Impala to raise R4bn in book-build

[miningmx.com] – IMPALA Platinum (Implats) is to raise R4bn through an equity issue with the proceeds to be pumped into completing the R3.9bn 16 and 20 shafts in the next three years, the company said.

Announcing its full-year financial results ended June, in which Implats posted a 58% decline in headline share earnings to 36 cents, the company said abandoning the projects would have “… a materially adverse impact on its the long term value”.

The shafts will take Impala Lease production to between 815,000 to 830,000 ounces a year by 2020 but including cutbacks also announced by the group today, there will be a 180,000 oz/year reduction on the previous 850,000 oz/year target from the Lease.

The equity issue comes at a time of sustained poor platinum prices, and other operational hiccups for Implats, which has seen cash fall by 39.5% to R2.6bn at the end of the year under review. No dividend was announced.

As a result, the company has reshuffled its project pipeline, slowing down the development of its 17 shaft and cutting capital expenditure by R1.3bn to R4.2bn for the current financial year. Working costs would also be reduced by R640m and overall group savings of R1.5bn for the current year had been targeted.

In addition, Implats has also reached agreement with its lenders to extend the term of part of its revolving credit facilities from one to two-and-a-half years while increasing the quantum to R3.5bn from R3bn. This comes amid a hefty 95% increase in net debt to R4.1bn.

Commenting on the equity issue, Implats said that roughly half of shareholders canvassed would support the move. This is despite the share having fallen 48% in the last 12 months, and a quarter since the end of May.

Shares in the company started the day some 13% lower but by midday the losses had moderated to about 7% as investors sought the likely discount that may be applied in the book-build, planned for a five-day period from October 6.

“The restructuring of our debt facilities as well as the proposed equity transaction announced today will enhance our ability to operate effectively and profitably both for the short and long term,” said Terence Goodlace, CEO of Implats.

Responding to questions in a media roundtable earlier today, Goodlace said: “We had to take decisive actions to mitigate the lower-for-longer platinum price outlook.

“But prices have further decreased and made our lives more difficult and we have gone back into our plans and have looked to make further cuts,” he said.

The new wave of restructuring follows an announcement in February of a five-year plan in which Implats targeted the merging and harvesting of shafts, as well as the deceleration of projects and a halving in capital spending.

At the time of that announcement, the dollar price of platinum was about $1,240/oz compared to the current price of $1,013/oz today. The rand had weakened to 13,50 to the dollar from 11.37, but this was not enough to offset the dollar metal decline.

Today’s announcement is further to the February plan and is a sign of the stress under which South Africa’s platinum sector is labouring.

“It really is very tough out there,” said Goodlace in opening comments to analysts in a presentation. “We could not have anticipated weakness in [platinum] price. Some of the things we are doing are not sustainable, but we have to survive.”