Impala Platinum to cut 13,000 jobs in sweeping R2.7bn overhaul
Restructuring costs will be funded from internal cash resources and inventory sales
Impala Platinum, the world’s second-largest platinum miner, is cutting its future production to 520,000oz of platinum and slashing the number of its mines to six from 11, with 13,000 jobs to go within two years.
Implats is the latest mining company to announce a major restructuring, shaft closures and job cuts to cope with a high-cost environment, and, in the platinum sector, a largely stagnant price for its primary metal, platinum.
“In a phased approach, operations will therefore cease at Impala Rustenburg’s end‐of‐life and uneconomic shafts, with future mining activity focused on profitable, lower-cost, high‐value, and longer‐life assets,” the company said.
The restructuring will cost R2.7bn during 2019 and 2020, and will be funded from internal cash resources as well as selling inventories.
Implats's share price rose as much as 8.5% to R20.89 after the announcement.
Implats now employs 40,000 people to produce 750,000oz of platinum a year.
Implats has already started the restructuring process and reduced its workforce from 42,300 in 2017. At 520,000oz it will fall below equally troubled Lonmin, which produces about 650,000oz of platinum a year.
Lonmin, which is the takeover target of Sibanye-Stillwater, is in the process of cutting 12,600 jobs as it closes old mines and focuses on newer, lower-cost operations. Both Implats and Lonmin have mines around Rustenburg.
Massive cuts needed
Implats CEO Nico Muller said the South African platinum industry, the world's largest source of the metal, would need to cut between 600,000oz and 800,000oz of platinum and keep it out of the market to influence the price and push it up.
This was on top of the 850,000oz that had already come out of the market from shaft closures to date.
The 230,000oz cut by Implats in the next two years was unlikely to have a major effect on the platinum price, he said, acknowledging criticism over the past decade that miners in SA were too slow to cut loss-making production, keeping platinum prices subdued.
The platinum price is trading at $815/oz, which is $100 below the palladium price and the lowest level in many years.
Implats could consider selling some of the shafts it is planning to close, Muller said.
“The only option for conventional producers today is to fundamentally restructure loss‐making operations to address cash burn and create lower‐cost, profitable businesses that are able to sustain operations and employment in a lower metal price environment,” he said.
“While employee rationalisation is inevitable in a restructuring process of this nature, due care will be taken to ensure that job losses are minimised as far as possible through a range of job-loss avoidance measures,” he said.
Implats has a backlog of metal worth R3.8bn locked up in its processing facilities because of a fire at one of its furnaces, reducing cash liquidity in the business. To unlock this value, Implats agreed to sell forward some of the metal for R2bn, which it will receive before June 2019.
Implats has untapped loan facilities of R4bn and cash on hand of R2.2bn. With these resources and the forward payments, Implats has enough cash to fund the restructuring, Muller said.
“Following the implementation of Impala Rustenburg’s strategic transformation, all group operations are anticipated to be profitable within the prevailing platinum price environment,” he said.
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