO operating entity.
Group EBITDA for the 2022 financial year was $82 million in line with expectations and mostly lower as a result of the lower basket price. Based on a growth 4E basket of $2,642 per ounce, which was the August average. We’re estimating an $80 million EBITDA for 2023 increasing in 2024 and 2025 on the back of higher ounce targets. Any movements in the metal prices or exchange rate will obviously impact the EBITDA going forward.
The dotted lines on the graph indicate the EBITDA based on the Standard Bank, Nedbank and Liberum price forecasts. We’re reported a cash balance of $121 million at 30th June, up from the previous year’s $106 million. Cash generated from operations was $92 million, and the Company paid $24 million in taxes. $16.4 million was spent on capital, $14 million of which was spent on SDO capital, expansion projects, SIB and tailings dams, and $2 million was spent on drilling and upgrading of our mining asset resources.
In total, the Company spent $9.8 million on share buybacks, which includes the on market buyback in May and June of this year as well as shares bought back from employees in September and March. $22.7 million was paid in dividends split between the 4 pence annual dividends paid in December, and the 2.25 pence windfall dividends that was declared in February and paid in April. The board has declared an annual dividend for the 2022 financial year of 8 pence per ordinary share and this will be paid in December 2020.
As mentioned in the previous slides, capital expenditure for the year was $16.4 million. The new the Lesedi tailings dam and MF2 plant were both commissioned during the financial year and the construction of Tweefontein MF2 commenced during this year. CapEx for 2023 is expected to be around 22 million, of which 4 million is planned for further upgrading of the mining assets.
6 million for stay in business including the Mooinooi and Doornbosch tailings dam facilities, and $11 million on larger capital projects being the completion of the MF2 at Tweefontein, the construction of the Lannex MF2, the Fine Chrome, recovery in Lannex, and standout power at Millsell and Doornbosch. The 2024 to ’26 capital forecasts are mainly for SIB, and these capital forecasts don’t include any capital for growth projects, as these answers haven’t been included in our current profile.
Returning capital to our shareholders is a top priority. And as I’ve mentioned already, we paid the 4 pence dividend and the one full in during the financial year. And have declared the 8 pence dividend for this year. In total, we’ve bought back 35.8 million shares since 2015. And we’ve canceled 18.9 million shares. And to date, including the 8 pence dividend that was declared now, we paid at $71 million in dividends since our maiden dividend in 2018.
Moving on to our ESG. We are very pleased to have released our first ESG report alongside our annual results this year. As reported in our prior year, Sylvania has developed our ESG strategy based on our company values and aligned our ESG approach at the UN Sustainable Development Goals and the 10 ICMM Principles. Sustainability of our business is key and we are committed to making a positive contribution in the lives of our employees, the industry and as well as our host communities.
Our ESG journey over the first two years has evolved and the report aims to provide all stakeholders with an understanding of the Company’s influence and impact on the environment, employees and the communities in which we operate. This slide just summarizes some of the key information from the report, and I’ll touch on a few of these in the next three slides.
Under the environmental performance, alternative and renewable energy sources are essential to reducing our carbon emissions. Part of our process has been to establish current and future energy needs, securing energy required to operate our plants currently, and then improving efficiency with the ultimate goal being the reduction in and replacing of Scope 1 and 2 energy sources over the next three to five years.
We have a number of initiatives in progress to reduce the emissions in the short-term, including the investigating of synthetic fuels or biodiesel for generators, minimizing land clearance and disturbance wherever possible, management of non-mineral waste and the possible implementation of solar and/or gas at our administrative buildings and change houses at all of our sites.
What is the precious and scarce resource, especially in the dry parts of South Africa? Our approach to water management is two pronged, being the reduction in water usage. They were conserving this precious resource, but also securing sustained water supply at operations with a challenge in the past. The very nature of our business being that through treatment of tailings is good for the environment and through the extraction of Chrome and PGMs from tailings and current projects from our host line. We’ve reduced the impact on the environment.
