The sky is the limit for Implats as it posts record results
Already riding high on PGM prices, the miner sees several good years ahead supported by demand from the automotive industry
After posting record results for the year-ended in June, Impala Platinum expects the good times to continue to roll as demand for platinum remains strong, bolstered by a recovering global automotive industry.
Owing to spectacular metal prices, the miner, which produces platinum group metals (PGMs) mostly from its SA and Zimbabwe operations, saw its profits more than double to R53bn for the year, and declared a R9.8bn dividend, bringing the total dividend for the year to R22 a share.
CEO Nico Muller said Implats’s outlook for PGMs was rosy.
“We are firm believers in the PGM market for the next seven years. We think that we are going to have a highly supportive pricing environment,” said Muller.
In particular, Implats sees a continued demand for rhodium and an exchange between platinum and palladium. While Implats has some expansion projects in the works, it does not expect these will result in a major disruption to the current supply demand dynamics supporting the PGM prices.
Head of corporate affairs Emma Townshend said the automotive sector — the largest consumer of PGMs for use in emission-controlling catalytic converters — was still recovering from the effect of Covid-19, which is positive for metal volumes over the medium term. The market is benefiting from tightening emissions legislation.
“So it's a bit of a perfect storm at the moment ... we think [from] 2020 to 2023, as that very battered auto industry recovers production levels to ... pre-pandemic levels, inventories [will] normalise across the supply chain,” said Townshend.
Higher commodity prices gave Impala Platinum’s full-year performance a boost. The miner’s profit more than doubled during the period and it has rewarded shareholders with a final dividend of R12.
Cash-flush as Implats might be, the group has no immediate acquisitions on the cards. It is, however, well-positioned should an acquisition opportunity arise, Muller said.
“I think that we have the flexibility to act on any value accretive opportunity that we see ... [and] we believe that we've got great opportunities within the group. And so that’s our first port of call. We own world-class, shallow, mechanised assets. We believe that smelting and refining is a critical part of the value chain, and we see significant opportunities in that area. And so I think that is that is our immediate short-term focus.”
In the longer-term, Implats is aware it needs to look at ways to further strengthen the business.
“We do recognise that the global demand patterns are potentially shifting over the next decade to 15 years,” said Muller. “We are developing a radar screen to educate ourselves on how these commodity demand patterns are going to shift and we want to be ideally positioned to tap into that, and we will be evaluating that as part of our growth plans going forward.”
For now, investors can expect the returns to keep coming with the preference being to return excess cash to shareholders through dividends.
“Looking at our cash flows going forward, we've done a lot of work on the balance sheet. There are a few minor things that we would like to still do, which is build up the cash buffer and continue to fund our environmental rehabilitation obligations,” said Implats CFO Meroonisha Kerber.
“Our growth projects do not require large capital, so I think going forward we're very well-positioned to make a significant increase in returns to shareholders.” Kerber said. However, between bond repurchases and dividends, the company has essentially returned 100% of free cash flow to shareholders in the second half of the financial year.
The Implats share was trading 6.5% lower at R205 a share on Thursday afternoon. The stock has gained 41% in value over the past 12 months.
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