Revenue and EBITDA are the sponsor’s targets; depreciation, interest, the rehabilitation unwinding charge, tax and net profit are independently re-derived. The mineral royalty is computed under the MPRRA formula and shown as a memo, as it is embedded within the operating costs that bridge revenue to EBITDA.
|
Year 1 |
Year 2 |
Year 3 |
Year 4 |
Year 5 |
|
|---|---|---|---|---|---|
|
Revenue |
1,200 |
2,800 |
5,100 |
7,900 |
11,800 |
|
EBITDA |
182 |
540 |
1,180 |
2,060 |
3,410 |
|
EBITDA margin |
15.2% |
19.3% |
23.1% |
26.1% |
28.9% |
|
Less: depreciation |
-95 |
-248 |
-397 |
-500 |
-559 |
|
EBIT |
87 |
292 |
783 |
1,560 |
2,851 |
|
Less: net interest |
-150 |
-391 |
-518 |
-542 |
-484 |
|
Less: rehab. unwinding |
-34 |
-37 |
-41 |
-44 |
-48 |
|
Profit before tax |
-96 |
-136 |
224 |
974 |
2,318 |
|
Less: taxation (27%) |
-0 |
-0 |
-12 |
-249 |
-626 |
|
Net profit after tax |
-96 |
-136 |
212 |
726 |
1,692 |
|
Net margin |
-8.0% |
-4.9% |
4.2% |
9.2% |
14.3% |
|
Memo: mineral royalty |
14 |
40 |
96 |
180 |
315 |
|
Memo: sponsor NPAT |
54 |
218 |
562 |
1,120 |
1,960 |
|
Variance to sponsor |
-150 |
-354 |
-350 |
-394 |
-268 |
Analyst flagThe early-year losses are real — and expected
Once the full R5.16bn debt’s interest, units-of-production depreciation and rehabilitation charges are loaded during the capital-intensive ramp, the re-derived accounts show losses of –R96m in Year 1 and –R136m in Year 2, well below the sponsor’s stated early-year profits. This is the normal financial signature of a greenfield block-cave development, where capital and financing precede mature production. The assessed losses are carried forward and shield taxation as profits emerge from Year 3, the Year-3 tax charge is only R12m as a result.
Year-1 ramp profile
Year 1 is not a steady-state year: production builds quarter-by-quarter as the cave is established and the concentrator commissions. The indicative quarterly profile below illustrates the intra-year ramp that underlies the Year-1 revenue figure, and explains why Year-1 debt-service cover is tight and supported by the debt-service reserve account, cash generation is concentrated in the second half.
|
Year-1 quarter |
Q1 |
Q2 |
Q3 |
Q4 |
|---|---|---|---|---|
|
Ore processed (Mt) |
0.6 |
0.9 |
1.1 |
1.4 |
|
Refined copper (t) |
3,354 |
5,031 |
6,149 |
7,826 |
|
Revenue (R m) |
204 |
264 |
336 |
396 |
The trajectory is characteristic of a well-structured mining development. Revenue compounds at roughly 77% a year off a low Year-1 base as the cave is drawn and processing capacity commissions; EBITDA margin expands from 15% to 29% as fixed processing costs are spread over rising volume; and net profit swings from early-ramp losses to R1.7 billion by Year 5. The gap between our re-derived net profit and the sponsor’s stated figures narrows over time as the debt amortises and the interest burden falls, by Year 5 the variance is modest relative to the scale of earnings, and reflects a more complete loading of depreciation, financing and rehabilitation charges rather than any disagreement on the operating economics.
