JOHANNESBURG (miningweekly.com) – Platinum mining company Impala Platinum (Implats), which is collaborating closely with the South African government to preserve jobs at the heavily lossmaking Impala Rustenburg operation, is also working in very close cooperation with the government of Zimbabwe, where it has secured major tax relief.
“We’re very excited about the future of Impala Rustenburg, but in a different form,” Implats CEO Nico Muller told Mining Weekly Online in an interview on Thursday, after the Johannesburg Stock Exchange-listed company reported an after-tax loss of R1.6-billion on Impala Rustenburg-linked impairments of R13.6-billion. (Also watch attached Creamer Media video).
The R2.7-billion review strategy for Impala Rustenburg entrenches 27 000 of the 40 000 jobs, but places a question mark over 13 000 jobs, five shafts and 230 000 oz of platinum production.
“I think a win-win for everyone would be the emergence of commercial opportunities from this strategic review process, where perhaps smaller, lower cost operators could come to the fore and agree to buy properties over from us and in that way continue contributing towards the local economic employment and development within the industry,” said Muller.
Impala Rustenburg contributed to a R3-billion headline loss in the 12 months to June 30, which is unsustainable; the intention now is to convert the battling top-of-the-cost-curve asset into a more prosperous, attractive, long-term and sustainable asset.
Its strategic restructuring is now taking place in close liaison with the Department of Mineral Resources, the Bafokeng community and the 40 000-strong workforce.
At the same time, in Zimbabwe, Muller recently had an opportunity, with Zimplats CE Alex Mhembere, to hand over a refurbished regional hospital at a ceremony presided over by President Emmerson Mnangagwa and five of his Cabinet Ministers.
“We spent the entire day together plotting the future and agreeing to combine the company with the efforts of the Zimbabwean government to grow the Zimbabwean economy,” Muller said.
Implats has released ground beyond Portal 10 at Zimplats, for which it had no immediate plans.
“We were very happy for the government to allow new entrants to potentially explore that. We’ve seen announcements of a $4-bilion investment coming, but we do understand that there are significant barriers to entry,” Muller told Mining Weekly Online.
He is not necessarily expecting a significant investment in platinum extraction in the short term, but to the extent that there is any development on the ground Implats has released, the company has undertaken to collaborate with the new participant, who will require available processing capacity.
This places Implats in a position to increase the ability of Zimplats to contribute financially to the changes between the special mining lease and the mining lease, which will see the company benefiting significantly from a much reduced tax rate.
The upshot is the creation of a far stronger economic vehicle in Zimplats, through the strengthening of its ability to contribute to the group.
Implats has mandated Mhembere to seek out other opportunities in Zimbabwe, where the company is eager to explore business linkages with the supply chain and to evaluate predominantly platinum group metals-related openings, as well as moderate diversifications outside of the existing portfolio, to the extent that these add value to the company.
Implats regards the success of its business in Zimbabwe as being related to the success of the economic development of Zimbabwe and does not believe that it can be successful by just growing itself in what is a relatively small economic environment.
“We have to assist the government to grow the size of the pond in which we operate to reduce their reliance on our foreign exchange earnings and to distribute that across a broader economic front.
“If there were value accretive opportunities, it would make sense if they were related to the automotive industry, because that is a market that we study and that we know, or to metals associated with platinum group metals, for example chrome. We’ve got chrome in our current business. If there is a chrome opportunity in Zimbabwe that we believe will assist the government to grow the economy, it is something that we at least will look at,” said Muller.
TOWARDS LONG-TERM RUSTENBURG PROSPERITY
In South Africa, Implats is determined to reduce the cost of mining at Impala Rustenburg, where the pan is to focus its future around its best assets and to reduce costs from R29 000 per platinum ounce to R24 000 per platinum ounce.
In that mode, there is long-term prosperity potential for the operation and for all of its stakeholders.
Muller emphasised that the company is setting out to create a vibrant, long-term sustainable business that can continue to contribute to the social upliftment of communities.
It is collaborating “very intensely” with the government and the task team that the government has established.
“They are very supportive in guiding us on all the possible solutions that we can look at. Whilst they don’t want to be interfering and directing us, they are supportive and they are exposing us to options in addition to what we have developed ourselves so far,” Muller said.
Implats has also engaged with Kgosi Leruo Molotlegi of the Bafokeng community and his team on the social and economic impact of the restructure on the broader Rustenburg area, where separate platinum company Lonmin is also in the process of restructure.
Implats has also been confronted by a desperate situation at Marula, which has been perpetually lossmaking.
“We were very open and honest to our management at Marula, the communities and the Department of Mineral Resources and we have been so pleasantly surprised by the turnaround at that operation,” said Muller.
The management team with the support of the corporate office have achieved a spectacular turnaround, with a 25% increase in platinum in concentrate produced in the 12 months to June 20.
Marula has risen from being an R837-million loss before capital and finance expenses to a R77-million contribution to the group this year.
“That’s a remarkable story and we now see a bright future for Marula,” he said.
The mine is now positioned to leverage off the improved palladium and rhodium prices because they have a stronger bias towards those associated metals within the PGMs range.
Even though Two Rivers is currently having to contend with mining through split reef, access to additional reserves is set to uphold its performance.
A year ago, Implats went public on putting an end to its support of lossmaking ounces and has taken bold decisions at Rustenburg and Marula to give credence to its stand.
Its second major decision taken at the same time was to introduce long-range plans to develop assets that will operate at the lower end of the cost curve.
To that extent, the investment of $30-million in the 15% interest in Waterberg represents a strategic step in that direction.
Waterberg is a shallow asset that lends itself to bulk mechanised mining methods and Implats believes that when it comes to fruition, it will operate at a low position on the cost curve, making it strategically important to the company.