Implats to adjust planned nonessential capex as slump in PGM prices takes toll

Impala Platinum (Implats) will rein in nonessential capital expenditure as part of its coping mechanisms against the steep drop in platinum group metal (PGM) prices, even as the top producer put a positive spin on the near-term demand outlook.

In a quarterly production update on Tuesday, Implats also said it would implement a “comprehensive” operational response to prevailing market dynamics, but stopped short of providing the details.

Its report comes less than a week after peer group Sibanye-Stillwater reported that it could slash up to 4,000 employees in the SA PGM operations after the slump in prices rendered some marginal shafts unviable.

The downward cycle comes at a time when cost inflation across the industry is higher, putting pressure on margins.

Implats has just bedded down the acquisition of cross-town rival Royal Bafokeng, which has rebranded Impala Bafokeng.

As a result, group production volumes rose 21% to 1-million ounces in the three months ended-September compared to the same period a year ago. However, production rose 5% on a like-for-like basis, which strips out Impala Bafokeng.

Refined production, which includes saleable ounces from Impala Canada and Impala Bafokeng, rose 25% to 885,000oz and 9% on a like-for-like basis.

Implats estimated that 8,000oz of production was foregone across its Southern-Africa-managed and joint venture operations during the reporting period, with a further 6,000oz deferred due to power constraints.

Excess inventory increased from the end of its financial year in June by 75,000oz to 320,000oz as at September.

CEO Nico Muller struck an optimistic tone about the near-term demands prospects, saying “recent discussions with our core customer base confirm our underlying view of rising demand for our key products over the coming year”.

Residual customer caution reflects the persistent global macro-economic uncertainty and notable trade-flow shifts in primary mined supplies.

Rhodium currently fetches about $4,450oz compared to record high of nearly $30,000 in 2021 when Covid-19 lockdowns resulted in demand-supply imbalance. Its cousin, palladium, was at $1,138.35oz, far below the peak of $3,000 reached at the start of the war between Russia and Ukraine. The platinum price changed hands at $1,932.40oz, having retreated from its previous highs.

PGMs are mainly used to curb harmful pollutants in internal combustion engines, as well as in jewellery.

Its shares rose nearly 7% to R80.59 on the JSE in early afternoon trade, the most since October 10, but are still down a whopping 62% for the year to date.

Other PGM players have also been under huge pressure on the stock market, with Anglo American down 55%, Sibanye-Stillwater off 42% and Northam Platinum down 39%.

mahlangua@businesslive.co.za