Implats restarts tragedy-hit shaft amid sharp earnings fall

Implats' Rustenburg Mines 11 Shaft

IMPALA Platinum expected to lose about 60,000 ounces of platinum group metals owing to the tragic underground accident at its Rustenburg 11 shaft in November in which 13 of its employees were killed and 73 injured.

Commenting in a trading update on Wednesday – in which interim earnings were forecast to be at least a fifth weaker year-on-year partly owing to a 32% year-on-year decline in the basket price – the group said 11 shaft would resume full production in April.

Production was currently ramping up to 60% of capacity after submitting an investigation into the accident, paving the way for “formal proceedings” to be initiated by the department of mineral resources and energy.

Despite a week-long stoppage related to the accident at the 1.2 million oz/year Rustenburg shafts, Implats produced strong production numbers for the six months ended December, assisted by the integration of Impala Bafokeng, the former assets of Royal Bafokeng Platinum (RBPlat). They contributed 254,000 oz in the six months under review despite underground sit-ins in December and January in which former RBPlat employees voiced discontent over benefits.

Output from ‘managed operations’ increased 28% to 1.51 million 6E ounces. Excluding Impala Bafokeng, production was 7% higher. Implats described the 11% production increase (to 675,000 stock-adjusted 6E ounces) at Impala Rustenburg as “a step change in operating momentum”.

Total refined production, including saleable ounces from Impala Bafokeng and Impala Canada, increased 19% to 1.75 million 6E ounces (4% on a like-for-like basis) in the six month period.

One notable feature of the update regarding refined metal output was the “noticeable reduction” in loadshedding which resulted in “minimal attributable foregone production”; that is, inventories of concentrate, Implats said.

Refined inventory totalled 330,000 oz, the group said. The rebuild of No 5 furance at Rustenburg was started in mid-December with its completion planned for April.

The balance sheet was exercised during the six month period as Implats took 100% control of RBPlat from a 56.41% stake previously at a cost of R11.4bn in cash and 37.97 million shares. Implats closed the six months to December 31 with net cash of R5.2bn. It spent R2.2bn in growth capital during the period and R6.8bn in total capex (2022: R4.95bn) as a consequence of incorporating Impala Bafokeng.

Cash was negatively impacted by the contractual receipt of R1bn by Impala Bafokeng post period end, Implats said.

In addition to the accident at the Rustenburg shaft and the acquisition of RBPlat Implats also announced plans to cut staff amid a precipitous decline in palladium and rhodium prices. Implats recorded an average sales price for the basket of metals of R25,795/oz, a reduction of 32% from R38 117 per 6E ounce sold for the six months ended December 2022.

Commenting on prospects for the second half of the financial year, ended June, Implats said unit costs were expected to increase 5% to R20,350 on a stock adjusted basis. Rand depreciation during the period was insufficient to offset the sales price declines while Implats incurred heavier costs at its dollar-denominated assets in Canada and Zimbabwe.