Will Muller take the plunge and cut Implats’ loss-making platinum?

Nico Muller, CEO, Impala Platinum

IT will be interesting to see how Nico Muller opens his account at Impala Platinum (Implats), the company of which he was appointed CEO in December (effective April 2017).

His predecessor, Terence Goodlace, clashed with analysts early in his tenure in respect of the scope of Implats’s flagship mine, the Lease Area, now called Rustenburg assets. One analyst, Steve Shepherd, formerly of JP Morgan Cazenove, asked whether the Lease Area ought to be a much smaller operation? Goodlace stuck to his guns and pronounced the mine capable of a bigger footprint of about 750,000 ounces/year.

The question now is whether Muller will seize his best opportunity provided by his recent appointment to make meaningful production cuts at Implats? Analysts, including René Hochreiter of Noah Capital, estimated recently that up to 300,000 oz of the Lease Area’s production was losing money at platinum group metal prices. There is the sense that in hiring Muller, Implats recognised the work he was doing at South Deep, the Gold Fields mine where he cut production in an effort to reach profitability.

Imagine, for a second, Muller did grasp the nettle and cut Implats’ production? Added to production cuts already announced at Royal Bafokeng Platinum, Platinum Group Metals and Bokoni Mines, a reasonable portion of platinum output could leave the market.

Sibanye CEO, Neal Froneman, has also potentially identified some 200,000 to 300,000 oz/year in loss-making production at the Rustenburg shafts he bought from Anglo American Platinum (Amplats) that could be vulnerable. Might it be possible that around 400,000 to 600,000 oz/year of platinum supply could be curtailed by 2018?

According to the World Platinum Investment Council (WPIC), global refined supply is forecast to fall 2% to 5.92 million oz in 2017 of which South African production will be some 4.19 million oz – a 1% drop attributed to the closure of loss-making production and depletion of small-scale mining. The WPIC also thought that while the supply deficit would narrow, there would still be a deficit. The thinking now, generally speaking, is that they’ll be a small supply surplus.

“But the production cuts would need to happen, not just spoken about” said Chris Griffith, CEO of Amplats in an interview with Miningmx in July when posed with the question as to whether the platinum market was due for a turn in fortune. “Our plan is to continue doing the things we have set out to do,” he said of Amplats’ cost-cutting drive. “I do think it will take longer than a year for the negative sentiment to work through the market,” he added.

“I’ve been banking on this for eight months now and put 50% of my savings/pension into platinum ETFs,” said Peter Major, head of mining for Cadiz Corporate Solutions. “And all I did was lose 11% this year. But I am adding to my positions because I think I’ve just been a bit early,” he said in response to Miningmx questions.

“In mining we always seem to under-estimate the time it takes to cut and increase production,” he said. “But when it finally happens, it is difficult to reverse!”

Implats’ Muller will mark his first formal public engagement as Implats CEO on September 14 when the company reports its year-end figures for the 2017 financial year.


  1. If Implats cuts production will it not have a direct impact on it’s processing unit costs and have the inverse effect? They should have done a deal with SGL when they could have!

    • PGM Mining costs are ±70% of total Underlying Costs with processing only ±8-10%. So the production scale benefits arising from processing CANNOT compensate for incurring mining costs. Sibanye balance sheet could never shoulder the scale of Implats assets/liabilities so that deal was never going to be consummated without serious regurgitation, puking, hangovers etc…..

  2. Take the plunge Nico and don’t look back!
    Sad, but great news. Finally, the producers have learnt a thing or two from their OPEC counter-parts. You cannot allow your customers to set the price for your products. Do everything possible to influence and control your product. Production cuts will mean deficit in supply and the market will respond and we will see investments/growth. Lonmin will be rescued from the inevitable chapter 11. And PIC can breathe a sigh of relieve since it holds 30% stake of Lonmin. Policy uncertainty will not deter FDI, money talks and the rest follows.

  3. Nico must work with local communities to take impala rustenburg area forward.If you get local directly impacted communities support then you will be ticking the mining charter score cards in the right direction.
    This have been a problem for your mine for a long time and we will be waiting in september to hear what you saying regarding this matter

  4. It’s going to be very interesting to see what Nico Muller does/says on the 14th – he definitely has a window of opportunity. I continue to believe that Impala needs to run the Lease Area at no more than 500koz Pt pa. A view that I formed in 2012/13, when it became clear that the market could not support the production of low quality ounces.

