Johannesburg, South Africa — MININGREVIEW.COM —20 February 2009 – Impala Platinum Holdings Limited – the world’s second-largest producer of the metal – has cut spending on new projects by a third and reduced the company’s output targets, after the price of the metal tumbled from its record levels last year.
“Impala will produce 2.1 million ounces of platinum in 2012 – 8.7% less than previously planned,” CEO David Brown told Bloomberg News in an interview here. “Fiscal 2009 production may drop 11% to 1.7 million ounces, while the company’s five-year investment plan announced last year will be cut to US$ 2 billion (R20 billion),” he said.
“Spending cash today on long lead items that will only deliver ounces in three or four or five years doesn’t make sense,” Brown continued, adding that Impala’s Merensky Marula and Leeuwkop projects have been deferred indefinitely.
Management is seeking to retain cash, suspending a share buyback programme in November and abandoning plans to take over Mvelaphanda Resources Limited and Northam Platinum Limited, after platinum prices tumbled 55% in the second half of 2008.
The company’s first-half production fell 15% to 878 000 ounces as output from Rustenburg shrank and Impala received less platinum to refine from other companies.
The decline raised costs and contributed to an 11% drop in profit for the six months ended 31 December, the company said in a statement. Net income fell to R5.26 billion from R5.93 billion a year earlier, it added.
“While the first-half output cut wasn’t planned, we’ve done our piece for the industry,” Brown said. “It’s quite clearly been mildly positive for the market that there’s been less metal available.” Platinum has gained 15% to US$1 075 this year.
Brown expects the metal to average between US$950 and US$1 000 an ounce in 2009. “By mid-2010, there may be some alleviation from this year’s tough trading conditions,” he added.
Impala’s larger rival Anglo Platinum Limited revealed last week it might extend output cuts and get rid of as many as 10 000 jobs, while Lonmin – another rival platinum producer – may slash as many as 6 000 jobs in South Africa to stem losses at some operations.
Brown said that alhough Impala was not planning job cuts, it might lower project and operating spending if the market weakened.