[miningmx.com] -IMPALA Platinum (Implats), the world’s second largest platinum producer, sounded a confident note in its full-year results announcement today paying a final dividend and targeting one-fifth growth in production from its flagship Rustenburg operations by 2018.
“We have a plan,’ said Terence Goodlace, CEO of Implats since July last year. “We will deliver on what we say we can deliver on,’ he said in a conference call to media.
The key elements of the planned recovery and sustainability at Implats are improving the development and cost of recovery at Impala Lease Area in Rustenburg, which produced 709,000 ounces in the year to end-June, and having overall group production supplemented by the 120,000 ounce/year 20 shaft, the second phase development of Zimplats, and an incremental contribution from Implats’ 16 shaft project.
Goodlace also expressed his “firm belief’ in the recovery of the platinum market during the medium to long-term primarily owing to the growth in global vehicle sales.
Implats’ performance in the 2013 financial year, however, bore all the hallmarks of difficult operating and market conditions captured by a 23% increase in total unit costs to R16,570 per platinum ounce, ultimately related to lower production from Impala’s Rustenburg mine.
From a production perspective, gross refined platinum production – which includes platinum Implats refines through its refining facilities IRS – came in 9% higher at 1.58 million oz.
Mine-to-market production, which is output Implats produces from its own mines including its Zimbabwean assets Zimplats and Mimosa, was 2% lower at 1.21 million ounces.
Overall, headline earnings came in 52% lower at R2bn owing to lower production from the Rustenburg mine, cost increases that out-stripped inflation, and R2.3bn in impairments related to a R1bn write-down of goodwill on the acquisition of African Platinum in 2007, and R1.3bn from the non-payment of revenue by A1, Implats’s US-based recycling partner. A1 supplied IRS with 114,000 ounces of material for which the South Africans have not been paid.
Nonetheless, Implats paid a 60c per share dividend, nearly twice the 35c/share paid at the interim period. The total dividend came in, therefore, at 95c/share – a firm declaration in the group’s robust prospects. This is despite a free cash outflow of R500m during the financial year.
The balance sheet has been shored up following a R4.5bn convertible bond raised from offshore and local investors taking total cash and near cash equivalents to R5bn. Net debt was R1.6bn, higher than some analysts were expecting, and up from the R1bn at the year-end stage in the previous financial year.
Interestingly, Implats has also throttled back capital expenditure plans saying it would spend R5.5bn in the current financial year compared to previous expectations it would spend R7.5bn.
“Critically, Implats has slowed capital spend at 17 Shaft, with the shaft now expected to reach steady state production levels in 2023, two years later than previously guided,” said Justin Froneman, an analyst for Standard Bank Group Securities.
For the current financial year, Goodlace said mine-to-market production would be relatively stable at 1.2 million ounces.
However, total group production would not match the 1.58 million produced in the 2013 financial year owing to lower output from IRS as Implats was unlikely to accept production from A1.
By the 2018 financial year, however, Implats hoped to have lifted production from its Rustenburg mine to 850,000 ounces a year by 2018 partly owing to a recovery of production at existing areas and as its growth projects, of which 16 and 20 shafts will be key contributors.
In the meantime, Implats faces some immediate headwinds including the ongoing uncertainty presented by its exposure to Zimbabwe.
“All I can say is that negotiations are ongoing,’ said Goodlace of news that the Zimbabwean government planned to amend the proposed indigenisation transaction in which Implats is to “sell’ 51% of its stakes in Zimplats and Mimosa (the latter with Aquarius Platinum).
Re-elected Zimbabwe president, Robert Mugabe, said recently that the country did not intend to pay for control of the assets. This is in contrast to the term sheets signed by Implats in which the sale of the assets was to be vendor-financed.
Zimplats had lodged a formal objection and a compensation claim for the compulsory land acquisition gazetted on March 1 by the Zimbabwean government. In February, some 27,948 hectares of land was repossessed by the Zimbabwean government which said it did not intend paying for it.
The other major uncertainty in Implats’ prospects is wage negotiations, primarily with the newly recognised Association of Mineworkers & Construction Union (AMCU).
“We have only just started with wage negotiations. We are pretty open-ended on our expectations,’ he said.
