Impala Platinum (Implats) would launch a $500 million (R4.4 billion) bond to boost its balance sheet and fund its capital project development, the second-biggest platinum producer announced yesterday.
Terence Goodlace, the chief executive of Implats, said the firm was near break even and would launch the convertible bond to fund the development of three shafts that would boost the growth of the company.
Goodlace was presenting financial results for the six months to December last year in Johannesburg yesterday.
Brenda Berlin, the Implats chief operating officer, was confident that the market would be receptive to the bond, as its structure was cost effective, she said yesterday.
Implats’s existing shafts are reaching the end of their life, and the company is focusing on developing the shafts to continue contributing to production for the next 20 years.
Platinum mining has been drastically affected by weeks of unprotected strikes, in which 600 000 ounces of production were lost last year.
The industry has also been squeezed by increasing cost pressures including worker wage increases and Eskom’s proposed power price hike.
Implats said unit costs per platinum ounce increased by 52 percent to R16 674 due to lower volumes of refined output in its first half.
The unit cost increase highlighted operational challenges at the firm, Michael Kavanagh, an analyst at Religare Capital Markets, said yesterday.
“The full extent of the cost increase took the market by surprise. It is a concern, especially if it [Implats] cannot keep its input costs down; the valuation will not look as rosy as it might have,” he said.
Implats, which operates mines in South Africa and Zimbabwe, reported a 78 percent drop in headline earnings a share to R1.28 for the period from R5.73 a year earlier.
The company’s revenue slipped by 2 percent to R15.2bn, and capital expenditure retreated by 28.1 percent to R2.2bn, in line with its cash preservation plan. Gross refined platinum output rose by 2 percent to 865 000 ounces.
The company declared a 35c a share interim dividend.
“Implats is in a difficult, but not impossible position. It needs to work hard to bring the new shafts to production,” Kavanagh said.
The company was rocked by a six-week wildcat strike at its Rustenburg operation in January last year, after a strike by rock drill operators over wages. Goodlace said the platinum industry’s labour environment had changed.
Since the strike, the Association of Mineworkers and Construction Union (Amcu) membership had increased to 50 percent of Implats workforce. This meant the National Union of Mineworkers was no longer the majority union.
“We have to sign a recognition agreement with Amcu,” Goodlace acknowledged.
Implats said production levels had not been fully restored since the strike.
The share price dropped 3.09 percent to close at R161 yesterday.