Impala Platinum CEO Terence Goodlace. Picture: MARTIN RHODES
Impala Platinum CEO Terence Goodlace. Picture: MARTIN RHODES

IMPALA Platinum, the world’s second-largest platinum miner, reported a decline in interim profit despite increased metal output and a sound cost performance, while a recent fire at one of its shafts and safety stoppages prompted it to lower its full-year output forecast.

Implats, which has mines in SA and Zimbabwe, reported profit for the six months to end-December of R204m, down from R249m in the year-earlier period as low prices weighed on its results.

Implats reported basic earnings per share (EPS) of 31c versus 41c before, while headline earnings per share (HEPS), which strip out exceptional items, dipped to 53c from 66c.

No interim dividend was declared.

Gross refined platinum output increased by nearly 10% to 692,100oz, but it had a difficult six months at its wholly owned operations in the Impala lease area around Rustenburg.

"Impala Rustenburg restored mill throughput to prestrike levels, but output during the reporting period was impacted by lower than planned stopping volumes, largely as a result of section 54 safety stoppages and a lock-up of platinum group metals (PGMs) due to scheduled maintenance in the smelter," Implats said.

During the six months, Implats closed its loss-making 8 shaft and the unprofitable mechanised sections at its 12 shaft. These closures accounted for 22,600oz of platinum and the company has reduced the Rustenburg workforce by 2,690, cutting its own employees and reducing contractor numbers.

Implats lost R530m in revenue and output of 26,000oz of platinum due to 42 safety stoppages at its Rustenburg mines ordered by the Department of Mineral Resources (DMR).

"While Impala remains very mindful of the safety issues that have affected operations over recent months, it continues to engage with the DMR in order to minimise the negative impacts of these stoppages on the safety risk profile and operational performance."

Implats has stopped work at its new 17 shaft, which it said a year ago would be put on a slower development trajectory and would come into production in 2021. No new start date was issued.

"Project development work at 17 shaft has now been placed on a low-cost care-and-maintenance programme pending higher PGM prices," Implats said, pointing out it would now spend R240m in the current financial year and the next instead of the planned R521m.

Implats raised R4bn via a rights issue during the interim period and spent R772m on its new 16 and 20 shafts.

It generated free cash flow of R630m during the six months "despite operating in a period when rand metal prices were low. This was largely due to Impala Refining Services (IRS) sustaining its considerable financial contribution to the group."

The rand price of the basket of metals Implats produced fell to an average R21,843 per platinum ounce, which was 15% lower than the R25,686/oz a year earlier.

Implats has identified savings of R1.6bn for the financial year to end-June and had already made savings at its Rustenburg mines of R570m by the end of the interim period.

Looking ahead, Implats said it estimated the fire at its 14 shaft would cost it 50,000oz of platinum and combined with the losses to safety stoppages, it lowered its production forecast at its Rustenburg mines to between 630,000oz and 650,000oz. The effect on profit would be offset by insurance claims related to the fire.

For the 2017 financial year, output was pegged at between 700,000oz and 710,000oz.

It retained its outlook after these two years as it builds up to 830,00oz of platinum by the 2020 financial year at the Rustenburg mines.

Output guidance for its Marula mine was unchanged at 85,000oz, Zimplats at 280,000oz, Mimosa at 110,000oz and Two Rivers at 170,000oz.