Our social performance, we had focused on four main areas under the social banner. The first being women empowerment, and that’s both in the female representation in the workplace and up skilling a woman in our host communities. Woman currently represents 20.9% of our workforce, which is up from the 19% reported in the prior year.
Secondly, health and safety, we’re very proud of our health safety track record achievements and awards, which Jaco mentioned previously at Doornbosch. And we continue to strive for safety excellence. We’ve also recorded no section 54 stoppages or 55 notices in the current financial year.
We launched an employee wellness program, and this gives employees the immediate family and persons living in the same household free access to support services counseling, financial and legal services. Training and development has grown year-on-year and in addition to training and developing our own employees, the Company offers internships and mentorships to people living in the local communities.
We also have community support and upliftment programs, where possible, local communities are given preference for new and vacant positions at our operations and we’ve employed 64 new local community members this year. We have a number of outreach and development programs, which include feeding schemes, education projects, borehole water project, and campaign sponsorships including gender-based violence campaigns safety and environmental campaigns.
We’ve invested a total of $77 million or $5 million in local communities through procurement spend. Sylvania has also contributed $2 million for the financial year to the South African economy through the payments to employees, Texas and both local and greater community — local and greater procurement.
In 2022, we developed our ESG Reporting Toolkit, which established a set of criteria and baseline data. To help us map our ESG journey. We’ve also drafted our ESG Framework Policies. We’ve launched a number of ESG awareness training campaigns and included ESG related aspects in the induction program for new employees, which has helped roll out our ESG strategy in our organization. And we’ve embedded this strategy in our daily lives.
We pride ourselves on our clear and transparent reporting and through open and honest relationships, we remain accountable to all stakeholders and legal compliance is critical to our operations, whether it’s exploration, processing, or rehabilitation. ESG as a way of life at Sylvania, and we look forward to providing you with further updates as we progress.
Jaco Prinsloo
Thank you, Lewanne. And now, that we’ve looked at the historical performance of the Company, and we’ve addressed the past results because just a little bit of what you can expect going forward from us in the next financial year and beyond. So, firstly, in terms of our strategy and the value drivers, in order for us to ensure that the Company remains in a position to continue to generate attractive cash profits for our operations and in order to fund our working capital fund growth and fund our identified project pipeline.
It’s important that we look after the current business and ensure that we can continue to produce as we have done over the years. And the two pillars of ensuring that is firstly making sure that we maintain a safe and profitable production environment. And that’s looking after all our health and safety initiatives making sure we maintain a disciplined safety culture, and also ensure operational excellence and make sure that the new projects we bring online are properly optimized.
And as I indicated earlier, we are looking at about 68 ounces to 71 ounces for the next financial year, but as projects — identified projects come in line towards ’24, ’25, we could increase that to between 72,000 ounces and 75,000 ounces. Again, for a basis, as close to 100,000 ounces on a six year basis, if you would, again, look at some of the industry disclosures.
The second part very crucial to our operations is maintaining our license to operate. And you’ve, as you’ve seen and heard now ran at quite a detailed coverage of what we’re doing in ESG, we certainly have it as a primary focus area. And I think we are performing very well in terms of our progress and rollout of ESG throughout the organization.
And then secondly, making sure we maintain those relationships with our key stakeholders, the communities in which we operate our labor, which has been excellent relationship over the years and then also in terms of our host mines. And then from a tailings standpoint of view, as I mentioned earlier, making sure we get our permitting and designs in place in time so that we can cater for future production.
Then looking at growth of the business, they are two pillars in terms of regenerating growth and value going forward. The first one is unlocking value from our existing and old assets. And first of all continuing R&D and optimization on our existing Sylvania Dump Operations and nothing over the years, the value we’ve unlocked with the rollout or the move to circuits, the rollout of final crime, recovery circuits, and classification. And those all assisted significantly to go towards our profitability and stability over the years.
