Loss in the year to June trig­gers strate­gic re­view at Im­pala Plat­inum

The Mercury - - BUSINESS REPORT - Di­neo Faku

IM­PALA Plat­inum (Im­plats), the world’s sec­ond big­gest plat­inum pro­ducer with op­er­a­tions in South Africa and Zim­babwe, is un­der­tak­ing a com­pre­hen­sive strate­gic re­view of its Rusten­burg as­sets to con­serve cash af­ter swing­ing to a loss in the year to June on the back of the con­tin­ual weak­ness in the plat­inum price.

The com­pany said the plat­inum price had ended this fi­nan­cial year 11 per­cent lower at $922 (R12 059) an ounce, com­pared to $1 033 an ounce at the start of the fi­nan­cial year. It said the av­er­age price for the year was 4 per­cent higher at $988 an ounce, com­pared to the pre­vi­ous fi­nan­cial year.

Im­plats said the Rusten­burg op­er­a­tions had in­curred a R2.68 bil­lion head­line loss due to the sus­tained low rand bas­ket prices, a cost base that was struc­tured for a higher level of pro­duc­tion and per­sis­tently low op­er­a­tional ef­fi­cien­cies. The re­view might lead to sus­pen­sions and the har­vest­ing of loss mak­ing shafts, it said.

“The Rusten­burg team’s im­me­di­ate pri­or­ity is to achieve a po­si­tion in 2019 of be­ing cash neu­tral in the cur­rent plat­inum price en­vi­ron­ment,” it said.

“A com­pre­hen­sive strate­gic re­view of this op­er­a­tion is planned to en­sure that it will op­er­ate at a cash neu­tral level in what is per­ceived to be the new nor­mal pric­ing en­vi­ron­ment.

Im­plats also an­nounced its am­bi­tious plan for Marula, the Lim­popo-based mine, which was re­cently rocked by com­mu­nity protests, as it posted a R737 mil­lion head­line loss in the year un­der re­view.

“The tar­get for Marula to be cash pos­i­tive at group level in 2018 has been set, and will be strictly mon­i­tored each quar­ter through­out the com­ing year,” the com­pany said. Im­plats has pre­vi­ously said that re­struc­tur­ing of Marula was on the cards.

“The com­pre­hen­sive stake­holder en­gage­ment process has been ini­ti­ated to mit­i­gate against fur­ther dis­rup­tions and, in ad­di­tion, the mine un­der­took a sec­tion 189 process to re­struc­ture its cost base,” the com­pany said.

The group, which has faced fi­nan­cial strain in tan­dem with its peers, re­ported a head­line loss of 137 cents a share in the year to June from head­line earn­ings of 12c a share a year ear­lier.

Im­plats blamed the com­pany’s cost base, that was struc­tured for a higher level of pro­duc­tion, and per­sis­tently low op­er­a­tional ef­fi­cien­cies for its woes.

The com­pany said it had con­tained group unit cost in­creases at 4.4 per­cent and cost of sales in­creased by 4 per­cent.

The group’s op­er­at­ing cost were ex­pected to be less than R23 100 a plat­inum ounce for the next fi­nan­cial year.

Rev­enue rose 2.5 per­cent to R36.8bn as all pro­duc­tion was not sold. “This com­bi­na­tion largely re­sulted in the de­cline in gross profit from R4m to a loss of R529m,” it said.

An­a­lysts said the year to June had been an­other dif­fi­cult pe­riod for Im­plats and the plat­inum sec­tor as a whole. Seleho Tsatsi, an in­vest­ment re­searcher at An­chor Cap­i­tal, said Im­plats 16 and 20 Shaft ramp-ups had faced de­lays. “Aside from the dif­fi­cul­ties at 16 and 20 shaft, op­er­a­tional is­sues were present largely across the board. Marula was af­fected by com­mu­nity dis­rup­tions,” Tsatsi said.

Tsatsi also said the bal­ance sheet was not an im­me­di­ate con­cern fol­low­ing the is­sue of the R6.5bn con­vert­ible bond in May this year. Im­plats is one of the few plat­inum min­ers work­ing to grow pro­duc­tion. “An ad­di­tional 260 000 ounces are an­tic­i­pated by 2020 from 16 shaft and 20 shaft a 17 per­cent growth on the 2017 fi­nan­cial year pro­duc­tion,” Tsatsi said.

The group’s bal­ance sheet was strength­ened with gross cash or R7.8bn and R4bn in unutilised fa­cil­i­ties avail­able un­til 2021.

“The bal­ance sheet is quite strong, but free cash flow is neg­a­tive, mainly be­cause of Im­pala Lease Area in se­ri­ous trou­ble,” said Rene Hochre­iter, a min­ing an­a­lyst at Noah Cap­i­tal Mar­kets.

Pro­duc­tion at Rusten­burg was ex­pected to be-be­tween 680 000 and 720 000 ounces and Marula was ex­pected to pro­duce 85 000 plat­inum ounces in con­cen­trate in the next fi­nan­cial year, the com­pany said.

Im­plats shares fell 6.8 per­cent to close at R36.80 on the JSE yes­ter­day.

Nico Muller, the chief ex­ec­u­tive of Im­pala Plat­inum Hold­ings. Im­plats says it is un­der­tak­ing a com­pre­hen­sive strate­gic re­view of its Rusten­burg as­sets to con­serve cash. PHOTO: NH­LANHLA PHILLIPS/ANA

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