Implats starts a strategic review
Loss in the year to June
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.