Video by: Chelsea Lotz, Business Report

WATCH: Implats balance sheet allows return of money to its shareholders

By Dineo Faku Time of article published Feb 28, 2020

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JOHANNESBURG – Impala Platinum (Implats) on Thursday said that it would return money to shareholders for the first time since 2013 after the wave of the strong platinum group metal (PGM) price boosted its balance sheet.

Implats declared a R1.25 a share interim dividend for the half-year to December 2019.

Chief executive Nico Muller said that the dividend, which would be paid next month, was based on the group’s newly approved dividend policy. “The dividend policy states that a dividend will be declared from 30 percent of free cash flow generated, pre-growth capital, for any given period, subject to the board’s discretion,” Muller said.

Implats reported a R5 billion hike in free cash inflow for the period thanks to the 41 percent improvement in rand PGM pricing an ounce.

The robust metal prices helped Implats to withstand a 16 percent decline in sales volumes.

Refined 6E production was 17 percent lower than the prior comparable period, heavily impacted by constrained smelter availability largely due to a planned furnace rebuild at Zimplats.

Implats acquired North American Palladium for R10.9 billion last December on the back of the strong price environment.

Yesterday, Implats also announced that it had parked the brakes on plans to sell certain Impala Rustenburg assets on the back of improved operational performances.

Two years ago, Implats shocked the government and labour when it unveiled plans to restructure Impala Rustenburg at a time when the industry grappled with the weak price environment in an oversupplied market.

Implats said at the time that it would close 9 Shaft and either outsource or closure 1 Shaft, both of which had a short lifespan.

Poor productivity and efficiency at both 12 and 14 Shafts also meant they were earmarked for closure.

Muller said a thorough investigation and the turnaround in the PGM basket price, however, made it possible to rather convert 1 Shaft’s operating model to the one it successfully used at 9 Shaft.

“Internal projections based on reserve and price assumptions estimate a life extension of at least three years at a production rate of 100 000 ounces of 6E per annum,” Muller said. “This development secures more than 2 500 jobs at the operation.”

Muller said that while the contractor mining model deployed at 9 Shaft continued to deliver profitable mine life extension, the remaining mineral reserves would be depleted soon.

He said during the period under review, 12 and 14 Shaft not only met the operating and cost thresholds, but became the most profitable operations for the group.

“The fundamental improvement in operating performance, combined with our view of a structural repricing of the medium-term 6E revenue basket, now fully warrants continued operation of these assets for the foreseeable future,” said Muller.

Seleho Tsatsi, an investment analyst at Anchor Capital, said it was noteworthy to see that all of Implats’ operations, even its higher-cost assets, were very cash generative over the period.

“The PGM basket price has appreciated significantly since the first half of 2020 and investors will be keen to see the effect of those prices on the second half’s results,” Sehelo said.

Implats shares fell 1.74 percent on the JSE on Thursday to close at R141.49.


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