IMPALA Platinum (Implats) said on Tuesday headline share earnings would be 40% to 49% weaker for the six months ended December.
The rand value of platinum group metals it sells fell eight percent during the period while the rand also strengthened which rubbed out benefits from higher production.
The outcome for shareholders is share earnings of between R1,84 to R2,17 compared to share earnings of R3,65 for the comparative interim period ended December 2023. Shares in Implats fell 4.4% in Johannesburg and reining in gains year-to-date totalling 1.5%.
Headline earnings would be between R1.65bn and R1.95bn for the period. This compares to R3.26bn in the six months to end-December 2023.
While there’s little Implats can do about market prices for platinum, palladium and rhodium there were signs of improvement operationally.
The problematic Impala Bafokeng, assets purchased in the takeover of Royal Bafokeng Platinum in 2023, turned in “stable production” of 254,000 ounces in concentrate. Impala Bafokeng also benefited from improved efficiencies at Styldrift.
Implats CEO Nico Muller commented previously that Styldrift was operating at 70% of capacity, but incurring costs – “resourced” as he put it – for 100%, equal to 300,000 oz/year. He said in February last year it would take 18 months to deliver efficiency improvements. Bafokeng production also includes the Bafokeng Rasimone Platinum Mine.
Implats’ mainstay Impala Rustenburg operations increased production 2% to 687,000 oz while restructuring at the group’s Canadian mine Lac des Illes showed up in a one-fifth decline in concentrate to 116,000 oz for the six months. Production was also lower at the group’s 85% owned Zimplats, down 15% to 280,000 oz owing primarily to the “accumulation of concentrates during the commissioning of the expanded smelter complex”, according to Implats’s statement.
Overall, group 6E production fell 4% to 1.82 million oz. Refined 6E production increased 2% to 1.79 million 6E ounces benefitting from increased processing capacity and fewer power disruptions. Implats ended the period with inventory of about 375,000 6E oz.
Sales increased by 5% to 1.77 million 6E oz.
Implats said total unit costs per 6E ounce were expected to increase by 3% to R20,900. “Moderating input inflation and labour savings were bolstered by rand appreciation on the translated dollar cost base of Zimplats and Impala Canada,” it said.
Implats is due to report its interim numbers on February 27 where attention will fall on the possibility of additional cost control measures in lieu of metal price recoveries. Analysts are mixed on the likelihood of a market revival.
RMB Morgan Stanley analysts said in January PGMs “remain stuck” in the same position as last year with a PGM basket price in the cost curve implying no free cash generation. It said there was “ongoing (large) downside risk to consensus earnings” regarding PGM shares.
Adrian Hammond, an analyst for Standard Bank Group Securities, said there were not yet enough “green flags” to present a case for recovery of PGM prices.
Much of the bad news had been priced into the shares, however, said Arnold van Graan, an analyst for Nedbank Securities. “Although PGM producers still face significant headwinds, we believe the fallout from the lower basket price has largely been priced into equities.”
“Further restructuring, growth capex rationalisation, coupled with a sustained recovery in the basket price, could see the valuation multiples start to expand from these depressed levels,” he said. “Although we expect continued volatility, we believe the equity downside from here is limited.”
