Implats unveils record R7.9bn interim dividend as payout lifted to 40pc of free cash flow

Nico Muller, CEO, Impala Platinum

IMPALA Platinum (Implats) increased the dividend ratio to 40% of free cash flow before spending on growth capital to pay shareholders a R10/share interim dividend or R7.9bn.

This payout was the fruit of higher refined production, which increased year-on-year 29% to 1.69 million oz,  and a significant kickup in rand-denominated pricing. In rand terms, the basket of six PGMs sold by Implats was 71% higher year-on-year at some R35,635/oz.

On a headline basis, interim share earnings came in at 1,855 cents, an increase of 328%. Basic earnings increased to R25.1bn, equal to 3,222c/share from R3.4bn and 439c/share, respectively, in the prior comparable period.

The company said in notes to its interim results that the impact of Covid-19 on platinum group metal (PGM) markets was cyclical rather than structural. In addition, the release of inventory material lately would not stem pricing which would remain “elevated”.

As if to emphasis the point, Russia’s Norilsk Nickel announced that water ingress at two of its mines in its Polar division had resulted in the suspension of production. This division is responsible for palladium production of 1.2 million oz (about 10% of global supply) as well as 302,000 oz in platinum output, equal to 5% of supply.

The market was so strong, and with few operational problems experienced in the six months ended December, that Implats was able to reach its previously stated net cash target of R20bn with ease (R20.3bn). This was after capital investment of R2.7bn, an increase of 39% year-on-year.

Operational and market improvements also saw the partial reversal of prior impairments of R14.7bn which resulted in an after tax benefit of R10.6bn in profit of R25.6bn. The increase in refined production was also a result of the six month contribution of Impala Canada.

Implats surprised the market in October 2019 when it swooped on North American Palladium, buying its Lac des Lille mine for R10.4bn. It subsequently said it would pass on a control option over the South African project, Waterberg Joint Venture.

Implats maintained its previously issued guidance for this year of 3.2 to 3.5 million 6E oz in group refined production.