2013 bond sale gives Implats wiggle room

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The bond sale last year by Impala Platinum (Implats) is shielding the producer from the pay strike that is crippling platinum mining operations for the 11th week.

The second-largest producer of the metal sold $200 million (about R2.2 billion) and R2.67bn of February 2018 notes last year and stockpiled two months’ supply of the metal before the strike began.

Implats could withstand the strike and resulting revenue losses for three months or more before it might have to raise further funds, Rashaad Tayob at Abax Investments said.

“They could survive for that length of time but it’s in no one’s interest to keep the strike going on that long,” Tayob said late last week. “The money they raised last year helped to bolster the balance sheet.”

The dollar-denominated bonds can be exchanged into stock at an equivalent of $24.13 a share while the local currency notes are convertible at R214.90 a share.

The dollar securities have returned 0.3 percent this year, underperforming the JPMorgan Chase metals and mining index, and the rand debt has returned 3.6 percent, according to data compiled by Bloomberg.

Implats shares have shed 2.6 percent this year. Yesterday they lost 50c to close at R119 on the JSE. The company also has American depositary receipts.

Issuing the bonds had stood Implats in good stead, company spokesman Johan Theron said on Friday.

“They were the right thing at the right time,” he said.

The yield on the dollar note was 4.67 percent on Friday compared with 4.4 percent on December 31 last year.

Implats more than doubled its cash holdings to R3.7bn by December 31 from a year earlier, it said on February 27.

More than 70 000 miners at Implats, Lonmin and Anglo American Platinum went on strike on January 23, demanding a minimum monthly wage of R12 500 within four years. The producers have offered a maximum rise of 9 percent.

Talks between the Association of Mineworkers and Construction Union (Amcu) and the producers stalled a month ago, with the Commission for Conciliation, Mediation and Arbitration saying the parties remained far apart.

“We are not willing to negotiate on 9 percent,” Amcu president Joseph Mathunjwa said at a rally at Lonmin’s Johannesburg offices on Thursday.

Implats said last week that it met all customer deliveries until the end of last month even as it was losing 2 800 ounces of platinum production daily at the strike-hit Rustenburg Lease mines. These operations accounted for 58 percent of mined metal in the six months to December. Its Zimbabwean unit and smaller South African mines are not affected by the stoppage.

The losses mean forfeited revenue of about R2.2bn in 10 weeks using a platinum price of $1 441 an ounce, according to calculations based on Implats figures. The metal, which has risen 5.2 percent since the start of the year, may average $1 499 an ounce this year and $1 625 next year, according to the median of 24 analyst estimates.

“The outlook for the metal is good and the yield is reasonable,” Esther Krukowski, an analyst at BlueBay Asset Management, said from London on Friday. Implats “is stronger than some of the other producers and would be able to borrow from banks if it wishes”. – Bloomberg


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