Implats resumes paying dividends
Impala Platinum (Implats) has resumed paying dividends, the first since 2013, as interim profit surged due to higher metal prices that enabled the company to keep mines open and save 12,500 jobs. Implats reversed its 2018 plans to cut production from its Rustenburg mines to close to 500,000oz of platinum group metals (PGMs) from more than 700,000oz as intended to restructure its assets to cope with lower prices.
Impala Platinum (Implats) has resumed paying dividends, the first since 2013, as interim profit surged due to higher metal prices that enabled the company to keep mines open and save 12,500 jobs.
Implats reversed its 2018 plans to cut production from its Rustenburg mines to close to 500,000oz of platinum group metals (PGMs) from more than 700,000oz as intended to restructure its assets to cope with lower prices.
The Rustenburg mines make up half of Implats’s annual production, and were for nearly a decade undercapitalised. They had become unprofitable, putting the company under financial strain and forcing plans for drastic action.
However, with the improved metal prices Implats had opted to keep a number of shafts in operation and retain thousands of jobs at a time of economic downswing and growing unemployment, maintaining its production above 700,000oz, said CEO Nico Muller.
This is an important factor in the market, where flows of palladium and rhodium — the two best-performing PGMs because demand is higher than supply — are closely watched.
Two old shafts, Number 1 and Number 9 shafts, would be depleted by 2024 and July 2020 respectively, but production would remain at more than 700,000oz from Rustenburg as two large new shafts came into steady-state production from mid-2022, Muller said.
EXCELLENT RESULTS
Implats, the third-largest SA miner of PGMs, declared a R1.25 per share dividend for the six months to end-December as post-tax profit increased to R3.5bn from R2.5bn a year earlier.
“Well done. These are excellent results, particularly out of Impala Rustenburg,” said Chris Nicholson from RBM Morgan Stanley during the company’s results presentation.
The restart of dividends “may come as a positive surprise to some in the market”, Nicholson and his colleagues said in a note.
They said they had expected only a year-end dividend because of the need to rebuild working capital in the company and the North American Palladium purchase during the interim period.
After the onset of the global financial crisis in 2009, Implats cut its dividend payments from 40% of headline earnings to about 28% and then scrapped them altogether in 2013.
It now pays out a minimum of 30% of free cash flow before growth capital.
Underpinning the higher profits has been a steady operational performance, particularly from its Rustenburg mines, which combined with higher metal prices, particularly those of palladium and rhodium, offset “constrained smelter availability”.
A furnace rebuild in Zimbabwe, where Implats through its Zimplats subsidiary is the country’s major foreign-exchange earner, led to a 135,000oz increase in metal inventory, taking stocks to 350,000oz, which Muller valued at R4.8bn. This money would be released over two years, and would go towards paying for the Canadian assets, repaying debt and to shareholders.
Refined output fell 17% to 1.32-million ounces for the period. Revenue increased to R28bn from R23.5bn, with the received price for the six metals rising 41%, offsetting a 16% fall in metal sales as inventories increased.
In 2018, Implats warned of up to 13,200 job cuts as it shut or sold unprofitable mines. However, the recovery in metal prices and extensive work on productivity had averted this, Muller said.
Implats has opted to adopt a contractor mining model at its 1 Shaft, which it slated in 2018 for either an outright sale or outsourcing the operations of the shaft.
With the higher price, however, Implats has decided to keep 1 Shaft and have contractors instead of its own employees mining it.
The 1 shaft is expected to deliver 100,000oz of six PGMs a year over a three-year period. It secures 2,500 jobs at the shaft.
Two more shafts, 12 and 14, which were also historically problematic, have undergone restructuring over the past two years and are now the most profitable in the Implats stable of mines around Rustenburg, securing 10,000 jobs.
Implats bought North American Palladium for R10.9bn in a deal that gave it assets in Canada. The assets there only reflect in the results for 18 days.
Implats reported net debt of R1.9bn at the end of December. Net cash from operations was R6bn.
Implats’s own output of the six metals making up its production was 2% lower at 1.34million ounces.
Third-party metal pushed through Implats’s processing plants increased 4% to 190,000oz.