    In the past it became clear to me that a number of platinum CEOs might have reasonably been accused of being “capacity hooligans” (courtesy of Nick Moore), and not understanding basic commodities theory. The proposition that continuing to produce loss making ounces in an oversupplied market damages the profitability of the “profitable” ounces was lost on many. And Mr Chris Griffith was certainly not an angel in this regard – though to be fair that particular CEO position was/(is?) probably compromised by the influence coming out of London. During the 2014 strike, he had an opportunity to shutter loss making ounces. He did not. Now Mr Froneman, having acquired (rather bravely) those assets for Sibanye may find himself having to do what should have been done years ago by Mr Griffith. And Neal will do just that if he believes it is required – he is no shrinking violet, as we all know.

    Maintaining unsustainable jobs back in 2014 was a poor excuse. Indeed, the labour unions could have learnt some valuable lessons by now if those jobs had been eliminated. So too could the DMR that has hardly rewarded the mining companies for succumbing to pressure to maintain jobs back in 2014 – read Amplats. The DMR has lately demonstrated that it is clearly not to be trusted insofar as it seems to be attempting to sabotage the mining industry with an agenda that is yet to be fully understood – although the Optimum debacle may give us some hints. What a mess.

    But “cometh the man, cometh the hour”. Maybe Nico will have the guts to do the “right” thing. Let’s hope so. And maybe that might act as a catalyst for others to follow suit. Lonmin needs to cut 200koz and as Mr Froneman has suggested, Rustenburg needs to cut 2-300koz. Impala a couple of hundred thousand ounces. And Union…. etc etc. Many of the older mines/shafts of the western Bushveld are, in my view, way past their sell by date. The DMR, the unions and some CEOs appear to have forgotten that mines are wasting assets and that mopping up loss making ounces is a recipe for disaster for the platinum mining industry.

  5. Dear fellow Readers,

    The analysis put forward by some for Implats to cut Pt production is just flawed , maybe due to ignorance of facts or downright misunderstanding of basic PGM mining business value drivers. I fcast the following for Implats FY17 results:

    1. Implats will continue to concentrate and operate-for-cash their old shafts (E/F , 4,6,7,8, & 9). Due to deflation in input costs across the industry, these shafts will be operated for longer , at higher Pt production, than most anticipate because of their low-cost & low capex intensity ( no reinvestments needed).
    2. Implats production will continue to transition to shafts 10,11,14,16 & maybe 1 (depending on its TCC). Production growth optionality will be provided by shafts 8, 12 & 17 together with shaft 20. The total group face length = 24km with IMS = >1,3 and Stope productivity = > 340m2/team.
    3. Implats will achieve its target >700koz Pt with Implats Refined = >1,45Moz Pt. With the Fcast depended on old shafts performances which i anticipate has been goodie FY17. anticipate FY18 Fcast = 700-750 Koz Pt.
    4. Given the trading statement in August, I expect Implats to have done well on costs containment. I expect TCC = R9K/4Eoz – R11K/4Eoz. The total year CAPEX= 650Koz/yr Pt. The Pt oversupply is due to other players, NOT Implats, unprofitable production. Implats had taken measures already by C&M shafts 8 & 12, with 14 at sub-nameplate capacity.

    You may ask why not cut production? The answer is that Implats has Debt = ±R8bn and has to keep producing to maintain its healthy cash balance of >R6bn.

    There is little loss making production in its base load production at the moment given the general trend of the PGM input costs which lowered units costs for older shafts thus helping their profitability whilst not hampering the production transition. The Cr2O3 contribution is helping matters too.

    So for production cuts advocates , I suggest that you look elsewhere NOT Implats!!

    Your truly,

  6. The Impala Lease area should be operated at >650 Koz/yr Pt. In the near term, Impala Lease area will have latent installed production capacity of >800Koz/yr Pt. CAPEX will be capped at <R4,5Bn/yr for the implats group.

    I wish for Implats to do more business development initiatives involving RBPlats. I still don't see/understand the business merits for RBPlats to hold onto Styldrift project. Buying the whole of RBPlats is a long-shot for Implats, but must be attempted again should the opportunity arise.

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