Implats cuts PGM forecast owing to refined inventory build, exacerbating metal supply worries

Nico Muller, CEO, Impala Platinum

IMPALA Platinum (Implats) cut platinum group metal (PGM) production guidance for its 2022 financial year to no more than 3.2 million ounces, about 300,000 oz less than previous forecast following a build in refined metal inventory.

Commenting in its interim results to end-December – which were characterised by a breakout in costs and disappointing deterioration in its safety performance – Implats said group refined output would be between 3.1 and 3.2 million (6E) oz.

It previously guided to output of 3.2 to 3.5 million oz (6E).

The group said in a trading statement in last month that “excessive wear” of a refinery, partly owing to the stresses imposed by the Covid related lockdown in 2020, would require an entire rebuild of the facility.

This news may exacerbate global PGM supply concerns amid the invasion of Ukraine which has resulted in widespread sanctions of the aggressor, Russia. Whilst outright commodity trading has not yet been banned, liquidity has dried up in the sector with some banks refusing to do business with Russia.

Speaking to press, Implats CEO Nico Muller said today there was “fear from possible sanctions” on Russia’s production of PGMs, especially palladium where it supplies about 38% (2.7 million oz) of total supply.

However, he doubted the market would be seriously disrupted citing the participation of China – which has declared itself a ‘partner’ of Russia –  which absorbs a significant portion of Russian production.

The price of palladium increased about $200 per ounce following the beginning of the invasion of Ukraine. It is currently trading at $2,512/oz – a six month high. Shares in Implats were nearly 7% higher on Monday – largely as the rand weakened –  taking total gains for 30 days to 29%.

Community disruption

Meanwhile, the impact of Covid hung heavy on Implats’ interim numbers. The group said in commentary to its production and financial numbers that the pandemic “… continues to be felt in constrained labour and skills availability” as well as “elevated absenteeism and heightened community dissatisfaction and lawlessness”.

Muller said activism in communities had increased both legitimately, from people wanting to create viable businesses, and illegitimately in the form of increased theft of copper cable from operating shallow shafts at Impala Rustenburg as well as illegal mining activities.

“I wouldn’t label it as a [procurement] mafia,” said Muller but he added that tempers among employees had also been stoked by Numsa (National Union of Metalworkers South Africa] which had sought to enlist existing unions members for itself.

Another lowlight was the death of six employees during the period in mining accidents. In November, the company reported a mud rush at its Rustenburg Mines 6 Shaft which claimed the lives of employees.


As reported by other South African companies lately, there was a breakout in inflation related costs. Cash operating costs were 12% higher in the period while unit cost inflation increased 17% to R16,756 per 6E oz.

Coupled with a deterioration in second half PGM pricing, which was linked to a reduction in components in the automotive sector, Implats reported a 9% reduction in interim earnings to R16,90/share.

Implats said, however, that the PGM market remained strong. The price of rhodium in particular was 29% higher taking the basket of PGMs 10% higher to average $2,417/oz. The rand strengthened though, so in terms of Implats’ price received the year-on-year increase was limited to 2% at R36,230/oz.

Said Implats: “Profitability and cash generation remained strong, indicative of the enduring robustness of the current PGM cycle”. In its new guidance, however, it warned of an increase in group operating costs of between R16,800 and R17,400 per 6E on a stock adjusted basis.

Implats declared an interim dividend of 525 cents/share, equal to R4.5bn. The group’s dividend policy is to pay 30% of free cash flow before allocating growth capital.

Set against strong long-term demand for PGMs, most of which returned to supply deficits in 2022, Implats bid cash and shares for shares in Royal Bafokeng Platinum (RBPlat). As of end-December, the company had a 35,3% stake in RBPlat which has subsequently declared Implats’ mandatory offer to its shareholders “fair”.

Implats, which offered R90 cash and 0.30 of its shares per RBPlat share, said there was a R9.2bn cash outflow and R6bn equity issue in terms of shares so far acquired. The company closed the period with R18.5bn in net cash.