Implats expects earnings collapse of about 80%

Low metal prices and impairments could result in a significant drop in earnings for platinum group metals (PGMs) producer Impala Platinum (Implats).

In a production update in January, the miner said it expected headline earnings for the six months to end December to be “at least 20% lower” than the previous year.

However, in a further update on Thursday, Implats said it now expects headline earnings for the six months to end-December to decrease 75%-82% to R2.5bn-R3.5bn compared with the same period in 2022. Headline earnings per share (Heps) are expected to decrease 76%83% to 279c-391c.

“Earnings for the period decreased primarily due to lower revenue arising from a 37% lower achieved dollar revenue per 6E [gold, iridium, palladium, platinum, rhodium, and ruthenium] ounce sold, partially offset by an 8% weaker rand,” it said.

Sales volumes for the period were 12% higher, benefiting from the maiden interim consolidation of Impala Bafokeng.

Impairment charges, including R701m and R987m of property, plant and equipment at its Impala Canada operations, and the Two Rivers Platinum joint venture, respectively, also affected earnings for the period, the company said.

Implats said in its earlier production update that earnings also suffered due to the effects of an accident at its Rustenburg mine and a three-day strike at the Bafokeng Rasimone Platinum Mine.

There were production losses of about 30,000 6E ounces at the Impala Rustenburg mine due to a lift failure at 11 Shaft, which killed 13 workers and injured 73.

This week at the Investing in African Mining Indaba in Cape Town the Minerals Council SA said due to the “rapid and precipitous decline” in the basket price for PGMs total sales values for 2023 are expected to have declined about 33% compared with 2022.

Its “Facts and Figures” report for 2023, released at the Indaba, shows that palladium and rhodium dollar prices dropped 36% and 56.5%, respectively — these two metals accounted for 60% of the PGM basket income split in 2023, so their price deterioration had a noticeable effect on the PGM revenues.

The Minerals Council said PGM miners in SA are increasingly discussing the need to restructure due to the huge drop in prices, coupled with high labour and electricity prices. This could potentially affect 4,000 to 7,000 mining jobs.

At midday on Thursday, the company’s share price on the JSE was down 21% year to date to about R67.88 per share.