Action on troubled Rustenburg mines a “key imperative” – Implats CEO

Nico Muller, CEO, Impala Platinum

Impala Platinum (Implats) has dropped its refined platinum production guidance for the year to end-June to 1.46m oz from the previous estimate of 1.5m following smelter problems at the Rustenburg division.

CEO Nico Muller commented, “following operational issues affecting the smelter at Impala Rustenburg, which resulted in lower refined volumes and the stockpiling of metal-in-concentrate, all group furnaces are now operational and making steady progress in processing the inventory build-up.”

But he pointed out the furnace problems experienced meant not all the metal-in-concentrate could be refined before the end of the financial year hence the revised production forecast. Accumulated “above normal” pipeline stocks are expected to be some 100,000oz of platinum at the end of June.

In his report for the March quarter Muller also addressed the restructuring review underway at the Rustenburg division which was highlighted in a recent research report by JP Morgan Cazenove.

According to the JP Morgan report, Implats is the “most vulnerable” producer in South Africa’s embattled platinum sector and the report predicted that its Rustenburg mines would “burn more than $1bn in cash at current metal prices across 2018 – 2020, equivalent to Implat’s market capitalisation.”

Muller commented, “the elimination of high-cost production at Impala Rustenburg remains our key imperative and I am happy to report that good progress is being made with this operation’s strategic review to align the business with our lower future metal prices outlook.”

Muller added that, “the Zimplats, Mimosa Two Rivers and Impala Refining Services (IRS) again delivered outstanding performances during the period under review.”

Recent research by Noah Capital mining analyst Rene Hochreiter showed Two Rivers and Zimplats to be the most profitable platinum mines in the sector after Anglo American Platinum’s Mogalakwena opencast operation. Hochreiter said platinum mines had received a major revenue boost from the recent jump in prices of many of the metals they produced as by-products, in particular nickel, chrome, palladium and rhodium.

That was caused by a surge in demand following the imposition of sanctions by the United States on major Russian aluminium producer Rusal which many traders feared could be extended to Norilsk Nickel – the world’s largest producer of palladium and second largest nickel producer. But the improvement was temporary with nickel and palladium prices pulling back after the actions against Rusal were subsequently eased.

Muller said mining volumes from the Rustenburg division increased 16% in the March quarter while the mill grade went up 4%. Overall, platinum in concentrate produced across all Implats’ mining operations rose 7% to 309,000 oz (previously comparable March quarter – 290,000 oz).

Despite these improvements “in fundamental mining performance” Muller pointed out there was a 51% drop in refined platinum production in the March quarter to 71,000oz (160,000oz) because of the build-up in concentrate stocks caused by the electrical failure at the Number 5 furnace.

Muller said the group’s operating cost is expected to be between R23,600 and R24,200 per platinum ounce on a stock-adjusted basis for the full financial year and he estimated capital expenditure for the current financial year at between R4.6bn and R4.8bn.