And then secondly is focusing on our own exploration assets. And as I said earlier, those are the exploration assets that we’ve acquired in 2019 already. But we haven’t progressed over the years because with the prevailing PGM market prices. But in recent years now, we’ve launched various initiatives to make sure we can understand the value better and unlock it so in order to generate the best return to shareholders.
And then the second pillar of this growth is to continue to look at external growth opportunities. And that within this that we replicate our proven and successful business model we currently have we leverage our current expertise, skills and reputation in the industry, of delivering on our promises and being a stable producer over the years to add value to third-party material and engage with the perpetrator.
And we have a number of parties we currently engaging with on exclusive basis are quite far advanced in terms of evaluating potential projects in the next slide, I’ll deal a bit more about that. And then obviously, as I continue to also look at it, additional room sources going forward. So to give you an indicative idea of what potential future projects can add and when you can expect, we’ve just indicated those four different areas for growth that I explained.
Just now and the first one is looking at the top line and that’s primarily the existing is their operations and that’s it, especially in the short-term, but less than 18 months, you can see the different analytics tools coming online. We’re already taking some third-party dump material on in terms of supplementing raid at some of our operations. So those agreements and meeting place those projects and execution of that capital provided for in our current capital profile that will end discussed earlier.
So that will carry on and longer term on our dump operations is focusing more on the Fine Chrome recovery and further improvement in PGM potential so that we could maybe unlock potential in some of the current feeder dumps, which would otherwise be sterilized. To say can we improve the grade further by removing the frame so that, it becomes a future potential feed source, so that we continue to investigate through our R&D efforts.
Then coming to the growth from still sticking to the same business model from our current tailings of runoff mine chrome or an enterprise perspective is our engagement with other stakeholders that I mentioned. And we believe that in the next 18 months to three years that there are potential projects that could come online and be investigating. So if we would be happy or successful with the commercial terms.
But as I said, we’ve already done substantial technical and commercial and legal due intelligences. You could add between 10,000 ounces and 15,000 ounces a year for each one of those opportunities. And we are particularly targeting eastern and western opportunity at the moment. And then obviously carrying on beyond the three years going forward is looking at the dedicated exploration program to identify more resources.
And then finally, slightly different from the core skilled strategy in terms of dump treatment is the primary platinum-owned exploration assets and other sectors of assets we and for more than 10 years already. But we didn’t pursue initially our strategy that it was a very high capital, high risk approach when we would need our own refineries to smelters downstream, which does offer it, our low risk and innovative brushed our business.
We then launched several studies to say, can we look at upgrading the resources so that we can get a salable concentrate grade so that would eliminate the need for expensive and risky tariffs and infrastructure and that’s exactly what we’ve been doing in the last two to three years. So in terms of both our northern assets, which consist of the overall macro resources and our forth break resources, we are looking at publishing updated resource statements and say, the next few weeks to a month.
And on the Volspruit, it could be on the Northern Limb of the operations and on the northern resources, we have identified trial area that represent about 10% to 15% of the total structure we own there to prove for a proof-of-concept. And based on that, we are doing our planning in the next 18 months to progress Volspruit current elementary economic assessment, which we’re awaiting the final report to a prefeasibility study and feasibility study, if at all, is positive. And then the Aurora section, which one part of the Northern Limb, we want to progress through a scoping study.
While we’re doing all of that, as I said to you earlier, we have owned these assets for long time and we own the mineral rights. So obviously, we have the pleasure of showing progress in terms of our process in terms of are we going to mine it or are we kind of create value in an alternative way. Once, we know what the feasibility of economic potential of these projects are, we can make a decision and say, is it worth spending these projects out and taking that cash and reinvestment for the dumb business.
