Implats warns of ‘at least’ 20% drop in interim profit on weak metal prices

Platinum group metals (PGMs) producer Impala Platinum on Wednesday warned that interim earnings will hit by an almost one-third decline in metal prices as well as the effects of an accident at its Rustenburg mine and a three-day strike at the Bafokeng Rasimone Platinum Mine.

In a production update for the six months to end-December, Implats said the notable decline in US dollar basket pricing was only partially offset by depreciation in the rand exchange rate causing “a significant retracement in rand PGM pricing”.

As a result, headline earnings for the six-months to end-December period to be “at least 20% lower” than the previous year.

Sales for the period decreased to R25,795 per 6E (gold, iridium, palladium, platinum, rhodium, and ruthenium) ounce sold. That’s a 32% decline from the R38,117 per 6E ounce sold in the same period a year earlier.

The inflationary pressures of rand depreciation also resulted in unit costs increasing 5% to about R20,350 per 6E ounce.

Still, the lower prices and higher production costs were offset to some extent by an increase in production. Thanks to the first-time inclusion of production from Impala Bafokeng — Implats concluded its acquisition of Royal Bafokeng Platinum last year — production for the period increased by 18% to 1.9-million 6E ounces from 1.62-million ounces.

Like-for-like output for the period was 2% higher.

Implats indicated in its annual results for its 2023 financial year (ended June 30 2023) that it expected full-year production in 2024 to be between 3.3-million ounces and 3.45-million ounces.

Production at Impala Rustenburg was up 11% to 675,000 6E ounces despite production losses due to a lift failure at 11 Shaft, that killed 13 workers and injured a further 73, some of whom are receiving ongoing rehabilitation, care and support.

“[The] production loss associated with the 11 Shaft accident is estimated at 30,000 6E ounces. Current estimates indicate a further 30,000 6E ounce shortfall from the 11 Shaft complex in [the second half of the year],” the group said.

In January the company submitted its investigation report on the incident to the department of mineral resources & energy. The department will now initiate formal proceedings relating to the accident, possibly this year. The proceedings are expected to take several months to complete, Implats said, adding it will conduct its own investigations.

Work is ramping up at 11 Shaft with employees accessing the area via adjacent infrastructure. Implats expects to increase mined volumes from the shaft to 60% of production capacity over the coming weeks.

“Infrastructure repairs at 11 Shaft are expected to be completed by the end of February, with a build-up to full production capacity currently targeted for April 2024,” it said.

Implats’ shares have fallen about 60% over the past 12 months, and were down 2.4% at R70.94 shortly before 1pm.

With Kabelo Khumalo

erasmusd@businesslive.co.za