Impala Platinum’s R13bn restructuring impairment puts it deeper into the red
That masked operational improvements as it removes unprofitable ounces, and Implats says long-patient investors will get their rewards — just not right now
Impala Platinum, the world’s second-biggest source of the metal, reported a deepening full-year loss on the back of a R13bn impairment that masked an operational improvement at its mines.
Implats has started a major restructuring to close five of its 11 mines near Rustenburg and cut up to 13,000 jobs over the next few years as it removes unprofitable ounces from its production.
It is one of a number of platinum companies to undertake such an exercise because of prolonged price weakness for the metal.
Implats posted a loss for the year to end-June of R10.8bn, compared with R8.1bn the year before. It recorded an impairment of R13.6bn for the year due to the restructuring of its 11 Impala shafts near Rustenburg, after notching up R10bn in impairments in the year before.
Implats did not declare a dividend.
"The Implats board and management team are aware that shareholders, who own and have invested in the company, have received scant reward over the past five years," it said.
"Decisive action has been taken in this financial year to reposition the organisation, return it to profitability in a low-price environment, and better reward all stakeholders."
At a gross profit level, however, there was a swing to profit of R1.6bn from a loss of R529m the year before.
"Strong advances were made towards the stated policy of eliminating loss-making production, demonstrated by the dramatic turnaround of Marula and the restructuring decision at Impala Rustenburg," the company said.
"Current market fundamentals require much improved industry discipline, particularly in discontinuing unprofitable production. Implats cannot, and will not, support loss-making production," it said.
Much like its larger peer, Anglo American Platinum, Implats is moving towards shallow, mechanised, less labour-intensive mining operations.
As part of the strategy it has taken a 15% stake in the undeveloped Waterberg platinum deposit owned by Canada’s Platinum Group Metals.
"Lower prices have triggered shaft and mine closures across South Africa’s Bushveld region, removing almost 1.5-million ounces of annual capacity to date," Implats said.
"It is widely acknowledged that at least 1-million ounces of platinum have been produced at a loss in South Africa every year since 2012."
To ensure the group can fund its restructuring and the completion of its two new large shafts into production, Implats has sold forward R2bn worth of metal.
Refined platinum production was 4% lower at 1.468-million ounces from its Impala, Zimbabwean mines, Marula and toll treated material.
Sales for the year fell by 8% to 1.355-million ounces.
Implats appointed Meroonisha Kerber as chief financial officer, replacing Brenda Berlin, who left during the year.
Looking ahead, Implats forecast production of up to 1.6-million ounces at a top-end cost of R24,800/oz, with capital expenditure pegged at R4.3bn.
Implats reported costs of R22,931/oz in the 2018 financial year.
The Impala Rustenburg mines, the heart of the company’s production, increased output by 3% to 669,000oz, while Marula pushed production up by 25% to 85,000oz.
The Zimbabwean operations generated nearly 400,000oz from Zimplats, an 80% held subsidiary, and the Mimosa mine it shares with Sibanye-Stillwater.