Implats to strengthen PGM processing power with aggressive R8bn project rollout

IMPALA Platinum (Implats) today unveiled a new raft of capital projects totalling $521m (R8bn) aimed at boosting its processing capability in Zimbabwe and South Africa, as well putting more mined ounces of platinum group metals (PGMs) into the market.

All in all, Implats’ PGM production would be increased 300,000 oz a year.

The projects would take Implats’ capital expenditure numbers, including stay-in-business capital, from about R4bn a year previously to between R10bn and R12bn over the next four years, the company said.

Moreover, the company could easily accommodate the closure of a cash and shares takeover of Royal Bafokeng Platinum (RBPlat) and pay a dividend in excess of the current policy which is 30% of free cash flow before capex, said CEO Nico Muller.¬†“I would be surprised if we didn’t do that in the second half of this year,” he said of paying a higher than policy dividend for the 2022 financial year.

Implats’ expansion capital is less than a fifth of its expected free cash flow generation which is currently running at a clip of R15bn per reporting period (R30bn across the financial year).¬†This is owing to high PGM prices, especially palladium and rhodium. Implats’ basket of metals averaged R36,230 per oz in the first half of its financial year (ended December 31) against unit costs of R16,756/oz.

While Implats is facing heavy inflation on costs – an industry trend experienced by other PGM producers – Muller said the firm was convinced of the integrity of the PGM cycle.

“It won’t last of course,” said Implats head of corporate affairs, Johan Theron by phone. “The cycle will turn, but we are doing the right things to protect our balance sheet and the business by putting in short-term mining expansion and long-term processing capability. That’s an area we’ve always been strong in.”

The new projects include the $204m expansion of the Zimplats smelter in Zimbabwe effectively doubling capacity and freeing up room for additional smelting in South Africa which currently treats concentrate from the Mimosa mine in Zimbabwe.

A furnace debottlenecking programme of R496m will assist in boosting the reach of Implats’ South African processing facilities and includes a 300,000 oz/year increase in the firm’s base metals refining capacity. That positions the company to process mined metal from projects such as the Waterberg Joint Venture in which Implats has a 15% stake.

In addition, some R5.1bn will be committed over 10 years to the extension of the firm’s Marula mine. Marula will be given about 17 more years of life. This project also includes 40,000 oz/year of additional production.

Added to a number of mining projects announced by Implats a year ago (during its last interim results announcement), the 40,000 oz additional production from Marula will take Implats’ mined production some 300,000 oz a year higher. There is also the option of increasing production from Zimplats 100,000 oz/year but that project had not been approved, said Theron.

The capital rollout is an astonishing milestone demonstrating where the PGM sector has come in the last five years. In 2018, Implats’ share price plumbed an all-time low. Since then, aided by supply deficits in palladium, as well as in the markets of yet rarer metals such as rhodium which has pushed up prices, Implats is now worth 500% more.

Commenting on Implats’ mandatory offer for shares in RBPlat, Muller said combining its mines with those adjacent at Impala Rustenburg created significant flexibility in developing new resources. The development of 17 shaft in Impala Rustenburg could be delayed along with the Afplats project whilst the company weighed up its combination with the second phase of RBPlat’s Styldrift project.

There was “nothing in the pipeline” in respect of Muller’s previously mentioned ambition to diversify Implats into battery metals production, but he said it would “be senseless” not to consider potential business IvanPlats, a mining project owned by Canada’s Ivanhoe Mining.