Implats CEO urges production stability amid volatile market and “rampant inflation”

Impala Platinum CEO, Nico Muller

IMPALA Platinum (Implats) kept platinum group metal (PGM) output at stable levels for its third quarter despite continued difficulties in the sector’s operating environment including inflation which group CEO Nico Muller described today as “rampant”.

Third quarter production of PGM concentrate declined 3% to 2.38 million ounces owing to lower volumes from assets it manages – down 4% to 1.7 million oz – and a 3% decline in production to 407,000 oz from its joint ventures. Implats also processes third party sales of PGM matte into concentrate which were 1% higher at 277,000 oz in the quarter.

Refined PGM production declined 6% to 2.35 million oz owing to the timing and extent of maintenance on its processing facilities. Refined production in the prior period was also boosted by destocking of the metal pipeline. Sales of PGMs were 4% lower than the prior comparable period with destocking – especially of iridium and ruthenium – again a feature of the prior period.

Muller said in February at Implats’ interim results presentation that South Africa was demonstrating “failed state” characteristics that was playing out in increased community unrest, exacerbated by the effects of Covid-19. He said today that Covid-19 related factors had led to safety stoppages that were likely to persist in the current quarter.

However, it’s the prospect of “rampant inflation” that may most alarm shareholders. Said Muller: “The operating landscape continues to be challenging.

“Escalating geopolitical conflict, rampant inflation, constrained supply chains and a tight labour market have compounded the production impact of extended safety stoppages and the operating protocols required to manage Covid-19”.

Inflation – as well as lower production – has become a significant feature of mining company results lately. Of 10 mining companies covered by Goldman Sachs, seven reported missed production targets while cost inflation – labour, electricity, fuel and consumables – was estimated to exceed 35% this year. On a net basis, cash costs were expected to increase about 15%, it said.

“We do not anticipate a rapid resolution of these challenges in 2022,” said JP Morgan Cazenove analyst Dominic O’Kane in a note, adding that Implats was facing “lingering operational risks”. The June quarter was seasonally a stronger one however.

Set against this, demand for metals remained strong, including PGMs. This was despite continued parts shortages in the automotive industry which the PGM market supplies.

“We continue to experience strong demand for our primary products from our customer base, despite the demand impact of constrained auto supply chains and the increasingly uncertain outlook for global growth,” said Muller.

Cash flow generation in the third quarter had been “meaningful”, he added.

Implats said in February it would spend R50bn over the next five years on capital projects targeted at increasing production of both concentate and refined PGMs. Muller said at the time he expected Implats to generate significant cash to foot the capital bill as well as maintain dividends.

Commenting briefly on Implats’ takeover bid for Royal Bafokeng Platinum (RBPlat), the company said it had acquired 37.79% of RBPlat following the acquisition of 493,990 RBPlat shares post the period end.

Implats was on target to meet revised refined production guidance for the year which was set at no more than 3.2 million oz in February. It had previously guided to output of 3.2 to 3.5 million oz.