JOHANNESBURG (miningweekly.com) – Platinum miner Impala Platinum’s (Implats’) gross profit for the six months to December 31, decreased to R21-million from R1.5-billion in the previous year – a direct result of lower metal prices. The net effect was that its headlines earnings declined 13% to R347-million for the half-year.

Implats on Thursday released its results for the six months, noting that it would continue efforts to prioritise shorter‐term cash preservation and profitability in the current low-metal price environment, which the company expected to persist in the longer term.

The platinum producer, nonetheless, was able to increase platinum production by 9.8% to 692 100 oz.

CEO Terence Goodlace explained during the results briefing that the production increase was primarily attributed to the impact of the ramp‐up of operations at Impala Rustenburg in the previous comparable prior period following the five‐month wage strike, and increased production from the group’s Zimplats operations in Zimbabwe.

He noted that on‐mine costs decreased by 15.6% from R926/t to R782/t milled, and capital expenditure (capex) reduced from R2-billion in the prior half-year to R1.9-billion in the six months under review.

“Gross cash improved to R6.4-billion and the group generated R630-million free cash after replacement capex during the period under review. The weakened rand provided some support to rand revenues and the rand denominated platinum group metals (PGMs) basket price averaged R21 843/oz platinum, some 15% lower than the comparable period in the prior year,” stated Goodlace.

He further commented that Implats had strengthened its balance sheet during the period under review through a “successful” R4-billion equity raising, the proceeds of which were earmarked for the completion of the new 16 and 20 shaft complexes at Impala Rustenburg.

Goodlace highlighted that, excluding the cash raised through the equity placement and R772-million project expenditure on the 16 and 20 shaft projects, the group generated R630-million during the half-year despite operating in a period when rand metal prices were low.

Meanwhile, he also pointed out that Implats had made “substantial progress” on a number of initiatives announced in 2015 in response to persistently low US dollar metal prices.

At Impala Rustenburg, 8 shaft and the 12 shaft mechanised sections were closed as planned in December 2015 and the workforce at Impala Rustenburg was consequently reduced by about 2 690 people over the seven months to January 31.

“Employee job losses were mitigated in line with our commitment to preserve jobs, as far as possible, by replacing contractors and through transfers to the new 16 and 20 shafts,” Goodlace pointed out.

PGM MARKET
He stated that the overall demand for PGMs from the group’s major customers remained strong during 2015, with generally sound market fundamentals across the key market segments, with the possible exception of the Chinese platinum jewellery market.

Implats refining and marketing group executive Paul Finney added in his presentation that automotive PGM demand improved strongly, but that sentiment and PGM price support were “particularly negatively impacted” by the Volkswagen diesel vehicle emissions scandal.

He explained that industrial demand was largely influenced by muted global economic growth, which constrained price support.

Nonetheless, Goodlace contended that despite the “persistently low” PGM metal prices and growing global economic uncertainty in 2015, the market fundamentals for the group’s metals remained sound owing to growing global demand and constrained primary supply.

“We believe, however, that our ‘lower‐for‐longer’ view of platinum prices remains unchanged for the short term, with sustained and increasing market deficits on the back of increasing demand supporting PGM price appreciation in the medium to longer term,” he concluded.