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Impala cans buyback, shares plunge
I-Net Bridge and Allan Seccombe
Posted: Thu, 20 Nov 2008
[miningmx.com] -- IMPALA Platinum, the world's second-largest platinum producer, said on Thursday that it has suspended its share buy-back programme due to the current global market conditions and to conserve cash.
Impala said it was adopting a cash conservation programme, reviewing capital expenditure plans and all projects in light of the global economic downturn and consequent rapid decline in platinum group metal prices.
This announcement comes a day after Impala said it could not justify the proposed R21bn plan to acquire Northam Platinum and Mvelaphanda Resources to get its hands on the 100 million oz Booysendal property as well as Northam's operations, including a smelter, due to poor market conditions.
There has been speculation in some quarters that Impala wants to reduce the cash component of its offer for the two companies. There are concerns that if the
platinum price drops further, falling into the $700-$800/oz level, Impala could really struggle to finance a new mine development, even if it is as shallow as Booysendal.
Analysts have said Impala really needs the Booysendal project though because it needs to reduce its exposure to Zimbabwe, home to the bulk of its resources, and shift away from the deep-level, technically challenging and very expensive growth projects it has in its pipeline.
The analysts think the deal will go ahead but on much revised terms.
By the end of trade on the JSE, Impala was 17% lower at R94 in line with the general market.
"Given the current global financial crisis and economic downturn, the rapid decline in platinum group metal prices coupled with lower cash receipts and the increased volatility within the capital markets, Implats has suspended its share buy-back programme," Impala said in a statement.
As at November 19, 2008 the company had completed
18.6% of the programme amounting to 5.5 million shares at a cost of R723.8m.
Impala said in August, when it released its 2008 full year results, would buy back 30 million shares, or 5% of its issued shares.
Two months ago, Impala said the change in market valuations in the last few months had created attractive buying opportunities, and that Impala's board had decided to take advantage of the lower share prices to initiate a buy-back programme that would have cost the company R8.9bn.
"Cash preservation is the company's major focus in the current environment, and both the board and management are reviewing capital expenditure plans, additional cost saving initiatives and all projects including the Marula Merensky and Afplats (Leeuwkop) projects," the company said.
These projects amounted to R9.7bn of the company's original five-year R30bn capital expenditure plan.
Impala reported a 6% drop in gross production to 1.91 million ounces
in its 2008 financial year.
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