Implats hit hard by Covid-19 pandemic

Impala Platinum lost 26,000oz or 6% of production in the March quarter as SA stopped its economy to contain the spread of Covid-19, and it expects a full-year decline of about 14% in metals in concentrate.

Implats is the first of SA's major three PGM producers to put numbers to the consequences on its business of the national lockdown implemented in SA and the disruptions caused by the pandemic at its Zimbabwean and Canadian operations.

Implats, one of the world’s leading sources of six platinum group metals, did not put a financial value on its lost output, which it separated into refined metal, which is the saleable product, and metal in concentrate, which is what comes out of the mines.

For the financial year to end-June, refined production of PGMs was forecast to be between 400,000 and 500,000oz lower than originally expected, coming in at between 2.6-million oz and 2.9-million oz, a decline of about 14%. 

Overall, Implats forecast its full-year PGMs in concentrate would fall by between 450,000oz and 475,000oz to a range of 2.5-million ounces and 2.8-million ounces.

Implats is operating under force majeure notices to customers of its metals, which allows it to suspend contracted deliveries because of events beyond its control.

“The geographical spread of our operations has allowed mining production to continue during the lockdown periods, albeit in varying degrees in different geographies, while the continued production of refined metal has provided an opportunity to reduce excess in-process inventory,” said CEO Nico Muller.

By the end of March, Implats had about 200,000oz of the six PGMs in concentrate stock, which will be refined during the final quarter of the company's financial year.

Implats had net cash of R3.2bn at the end of the March quarter, with an unused credit facility of R4bn. Overall, Implats has liquidity headroom of R12.9bn.

The SA operations were forecast to be particularly hard hit in the lockdown.

For the full year, Implats forecast that nearly a fifth of metal in concentrate would be lost at its flagship Rustenburg mines after underground shafts were shut from March 27 and have only recently been given government approval to ramp up to half of normal capacity.

The Two Rivers joint venture with African Rainbow Minerals, full-year output was forecast to fall by a quarter.

The logistics involved in returning half the workforce are enormously complicated, involving the transport of mineworkers back to the operations, screening thousands of people and, if there's the slightest sign of potential infection, testing for the virus.

There is the induction of staff after at least three weeks away from work, returning underground mining areas to safe environments are being idled for so long, and then the need to keep employees safe, sanitised and keeping social distancing.

The lockdown cost Implats 26,000oz of six PGMs during the March quarter from its Rustenburg mines as well as the Marula and Two Rivers operations.

Zimbabwean mines least affected

Implats said that for the balance of its financial year to end-June, it had assumed production rates of between 30% and 40% of planned output for May and June in SA.

The Zimplats subsidiary in Zimbabwe has continued operations, but it has not sent any material across the border into SA for refining. The Mimosa mine shared with Sibanye-Stillwater has not sent concentrate to SA for smelting and refining.

Production of concentrate from Zimplats was the least affected, showing a 3% decline at worst, while Mimosa could shed up to 9% of production.

At the Canadian operation, an employee died from Covid-19 and a number of others have tested positive. The mine was temporarily closed for two weeks from April 13 and the workforce quarantined.

“In Canada, the guidance assumes operations will resume in May 2020 but at a lower production rate,” Implats said.

The Canadian output forecast was dropped by a third.

“The group’s focus for the remaining months of financial year 2020 will be multipronged and will include securing operational stability in a period where unplanned interruptions are likely to be a regular feature,” said Muller.

Implats would focus on “protecting the health and well being of our employees; maintaining close and collaborative relationships with our customers; and further reducing the group’s excess processing stockpile to secure cash flow and protect our financial position”, he said.

seccombea@businesslive.co.za