IMPALA Platinum (Implats) had survived the past few years of depressed platinum market conditions through an “aggressive defensive strategy” which had positioned the group to benefit from the market improvements now starting to come through.
Management is looking at re-instatement of various organic growth and life extension projects – such as the Two Rivers Merensky Reef expansion – which had been shelved as well as possible joint ventures with any new entrants into the platinum industry.
That’s according to CEO Nico Muller who said management’s mission had been to “create strength in a lower price environment.”
He stated, “We have emerged out of this process with a very strong and flexible balance sheet with net cash of R8.1bn and we have excess inventory of 420,000oz (of platinum group metals) in a situation where prices are 30% above where they were three months ago.
“I think the company is entering a new phase – a very stable and strong one – a period with more supportive pricing and with the financial means to execute a new strategy creating strength for the future. We are positioned very strongly for the next five to 10 years. “
Implats’ shares collapsed from levels around R280 in late 2021 to as low as R60 in early 2024 before recovering to current levels around R158,
Muller said the rerating of the company’s share price had also taken place against its platinum industry peer group, in part because of Implats’ success in reducing operating costs and chopping back on capital expenditure.
There could be further benefits to come. Muller commented, “We do not have major expansion projects on the radar screen. In the absence of major expansion projects and in the absence of the need to further strengthen the balance sheet I think we are going into a period where shareholder returns will be prioritised over the next number of years.”
Muller also indicated that Implats was keen to look at growth prospects utilising its spare processing capacity and the group’s strategic presence in all the key platinum mining regions bar Russia.
He commented, “We have the industry’s second biggest processing complex and we are in a position to offer processing capabilities to any potential new emerging producers.”
Implats’ approach is to get into toll-treatment or concentrate offtake agreements and then convert those arrangements into equity in the new projects.
Muller commented, “that is exactly how Implats got involved in Two Rivers and in Zimplats. We started off with a processing agreement that was converted into equity. It is a strategic capability that we believe the company will be in a strong position to leverage as time goes along.”
Muller sounded a note of caution about the platinum producers bringing on new supply into a market that was already over-supplied and where prices were under pressure.
But he added, “to the extent that the market supports the initiation of new projects – such Karos; Great Dyke Investments; Waterberg and even Ivanplats – I do think we have a strong position given the excess processing capacity that we have and our presence in all these jurisdictions to offer a fairly attractive proposition to potential players. “
