Impala Platinum takes a long, hard look at loss-making shafts after R8bn loss
Implats has slashed its production forecast and is seeking cheaper, shallower assets
Impala Platinum (Implats) posted a hefty full-year loss, with a R10bn impairment and gross loss feeding into decisions to review assets and take a much tougher stance on loss-making shafts and seek shallower, cheaper options.
Implats, the world’s second-largest platinum miner, lowered its production forecast to 750,000oz of platinum by 2022, well below the 830,000oz of platinum it had pegged for 2020 during last year’s annual results presentation.
Key drivers of the lower and later forecast were the move away from unprofitable mines and a reconfiguring of the company’s new 16 and 20 shafts, which will need an additional R700m to be spent after plans for the mines were revisited under new CEO Nico Muller.
The bill to bring 16 and 20 shafts into production was raised to R2.2bn and the company had R1.5bn in cash allocated to complete the mines under the old plan.
“A slower build-up at 16 and 20 shafts, lower production levels at the mature shafts and the earlier closure of the end-of-life shafts will impact on the production profile over the next five years. It is now expected that 750,000oz of platinum will be achieved in 2022,” the company said.
“This may be further affected by the strategic review being conducted,” it said.
Implats had no reason to return to the market to raise capital, chief financial officer Brenda Berlin said.
"We have absolutely no intention of going back to the market," she said, adding that the intention was to bring Implats' loss-making mines around Rustenburg, the engine of the company, to cash-neutral by 2019, facing another year of cash burn during the 2018 financial year.
Implats raised R3.9bn in 2015 to build 16 and 20 shafts and now needed R700m extra over the next five years, she said. "It's not a stressful number."
Implats recorded a post-tax loss of R8.1bn for the year to end-June compared with a R43m loss the year before. A R10.2bn impairment against payments to the Bafokeng was made during the year.
Operationally, however, higher cost of sales exceeded revenue, pushing Implats into a gross loss of R529m compared with a R4m profit the year before.
The group’s platinum output increased to 1.53-million ounces compared with 1.44-million ounces the year before, but the company noted there were “sub-optimal” performances at its wholly owned mines and the shared Marula mine.
The Impala mines generated 654,000oz of platinum in line with the company’s interim guidance, but they recorded a headline loss of R2.7bn.
“This was largely a result of sustained low rand basket prices, a cost base that is structured for a higher level of production and persistently low operational efficiencies. It is clear that we cannot accept it being business as usual for Impala,” the company 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,” it said.
“The assessment is reviewing all operations and will result in the elimination of loss-making production, while interrogating future dependence on high-cost, deep, conventional mining operations. Implats is intent on securing assets that provide optionality for cheaper, shallower and mechanised resources,” it said.
The loss-making Marula had to return to profit in the immediate near term or face closure, the company warned. Marula made a headline loss of R737m, with community disruptions to the mine weighing heavily during the year.
By 10.05am, Implats had fallen 2.8% to R38.25 on the JSE.