Implats’ full year headline earnings hit by lower PGM prices, disruption to metal output

IMPALA Platinum (Implats) will post a decline in earnings for the year ended June 30 which it put down to lower production and a 4.5% slide in the platinum group metal (PGM) basket price for the year.

Headline earnings, which exclude a credit in the previous year related the write back of assets, will be 8% to 16% lower falling to between R30.5bn and R33.5bn. Headline share earnings will be between R36,69 to R40,30 per share.

Lit up by its blockbuster takeover proposal for Royal Bafokeng Platinum (RBPlat), the 2022 financial year has nonetheless proved challenging for Implats, especially operationally.

A period of extended maintenance on its No. 3 furnace combined with community disruption at the mines and Eskom-related power interruptions led to a 3.6% decline in gross concentrate production for the 12 months.

Gross concentrate of 6E (six elements) production consequently came out at 3.17 million ounces compared to 3.29 million oz in the previous year.

Post the furnace downtime, gross refined volumes fell 5.6% to 3.09 million oz compared to 3.27 million oz previously when Implats benefited from increased availability of processing capacity due to the timing of annual processing maintenance.

Implats offset the lower refined volumes and general decline in PGM prices by selling metal from inventory in order to benefit from specific price movements.

Shareholders in the company will also gain from Implats’ share of profits generated by RBPlat after the company acquired a 37.83% stake in the business. However, shares in issue increased to 831.25 million from 784.43 million in the prior period as Implats’ offer for the RBPlat shares is partially in shares.

Last month Anglo American Platinum (Amplats) announced a 42% decline in interim earnings as a result of lower prices as well as a year-on-year decline in sales related to stock build-up in the previous period that was unwound.

Normalised sales from Amplats and lower supply from Implats ultimately bodes well for PGM prices long-term where supply is unlikely to increase markedly, if at all.

Implats is due to report its full year numbers on or about September 1.

The presentation will be eagerly anticipated for CEO Nico Muller’s update on progress with the proposed takeover of RBPlat as well as his assessment of social conditions at the mines. He has been one of only a few CEOs to publicly call out the impediment posed by disruption to mining operations.