21 July 2011
Eastern Platinum
|
Year
End
|
Revenue
(US$m)
|
PBT* (US$m)
|
EPS* (c)
|
DPS (c)
|
P/E (x)
|
Yield
(%)
|
|
12/09
|
111.4
|
(0.4)
|
0.8
|
0.0
|
N/A
|
N/A
|
|
12/10
|
155.0
|
8.9
|
2.0
|
0.0
|
52.9
|
N/A
|
|
12/11e
|
158.9
|
21.1
|
1.1
|
0.0
|
96.2
|
N/A
|
|
12/12e
|
314.4
|
78.4
|
3.9
|
0.0
|
27.1
|
N/A
|
Note: *PBT and EPS are normalised, excluding intangibles amortisation and exceptional items;
$1.6/£.
Investment summary: H2 production on the up Ithas been a difficult first half for Eastern Platinum. Production of platinum group metals from the company’s flagship Crocodile River Mine (CRM) was down year on year in both Q1 (-17%) and Q2 (-33%) as a result of employee absenteeism following
the Christmas break, operational issues with respect to safety enhancement (in Q1) and illegal industrial action (in Q2). Nevertheless, the company has now appointed a mining contractor at CRM and expects this to contribute to a 29% increase in production in H211. Meanwhile on the eastern limb, Eastplats has awarded EPCM contracts and expects earthworks at its Mareesburg open-pit and plant to
|
NAV per share (c)
|
114.5
|
|
Crocodile River Mine: getting back on track
|
Net cash ($m)
|
346.5
|
|
commence this month.
Price 66.13p
Market Cap £601m
Share price graph
Share details
Code ELR Listing TSX, AIM, JSE Sector Metals and Mining Shares in issue 908.2m
|
Price
|
|
|
52 week
|
High
|
Low
|
|
124.0p
|
50.2p
|
Balance Sheet as at 31 March 2011
Debt/Equity (%) 0.3
Since Q310 when CRM achieved record PGM production of 37,798 oz (5PGM+Au), the mine has had three difficult quarters. However, compared to first half production of 45,915 oz, the company expects production to increase by 29% to 59,085 oz in H211. Given historic quarterly production rates of approximately 30,000 oz, a two- year wage deal with the unions and on-reef development at Crocette, Eastern Platinum should be able to achieve this, especially given the recent appointment of mining contractor JIC Mining.
Eastern Limb: Earthworks to start shortly
The bulk of Eastplats’ future production growth is expected to come from its eastern limb assets where the company is initially developing a new open-pit mine and concentrator at Mareesburg. EPCM contracts have been awarded and earthworks are expected to commence shortly, with commissioning by the end of 2012.
Valuation
In line with company guidance, we have reduced our estimates of full-year
production at CRM from 121,821 oz to 105,722 oz. As a result, our full-year earnings estimates have also changed from 3.3c to 1.1c, placing the shares on a prospective P/E of 96x in FY11, which reduces to 27x in FY12 on the back of our EPS estimate
of 3.9c (assuming PGM production of 147,814 oz). Given the shares have fallen
c 44% since the end of last year, the current price represents a good entry point.
Eastern Platinum is a research client of Edison Investment Research Limited
Business
Eastern Platinum is a mid-tier producer of platinum group metals (PGMs) on the Bushveld Complex. It has an 87.5% interest in the Crocodile River Mine, which it operates on the western limb. In addition, Eastplats has four development
projects on the eastern limb, Mareesburg (75.5%), Spitzkop (93.4%), DGV (87.5%) and Kennedy’s Vale (87.5%).
|
Valuation
|
2010
|
2011e
|
2012e
|
|
P/E relative
|
496%
|
N/A
|
311%
|
|
P/CF
|
17.4
|
28.5
|
15.3
|
|
EV/Sales
|
2.7
|
8.6
|
4.6
|
|
ROE
|
1%
|
1%
|
3%
|
Revenues by geography
UK Europe US Other
0% 0% 0% 100%
Analysts
Michael Starke +44 (0)20 3077 5727
Charles Gibson +44 (0)20 3077 5724
Andrey Litvin +44 (0)20 3077 5755
mining@edisoninvestmentresearch.co.uk