Implats pumps full-year earnings

Impala Platinum, the world number three source of platinum group metals (PGMs), expects a five-fold increase in annual headline earnings as soaring metal prices offset a small dip in sales.

Implats, which vies for the global third place with Russia’s Norilsk Nickel, updated its guidance issued on July 23 for annual results due on September 3, advising investors to expect enormous increases in basic and headline earnings.

Headline earnings, which strip out one-off items to give investors a like-for-like basis to assess a company’s performance, would grow more than five-fold to between R15.6bn and R16.2bn for the year to end-June compared to R3.04bn in 2019.

“The benefit of a significant increase in the dollar basket price for PGMs, together with rand depreciation, has resulted in a meaningful increase in gross profit, which is expected to increase to R23bn in the period from R7bn in the comparative period,” Implats said on Thursday.

Refined and sold ounces dropped by 5% to 2.8-million ounces of the six metals Implats produces. This was slightly ahead of the top end of the guidance Implats issued on June 24.

SA entered a hard lockdown of its entire economy at the end of March. Restrictions on mining were eased in May and June, allowing for a phased return to normalised operations.

Many SA mining companies have reported reduced production for the three months to end-June, but their financials reflected the benefits of strong metal prices, particularly for PGMs — most notably rhodium and palladium — and gold, combined with a depreciation of the rand against the dollar.

Rhodium and palladium are used primarily to make anti-pollution devices for petrol engines, with rhodium also used in diesel engine exhausts.

SA is by far the largest producer of rhodium, accounting for 621,000oz out of global mined supply of 746,000oz. Disruptions to mines in SA would drive the market into a deeper deficit than the 26,000oz shortfall last year, pushing up prices.

Implats, which has Nico Muller as its CEO, said production from its mines was at the top end of the June 24 guidance when it said mines in the group would generate 2.4-million to 2.53-million ounces of the six PGMs in concentrate.

The flagship Impala mining complex near Rustenburg is expected to deliver about 170,000oz less metal for the year. The Impala mines account for roughly half the group’s output. These are underground mines and were the most disrupted by the lockdown and phased return to normal operations.

The return was not helped by the disruption of having Mark Munroe, the CEO of the Impala operations, charged with breaching lockdown regulations in calling employees back to work. The charges were dropped this week.

The Zimplats and Mimosa joint venture in Zimbabwe continued operations since the start of the year and were not shut down in that country’s lockdown.

Implats issued 64.3-million shares during the year after holders of the company’s bonds opted to convert them into shares rather than cash. This raised Implats’s shares in issue to 777.2-million.

The extra shares diluted the growth in headline earnings per share, which was forecast to grow by more than four times to between R20.07 and R20.84 from R4.23 a year earlier.

Basic earnings would grow by nearly 11 times to R15.8bn and 16.1bn from R1.47bn before.

seccombea@businesslive.co.za