Implat sto raise R4bn for two new shafts

IMPALA Platinum, the world’s second biggest platinum miner, said yesterday that it planned to raise R4 billion to fund two new shafts in Rustenburg, after being battered by the rapid slide in commodity prices.

The miner preferred selling shares after considering other options, chief financial officer Brenda Berlin said.

The company would have “survived for another two years without raising any capital, but then they could have found themselves with their back against the wall”, Hurbey Geldenhuys, a mining analyst at Vunani Securities, said.

“This is mining, you can’t stop investing in a down cycle because you’ll miss out when prices turn.”

The platinum price has declined by 17 percent since last year while the Implats share has declined by 40.3 percent in the year-to-date on the JSE.

Global growth concerns, particularly in top consumer China, and oversupply have sapped demand for platinum, pushing the spot price to near six-and-a-half-year lows, just above $1 000 (R13 431) an ounce.

The share declined by as much as 15.5 percent yesterday on news of the planned capital raising, which is aimed at funding the development of its shaft 20 and shaft 16 over the next three years.

Impala’s share on the JSE ended down 2.77 percent at R45.25, which valued the company at R28.6bn.

Support

The company said it had already secured fundraising support from about half of its shareholders, including Coronation Fund Managers, Royal Bafokeng Holding and the Public Investment Corporation. The share sale is being underwritten by UBS.

Peter Major, an analyst with Cadiz Corporate Solutions, said he supported the rights issue as a better option for Implats than taking on debt from banks or other financial institutions. “Shareholders have taken big losses over the year. Impala has done everything it can to avoid taking on more debt. Borrowing more money is not the answer,” said Major.

“It is never guaranteed that your share runs after a rights issue. But I think in this case there’s a decent chance it will gain at least 15 to 20 percent over the next year. This rights issue is set at a huge discount, which ensures it will be successfully followed.

“So I am sure all existing shareholders will follow their rights. But I am ‘not’ so sure how much better the platinum price will be in a year’s time. Although – in rand terms – I am pretty sure both Impala and platinum will be at least 15 percent higher than today,” Major said.

Plunged

Implats yesterday reported its full-year gross profits had plunged 50 percent to R1.63bn. The company reported a net loss of R2.7bn from a profit of R540 million in the prior year.

Gross refined platinum production rose 8.3 percent to 1.276 million ounces in the year to June. No dividend was declared. The cost of last year’s five-month platinum belt strike coupled with a lower commodity price had contributed to a 58 percent knock in headline earnings a share, which declined to R221m in the period under review.

Implats chief executive Terence Goodlace said there was hope for platinum during a teleconference, adding that negative sentiment was driving the slump in commodity prices.

“In our opinion, demand will be muted, and we believe there will be deficits over time,” said Goodlace.

“Not one of our customers has said don’t give us the metal. We don’t need it, there is a huge disconnect between what is happening in the market and production,” he added.

Implats plans to cut operating costs by R930m, with a capital expenditure target of R5.5bn in its 2016 financial year. – Additional reporting by Bloomberg and Reuters