Implats eyes 360,000oz extra PGM output after record results
Impala Platinum is bulging with R20bn of net cash and plots internal growth and potential acquisitions, including battery minerals
Impala Platinum, the third-largest source of SA platinum group metals (PGM), reported record interim results and an interim dividend as its cash holdings ballooned, positioning it for growth in Zimbabwe and SA to add 360,000oz of metals.
This will add 14% of metal to the company’s annual output, which is a “significant” addition, said CEO Nico Muller.
Implats is looking at its own assets for growth opportunities for low-cost, low-risk, mechanised expansions, which include growth at its two new shafts in Zimbabwe, adding 180,000oz of PGM, and its Two Rivers joint venture in SA for another 180,000oz, said Muller.
The board will decide on the two projects during coming months. “I’ll be surprised if those projects are not approved,” Muller said. “These are ounces in addition to what we are producing at the moment.”
The capital cost is R10bn over four years, he said, with R4.3bn going into Zimbabwe and includes a new concentrator.
The R5.7bn investment in Two Rivers will be split between Implats and Patrice Motsepe’s JSE-listed African Rainbow Minerals according to their stakes, meaning R2.6bn will come from Implats.
Asked about the risk of over-supplying the market as SA PGM miners, the world’s largest source of the metals, have done in the past, with Implats joining its two larger peers Sibanye-Stillwater and Anglo American Platinum in unveiling growth projects, Muller said there was no chance of repeating past mistakes.
There had been a decade of underinvestment in new PGM projects and the SA PGM miners owed it to the global market to show that it had future growth projects in place to give them certainty that future demand could be met.
The next level of growth would come from buying stakes or assets that are similarly low-risk and mechanised.
The surprise announcement from Muller was that the company would, at some point in the future, look at investments in battery minerals, something that Sibanye-Stillwater embarked on this week with an investment in a Finnish company starting a R6bn project in Finland.
Muller said this was a longer-term strategy and did not expect to make any announcement in this regard in the next 12 months, but that the battery minerals opportunity would complement its production of copper, nickel and cobalt that are by-products of PGM mining in SA.
Implats benefited from a full six months of its new Canadian business and operational improvements at its joint ventures, allowing it to produce more metal in a high metals price environment.
With net cash of R20.3bn compared with net debt of R2bn a year earlier, the company declared a R10 a share interim dividend equivalent to R7.9bn. This compares to a R1.25 a share interim dividend the year before and a final 2020 dividend of R4.
Gross debt fell to R4.6bn from nearly R8bn, as Implats tapped into a fourfold increase in free cash flow of R20bn to strengthen its balance sheet.
As revenue doubled to R58bn due to an almost three-quarter increase in the rand price of the six metals coming from its operations, Implats said its earnings before interest, tax, depreciation and amortisation, which is essentially an operating profit metric, more than tripled to R25bn.
Implats expects its run of profit to continue because of “continued tightness in palladium and rhodium markets and improving demand outlook for platinum expected to support firm pricing”, said CEO Nico Muller.
Making use of the windfall of higher prices, Implats will continue work on getting the best out of its Impala Canada business, ensure the ramp-up to steady state production of two new large mines near Rustenburg, advance metal processing projects at its operations in Zimbabwe and finalise feasibility studies into extending the life of the Marula joint venture in SA and Mimosa joint venture mine in Zimbabwe.
Refined output of the six PGMs Implats produces increased by nearly a third to 1.69-million ounces during the year and it expects to release inventory of 100,000oz of metals before the end of its financial year to June.
For the full year, Implats is targeting output of up to 3.5-million ounces. Capital expenditure in the second half of the year will be about R6bn.