Do we partner with maybe one of the bigger PGM producers who have the track record in mine, so that these are surface — open cost surface operations? So no risk, no cost attractive mining projects, which would utilize exactly the same metallurgical skills and experience we already have in our dump business. So that we would be able to do the metallurgical side for a decade straight across our partnership could well work with it. And I think the unlikely option, but still the option you have to evaluate is, say, which you look at development going further.
Again just being indicative in terms of timeline and the profile is each one of these projects Volspruit and in the northern project could each add approximately 70,000 ounces to 120,000 ounces a year. So in other words, doubling the capacity of the existing Sylvania, if you are fully attributable basis at the moment, but it is in the three to five year window of execution. So, it’s just to give you an indication of where what are the different opportunities in that regard.
So just to close off then and looking at the outlook, going forward, as I said, we have a proven track record. We will continue to deliver sustainable shareholder value, and we will continue on our combination of issuing dividends and share buybacks as and when opportunities arise. We have longevity in our operations asset. We have operational life beyond 10 years on this the current resources, and we’re the current growth prospects and our growth aspirations, we’re pretty sure that we are able to extend that.
Even further, in terms of profitable growth, I explained in the previous slide just a strategy how that ties in and focusing in towards a PGM market. And that we as I said, remain cautiously optimistic, we do believe that fundamentals are robust and supporting the price. And then in terms of earnings guidance, as I said, 68,000 to 70,000. So we’ve dug in for the current financial year, and then from ’24 onwards, we’re looking to increase above 70,000 ounces, 40,000 or 90,000 ounces.
So yes, that is, I think a wrap from Sylvania presentation, I would be happy to take some questions. Thank you.
Question-and-Answer Session
A – Unidentified Company Representative
[Operator Instructions] We have received a number of questions from investors. And if I may, I will start with the first one. Have you any plans in the near future to use some of your cash balance to buy back further shares in the Company?
Jaco Prinsloo
Thank you, Paul. I think we’ve, over the years had a strategy, more balancing share buybacks at the times when the board believes there’s this opportunity for us in terms of the value in our shares and also balancing off against dividends. We’re obviously very cognizant of the fact that some of our shareholders prefer a dividend and others prefer a share buyback, and I think it’s due to personal tax preferences.
So we try to have a balance of both. The philosophy still remains the same. It’s a utilization of our available cash resources. So, we — some of those our dividend policy states, we have to satisfy the requirements that we have additional working capital, provided that we have sufficient capital for our identified capital projects are allowed, that we can only our commitments in terms of the growth opportunities and aspirations we have and then also to keep healthy margin for unforeseen circumstances.
I think we’ve been able through the years to through COVID and through the current economic uncertainty to buffer any unforeseen circumstances. So I think we would continue to maintain the same balance and said we would maintain a balance between buybacks and dividends as and when it satisfies the criteria for us to distribute additional cash.
Unidentified Company Representative
Fantastic. Thanks Jaco. Next question we’ve got here. The problem with [indiscernible] has the board done anything yet to protect the Company from these issues?
Jaco Prinsloo
Look, I mean, it’s a constant consideration on the board. It’s definitely featuring high on our company risk register. It’s primary focus point first all the time. I think, considering the [indiscernible] maybe important to highlight. So, I think a lot of time what most investors would see in most of the individual or household consumers obviously is the load shedding impact, especially the business smaller businesses.
We are shielded to an extent from their direct load shedding through the industrial customers, relationships like our host mines have with the power utility. Because they can manage the demand on the smelters on one-side they assist the utility to manage power in those located load shading and in return for that the mines are normally not load shed or disrupted, because they absorb that impact on the on the smelter side or bus being located in the mines. We don’t have necessarily disruption to the same extent as private consumers and small businesses have.
However, we say miss a lot of the companies in the industry, we have incidents, sporadic incidents of vandalism, cable theft, supply substation disruption. We’re permitted to get copper from the bus bars and the cables. And those interruptions do impact on us. And based on our then analysis of those disruptions for the past few years, we have committed capital in this current financial year to our prices most significantly affected to put in backup power generation capacity.
