Implats' 20 Shaft headgear
Implats delivered a solid performance for its FY2016 results thanks to “excellent operational performance results” from Zimplats, Mimosa, Marula and Two Rivers.

The South African platinum major also pointed out that the four mines delivered their best‐ever output in addition to a significant contribution from Impala Refining Services (IRS).

Implats’ FY2016 (to 30 June) platinum production from Zimplats increased by 52.5% to 290 400 oz, compared to 190 000 oz in 2015. Marula’s platinum production rose by 5.6% to 77 700 oz compared to 73 600 oz in the previous year. Two Rivers improved production by 7.1% to 185 900 oz, compared to 173 500 oz for the year ended 30 June 2015.

Implats overall performance

While Impala Rustenburg restored mill throughput to pre‐strike levels in the first half of the year, poor safety performance in the second half affected its overall result.

Production was materially impacted by an underground fire at the 14 Shaft complex, a fall‐of‐ground incident in an underground mining panel at the 1 Shaft complex and other unrelated DMR safety stoppages across the operation.

In spite of this, gross group platinum production increased by 12.7% to 1.44 Moz.

Headline earnings per share decreased from 36 cents per share (cps) to 12 cps – mainly due to the lower rand metal prices received (7% lower), which were offset to some extent by the increased volumes and stringent cost control.

Impala Refining Services (IRS), which uses Impala’s excess processing and refining capacity to smelt and refine the concentrate and matte produced by the group’s other mine- to-market operations and third parties, generated R1.35 billion post tax, which is a significant contribution to the group.

This world-class refining business remains a strategic competitive advantage for Implats. Platinum production from mine-to-market operations increased by 10.7% from the previous year to 628 600 oz (567 500 oz) as all operations delivered higher volumes to IRS.

Implats’ CEO Terence Goodlace comments: “Our proactive response plan to the lower PGM price environment, introduced in February 2015, has shown positive results during the year as we continued to prioritise shorter‐term cash preservation and profitability enhancement measures.”

He adds that the response plan initially targeted savings of R930 million in the 2016 financial year. Thereafter, the 2016 budget targeted a further R640 million in savings (bringing the total targeted savings to R1.6 billion for 2016).

Against this, the company achieved a combined saving of R1.4 billion across the group, of which R1.1 billion was realised at the South African operations.

“This is an excellent achievement given the very difficult operating environment. Other key strategic initiatives included reprioritising and rescheduling capital expenditure and strengthening the Group balance sheet,” says Goodlace.

Revenue for the year increased by R3.5 billion from the previous year to R35.9 billion as a result of an increase in sales volumes and a positive exchange rate variance, but offset by lower dollar metal prices.

The group’s cash position at end of the financial year improved from R2.6 billion to R6.8 billion mainly as a result of the equity raise and strong cash generated during the year.

Excluding 16 and 20 Shaft capital expenditure, the group generated R1.6 billion in cash.

Group debt facilities of R4.75 billion remain undrawn – R4 billion of this is available until 2021. The liquidity that the cash and debt facilities provide will enable Implats to address upcoming debt maturities, as well as the on-going needs of the business.

Capital expenditure for the year amounted to R3.6 billion (2015: R4.3 billion) and is expected to be higher at R4.4 billion for the 2017 financial year, of which R2.4 billion is planned at Impala and US$122 million is planned at Zimplats. Capital expenditure will be funded from the opening cash balance and operating cash flows. 17 Shaft has been placed on low cost care maintenance

PGM market

Despite global macroeconomic uncertainty, overall demand for PGMs from major sectors remained healthy during 2015 and continued to hold its ground during the first half of 2016.

Secondary PGM supply was affected by the low PGM and steel price environment, which led to some hoarding by collectors.

Primary PGM supply continues to be at risk due to the continued lack of capital investment and the challenging mining environment in southern Africa. The platinum and palladium markets remained in a fundamental deficit during 2015, while the rhodium market showed a small surplus.

Looking ahead

In the short term, PGM prices are expected to remain subdued and as such Implats will continue its cash preservation initiatives as well as the drive to enhance productivity and profitability.

The group continues however to invest in its operations and will mechanise and optimise through the downturn to ensure it is well positioned for the future.

All operations are performing “extremely well” and efforts are apace to restore Impala Rustenburg to its full potential.

Given the impact of the 14 Shaft fire, the production estimate for Impala is between 700 000 and 710 000 platinum oz for 2017, after which the previous guidance of building up to 830 000 platinum ounces by 2020 remains.

Production guidance for the other operations remains unchanged for the coming year ‐ Zimplats 260 000 oz platinum in matte and Marula, Two Rivers and Mimosa 90 000, 175 000 and 115 000 platinum ounces in concentrate, respectively.

Unit costs are expected to be approximately R21 300/oz.