Implats impairs mines for R1.69bn as metal shake-out hits sector

IMPALA Platinum (Implats) will announce R1.69bn in asset write-downs in its interim accounts ended December following 37% decline in platinum group metal prices. It makes for nasty reading as basic interim earnings will be 86% to 93% weaker year-on-year, according to a trading statement on Thursday.

The sector has been ravaged by heavy prices declines especially in palladium and rhodium last year. Anglo American Platinum (Amplats) also said today in a trading statement it had written down the value of some assets.

Implats took a R701m charge on its Impala Canada mine Lac des Iles which follows a R7.8bn write-down in August. The mine was bought for R11.9bn in 2019.

The write-down at Impala Canada was largely owing to the decline in the palladium price and “subsequent changes in planned operating parameters at this operation” that relates to Implats focusing on high grade areas which reduces mine life.

It also wrote down its Two Rivers Platinum joint venture for R987m. The asset, which is controlled by joint venture partner African Rainbow Minerals, is currently spending money on the R5.7bn ‘Merensky Project’ which envisages steady-state PGM production of about 182,000 oz a year by 2025.

The two asset revaluations are worth 188 cents in interim share earnings which are expected to come in between 112 and 224c/share for the period, Implats said in the trading statement.

Implats said cash costs were negatively impacted by the consolidation of the cost base of Impala Bafokeng in the period, and the weaker rand on the translated costs of Zimplats and Impala Canada, said Implats. But production from Impala Bafokeng helped offset some of the damage from weaker metal prices, as did an 8% rand weakening.

At the headline earnings and headline share earnings level, Implats expects to announce bottom line numbers of between R2.5bn and R3.5bn and – a decline year-on-year of between 75% and 82%. Share earnings would come in between 279 and 391c/share, a fall of 76% and 83%. Headline earnings and share earnings for the comparative period were R14bn and 1,654c/share respectively.

The numbers are not a huge surprise given how Implats’ shares performed over 12 months, down about 66%.

Reuters reported in November that Implats was offering voluntary job cuts to workers at some of its shafts in South Africa. “We are obviously doing everything to reduce costs,” Johan Theron, spokesperson for Implats told Reuters. “Labour is a big cost component so you always start with labour by offering voluntary separation packages,” he said.

Implats, which is due to publish its interim results on February 29 is by no means alone in its distress. Anglo American Platinum (Amplats), its rival, said in a trading statement today basic earnings would be 69% to 79% lower or between R10.1bn and R15bn.

The value of concentrate inventory held by the group declined by R5bn during the period which resulted in an increase in the cost of sales, it said.

It also announced asset write-downs but didn’t provide details. The group also suffered a loss on the disposal of its 50% interest in the Kroondal pool-and share-agreement. Amplats will announce its numbers on February 19.