IMPALA Platinum (Implats) shares soared nearly 15% in heavy trading on the JSE yesterday as it appeared investors had digested and approved of the radical restructuring of the group’s Rustenburg mines announced early in August.
The restructuring will see Implats drop its labour force by 13,000 workers to 27,000 in two years; reduce the number of operating shafts to six from 11 and cut annual platinum production by 230,00 ounces.
Analyst reaction to the Implats’ plan is hugely divided with some recommending investors remain “underweight” and predicting an end-2019 share price of below R19 while others are calling the group a “buy” with a share price target of more than R80.
Implats’ shares dropped from around R20 to as low as R16 after the restructuring was announced but closed yesterday at R22,63.
Investor relations executive Johan Theron commented: “It’s very hard to say why the share price jumped. We don’t really know but yesterday was a futures close-out date and that might have had some impact”. Theron added that the Implats’ restructuring plan had been “well-received” by shareholders and investors.
“Everybody has been very supportive of the new strategic direction and we are happy to see that strong support. Investor concern now seems to have moved from the strategic plan itself to the execution of that plan.”
One of the key issues in the execution of the plan will be the reaction of organised labour – in particular AMCU (the Association of Mineworkers and Construction Union) – and the Department of Mineral Resources (DMR) both of which have heavily criticised the Implats’ proposal.
Theron commented: “You have to distinguish between the public statements being made and what is happening in the negotiations. The comments from AMCU should be viewed as a more of a ‘shot across the bows’.
“We have to go through this process as honestly and openly as possible. I think there’s a very good understanding of the challenges faced and the reasons why we are doing this.”
Citing the government and labour opposition a Goldman Sachs report stated: “We remain a bit wary of the potential outcome of the turnaround programme … we believe optimism surrounding the turnaround plan is a bit too early”. It added that the share price rally looked “overdone” and attributed it to the “strong guidance for financial year 2019 and the recent rally in PGM (platinum group metal) basket prices.
According to Citi analyst Johann Steyn: “We believe Implats has a credible restructuring plan since it address the two core problems; poor labour efficiency and poor capital efficiency. With a good financial year 2018 starting base, a credible restructuring plan, upside at spot and a depressed valuation, we continue to rate Implats a buy.”