And so Millsell and Doornbosch would be the first two operations that have that. Tweefontein has a full backup power generation and capacity. And that’s why one of the reasons Tweefontein has been our flagship in terms of stability and performance over the years. And then I think, looking at the country as a whole, the government have just announced in this last month that they are looking to the threshold they put on IPPS or independent power producers to produce energy, which was initially 1 megawatt moved up to 100 megawatts and the government are looking to do away with the limit altogether now with certainly both very positive for the industry as a whole.
And I think if you look at the Minerals Council of South Africa’s communications over the last few months, talking to their various mining clients, it seems like this number, I mean, I think they’ve got close to 70 individual projects, identified or ready to bring significant additional power capacity online. So, we do think that overall, we’re keeping a close eye on power risks. And as I said, we have our own mitigating measures in place, and we’re keeping a close eye on the developments within the industry and the country as a whole.
Unidentified Company Representative
That’s great. Thank you very much. Indeed, I think so many have touched on, but do you see platinum prices rising in near and medium term in the future?
Jaco Prinsloo
Look, I think I did cover on that. And as I said, the fact that we primarily looking at the use of our PGMs. We know palladium and rhodium are the bulk use is in automotive industry. We know that automotive sales have been significantly down, impacted by the global economy, both the impact of Russia, Ukraine, thinking I think in Europe, people are worried about increased energy prices and inflation and then you don’t buy new cost. In China, they’ve had the COVID lockdowns recently, with the new outbreak they’ve had and then a lot of the factories have been impacted in terms of production.
Those are all limits we think, if you look at some of the core sales forecasts going forward, a lot of the analysts are expecting that to improve and that would obviously an increase the demand again for the metal and that’s why palladium and rhodium in the medium term are forecast to remain in deficit. But you know, being that said, I think every industry has to — it’s difficult. You can’t just focus on the poor supply and demand fundamentals because the social, political and global economic parameters also impact on these prices. But as I said, we are forecasting that’s why we put the range in our prices. We’re forecasting since the current outlook is robust enough for us to work on. And then, I do think there might be potential upside looking at some of the analyst forecasts.
Unidentified Company Representative
That’s great. Thank you very much. Thanks [indiscernible]. In the past, I believe the material you posted at an estimated 10 year life left. Firstly, is this the case or do you think the opportunities available to you to acquire new clients can realistically materially extend this horizon? And secondly, does the Company have a realistic prospect of exploiting the mining rights has to a profitable mine of these, thus, reducing the reliance on acquiring new reprocessing clients?
Jaco Prinsloo
So I would answer it in two parts because, I think they are two different questions almost. The first one relating to the resource life, and as we indicated by that individual operation contribution in the production graph I’ve highlighted earlier. We have different operational life on the different operations. Some of our operations have life extending beyond 15 years and then others have a short operational life. That’s why we always say, we believe that we have a combined profitable life of at least 10 years or beyond that in our portfolio, with the current identified resources, current mine plans and the kind of infrastructure.
We do obviously looking at some of the potential from third-parties and seeing that there are projects that can add 10 to 15 year life, new life one to operations, and then that’s why we are pursuing these in detail. And as I said, we have the right management structures in place the overall infrastructure expertise to take on more opportunities and then that’s certainly, why it is a key focus area for us.
Looking at the question about realistically expanding or commercializing the exploration assets, I think certainly looking at projects in the industry and looking at the longer-term PGM demand fundamentals, there will be a need for future production. And then looking at the supply pipeline, there is a couple of deep level expensive projects in progress or in feasibility stages in the same area where we are. But I do think that, what makes our asset unique is that there is a shallow open cost operation, so cheap mining cost and low risk. And the fact that, we have done the work to upgrade the type of grades on the models to get us to a salable concentrate means that you bring down the capital and the downstream processing risk significantly.
