Sylvania Platinum (LON: SLP) has updated its dividend policy and it intends to pay 40% of free cash flow. The latest interim is 3p a share and Liberum forecasts a total 2022-23 dividend of 9p a share, increasing to 14p a share next year – although it may not be maintained at that level.
The tailings processor and minerals explorer, which has six platinum group metal processing plants in the Bushveld complex in South Africa, can afford this because it has $123.9m in cash. That could increase to $152m by June 2023. Last year $25.6m was paid in dividends.
First half production of platinum group metals increased to 38,471 ounces. This offset lower selling prices. Recovery levels improved to 56.5%. Investment in new plants is paying off and more investment is planned. The full year expectations are for production of between 70,000 ounces and 72,000 ounces.
Interim revenues were 16% ahead at $79.9m and net profit was one-third higher at $32.6m. The cash cost declined by 16% to $742/ounce. That is much lower than rival producers.
Exploration
Sylvania Platinum is reinvesting some of its cash in exploration. The most far advanced project is Volspruit, which has gold, copper and nickel. There could be an open cast mine.
There are plans to update the mineral resource estimate. The current estimate does not include the rhodium and other metals. Management will have to decide whether to spin off or the asset of find a partner.
There could also be mineral resource estimates for the Aurora and Hacra exploration projects.
Further tailings projects could be added to the portfolio. It could take 18 months or more for these projects to obtain permissions and get up and running.
The share price rose 5.2% to 105p, which provides a forecast dividend yield of 8.6% and that could rise to 13.3% next year. The dividend is not necessarily going to be consistent, because it will depend on metals prices and production levels, but it should continue to provide an attractive income for shareholders.