Implats to redeem convertible bond issued at PGM firm’s valuation ebb

IMPALA Platinum (Implats) has offered to redeem outstanding convertible bonds in terms of its R3.25bn issuance which has a 2022 maturity date.

“The group’s strong financial performance has allowed us to proactively expedite the strengthening of our balance sheet and increase Implats’ funding flexibility,” said Implats CFO, Meroonisha Kerber in a statement to the JSE.

The company sought to repurchase the bond in December, but investors weren’t that tempted believing that the share had some way to go. Shares in the company have gained about third since the end of the year.

Implats said today it had so far bought about 49% of the bond – issued in 2018 – at a cost of R8.8bn, equal to R55,740 per R10,000 bond. Shares in Implats are currently trading at R244,97/share, a gain of about 438% in the last five years.

The improvement in Implats’ share price is mostly a function of higher platinum group metal prices. In February, the company reported interim share earnings of 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.

Implats consequently 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.

The company also said at the time of its interim results presentation that it was assessing two growth projects that will add 262,000 ounces to its annual production – just over 14% of total output – at a potential cost of R10bn.

Implats maintained its previously issued guidance for this year of 3.2 to 3.5 million 6E oz in group refined production for its 2021 financial year.

The redemption of the outstanding bonds would reduce the potential dilution of existing shareholders “… and resulted in an effective buy-back of our equity at a market discount of about 13% at current prices,” said Kerber.