Our deal with this is, we are well aware with our processes, we have excellent metallurgical and processing track record. But looking at the open cost mining operations and the current operations we have like Mooinooi and Lennox, we are treating open cost operations somebody else’s money for us in any case. So our plans are already treating runoff mine material. We are already treating a recovery in the PGMs from it. So it’s a ideal match to our current skill set and expertise.
So processing wise, it’s fine. And that’s why I said, we understand the potential of this one. We will decide to say, okay, do you then partner with somebody on the mining side, like we are partnering with our current those mines so that we can focus on our processing going forward, and add significant value or do you say, listen, it is not fitting the core skills and strategies of the Company. You spun it out and you reinvest that money, if you’ve been able to identify other third-party material in the dumps space.
So either way, the steps we take in current term exploration to understand our resource better and improve the confidence and the classification our resources is definitely adding value to shareholders. Because whatever step you take next will depend on the work we are doing now, that will unlock the value for you going forward. So, I think certainly the projects are attractive and they there could be definitely, in my view, I think, as a high prospect of realization, as commercial projects in the end, if we the guy’s taking you there or portrait of someone that is a question that we can only answer once we have more of the detailed information available that is currently being performed.
Unidentified Company Representative
Next, we’ve got here is any plan to commercialize the nickel resource of the Volspruit mine? Or is this something that’s been looked at especially given the nickel is substantially increasing due to demand for use component in high energy density batteries?
Jaco Prinsloo
Thanks Paul. This question actually ties in perfectly with the previous one. Volspruit mine is one of the as I said earlier, we have Volspruit and then the Northern Limb project areas. So those would be two respective mining areas. So it’s exactly what I’ve just been discussing to say the fundamentals quarters in terms of development. It could well be that you exploit it, so just then maybe touch on the nickel portion. That we have not discussed in the previous answer is, and I didn’t mention it there.
So while these are primary PGM resources, in contrast to our current chrome tailings or mine runoff material retreat, you basically recover PGM as a byproduct, while the host mine retained the chrome as their primary product. These open source projects are primary PGM projects and they’re in the same geological area as Anglo Platinum Mogalakwena Operation, which is the flagship lowest cost operation and biggest platinum mine in the world. So it’s geographically located there.
So those Northern Limb ores contain a significantly higher portion of nickel and copper. So the base metals and yes, it is very attractive from that point-of-view. And it is a big consideration, especially looking at battery demand and alternative energy demand going forward. That said, it has then obviously slightly lower rhodium or significantly lower rhodium content, typically on our properties between 4% and 6% rhodium compared to 12% rhodium in our current suite.
But you have the base metals almost 10 times the base metal content, in the concentrate than in our current SDO operation services. The nickel and copper certainly could be attractive. And but it’s a careful balance in the industry finding the offtakers that are able to accommodate the base metal capacity in the existing smelters and refineries. But again, as I said, the studies we’re currently performing would highlight all of those opportunities, challenges and requirements for us to make a decision going forward.
Unidentified Company Representative
It’s a growth in renewable energy likely to increase the demand for platinum in the near or long-term future. Is that like to offset the fallen demand due to the fallen use of catalytic converters?
Jaco Prinsloo
Look so, you have to understand just the applications. I think overall this is a slight shift in which element is being consumed in the different areas. So while palladium and rhodium, are currently primarily the auto catalyst, customers are last portion for palladium, Palladium has a portion of its consumption that’s industrial and that would probably continue to be strong going forward.
So you might have rhodium and palladium going down as vehicle as the traditional internal combustion vehicles are replaced with newer tech electric vehicles and also power more renewable power. But then to counter that in one part is increasing emission standards for this greener economy is, so while there’s fewer cars, the catalytic requirements or the loadings in the catalyst becomes increasingly more so that balance some of them out.
