Implats: Bond yields betray threat to growth

YIELDS on Impala Platinum (Implats) bonds are signalling mounting concern that this year’s five-month mining strike will force the firm to ask investors for cash or risk sacrificing growth. Rates on Implats’s February 2018 convertible dollar notes have risen 43 basis points since August 27, the day before chief executive Terence Goodlace said the mining house would review R9.4 billion of capital projects that would account for a third of annual output. The average yield for bonds of emerging market metals companies fell 3 basis points in the period, JPMorgan Chase indices show. Implats said the stoppage cost it 312 000 ounces in lost output and stalled projects as cash had to be preserved. The company would burn through R2.8bn until November as it returned the mines to pre-strike output levels, spokesman Johan Theron said this week. “Raising finance at this juncture isn’t going to be cheap but may be necessary as Implats does not have the production or cash flow to fund significant” capital spending, Esther Krukowski, a fund manager at BlueBay Asset Management, said on Monday. “Without investment, medium-term production will plummet.” BlueBay owned Implats bonds until December, data show. Krukowski declined to comment on current holdings. Implats shares added 0.54 percent to close at R93 on the JSE yesterday. Implats’s profit fell 74 percent in the year to June, it said last month. Anglo American Platinum, the largest producer of the metal, reported an 88 percent drop in earnings excluding one-time items for the first half, it said on July 21. “The platinum industry as a whole is rather beleaguered,” Krukowski said. – Bloomberg