But then significant change and you will see that on the graph, I had the PGM prices looking at the long-term outlook for platinum. Platinum plays a major role in the alternative energy and renewable energy economy going forward and especially the hydrogen economy. So platinum is basically rolling platinum fuel cells. And therefore, we are fortunate to having platinum, in fact, more platinum than palladium and rhodium and our ultimate. So, if you have a drop in the palladium and rhodium, plus going forward we see platinum price significantly increasing, and as I said, looking at the expression project here with a further benefit of nickel and copper in that.
Unidentified Company Representative
That’s fantastic. Thank you very much indeed. And I think we’ve just got time, just get some quick answers. Last couple of we’ve got three, what’s the rationale for holding so much cash, especially the more volatile South African rand rather than say for U.S. dollar?
Jaco Prinsloo
Look, so I think the — we explained earlier how do we decide how much cash to hold and it’s also part of our dividend decisions to make sure firstly, we can based on the — our current view of the global economic walrus. So, you know, in the times of since COVID and also the current uncertainty with the conflict in Ukraine and other economic parameters, we did increase our standard working capital requirements from the four to six months already.
So that plays a big role in what we do. We do have to cater for our identified project capital expenditure. And you’ve seen that we have the higher capital forecast for the next financial year for the specific projects Lewanne had mentioned. Then we further have to look at the growth opportunities which are identified, so we need to make sure we have that.
And then for the last one is making sure we have enough capital to pay the dividends. So we in fact, at the end of this current financial year through June had more of our cash in dollars, U.S. dollars than we had in South African rand. But it’s important to note that South African and our all our operating expenses are incurred in South African rand and therefore, it’s important for us to keep adequate holding of rand in South Africa.
The rand that we do have in South Africa, we invest with reputable institutions at interest rate of about 4% to 6% in there. So, it’s not that at all philosophy and the team is very diligently managing all the time to ensure we have the right education, the right place, and over all that the Company work through the guidance of the board hosts that are demanded of cash on hand.
Unidentified Company Representative
That’s fantastic. Just conscious of the time. So I think if I may, you have covered off a lot of questions we have from investments because the Company will review all questions submitted, and we published responses to those on the investor meet company platform. And like before redirecting investors to provide you with their feedback, what you do now is important to you and the team should ask you for a few closing comments if I may, please?
Jaco Prinsloo
Okay. Thanks Paul, and as always, it’s a great opportunity. And we said since we initiated the first session of the investment company, off the COVID, it’s been a unique opportunity for us to get exposure to a lot more shareholders and potential prospective investors through this platform. So thank you for that opportunity.
So just closing on the Company, I think, as we explained throughout the presentation, like all PGM companies in the industry, both our financial performance and the share price performance is significantly dependent on what the PGM market does. I shared my views that we believe we have a robust outlook on that and therefore we quite upbeat about what the future holds.
But each investor would have to apply his own set of assumptions and risk appetite to determine where you play with prices in terms of future potential. However, and as I said, so what makes Sylvania unique investment opportunities is the fact that we have a very attractive suite of very attractive and stable cash generative operations, that gives us the opportunity to generate cash to invest in further growth and sustainability of the operations.
We have a proven track record of delivering on our promises and I think by an end of returning value to shareholders and by leveraging on that and just continue to do what we have been doing to-date, I’m confident that we would be able to unlock significant further potential for shareholders both from new opportunities, growth opportunities and from our exploration assets going forward.
And I hope that, there as shareholders feel that get the same many ways we believe we are delivering. So thanks again for the opportunity. And yes, as I said, we will get back on some of the questions that we haven’t been able to answer now in writing later. Thank you.
Operator
Jaco thank you indeed for updating investors today. Can I please ask investors not to close the session? You’ll be automatically redirected to provide your feedback and all the team can better understand your views and expectations. This will only take a few moments to complete and I know it’s greatly valued by company.
On behalf of the management team of Sravania Platinum Limited, I’d like to thank you for attending today’s presentation. That concludes today’s session. Thank you, and good afternoon to you all.
Jaco Prinsloo
Thank you.
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