JOHANNESBURG (miningweekly.com) – South Africa’s second-largest platinum-mining company saw its earnings plunge in the 12 months to end-June, but that did not dissuade the board to be swayed away from its dividend policy.

The board of the JSE-listed Impala Platinum (Implats) has decided to declare a dividend for the year of 95c a share, made up of the interim dividend of 35c a share and a final dividend of 60c a share, in line with the Implats dividend policy of 3.5 times cover.

Gross refined platinum increased by 9% to 1.58-million ounces but mine-to-market output decreased by 2% to 1.21-million ounces.

Lower volumes at the Impala mine in Rustenburg negatively impacted unit costs, which increased by 23% to R16 570/oz, but R5.9-billion in operationally generated cash funded the bulk of Implats’ R6.4-billion capital expenditure.

Implats' headline earnings a share decreased by 52%, from 685c to 330c, or R2-billion, owing to lower strike-hit operational performance at the Impala Platinum mine, above-inflation cost increases and impairments of R1.3-billion of long-term receivables, excluding the goodwill impairment for the Afplats transaction.

Basic earnings a share, which included the Afplats write-down, fell even further, by 76%, or 168c a share, as a consequence of the R1-billion Afplats hit off.

Implats CEO Terence Goodlace said the platinum industry was facing extremely tough times with static platinum-group metal (PGM) basket prices, low productivity, cost pressures and industrial relations challenges.

He said that the Impala team had, however, managed to come to grips with its particular operational and industrial relations challenges and had reviewed its plans to deliver on safety, health and production.

“We aim to do this with the necessary respect and care deserving of our stakeholders.” Goodlace added.

The R30-billion revenue was R2.4-billion higher than last year because of higher sales volumes of R351-million and a weaker exchange rate of R8.80 to the dollar, which gave rise to R3.8-billion more revenue.

Group unit costs soared from R13 450/oz to R16 570/oz on 150 000 fewer ounces being produced owing to the strike, and mining inflation of 13%, made up by 11.6% from South African operations and 20.3% from Zimbabwe operations.

Implats, which has spent R2-billion on home-ownership schemes for its employees, received R677-million in debtor receipts from house sales.

The raising of the convertible bond increased cash to R4.5-billion at year-end.

Total borrowings increased by R4.5-billion to R6.1-billion, increasing the group’s net borrowed position from R995-million at June 2012 to R1.6-billion at year-end.

Global economic conditions are continuing to impact PGM markets, with dollar prices for Implats metals lower than the prior year.

The platinum market moved into a deficit of half-a-million ounces because of reduced primary supply from South Africa and a marginal increase in demand from the automotive sector.

Non-automotive industrial demand was lower but an uptick in jewellery offtake helped support the market.

The anaemic pricing environment stunted any growth from the recycle sector.

The uptake of 600 000 oz by the local Absa Platinum exchange-traded fund ate into stocks and palladium demand growth continued through stronger US and Chinese automotive sales.

Growth of up to 4% is expected in global vehicle sales and will result in shortages of both platinum and palladium, which will not easily be met from increases in primary supply, because of operational problems in South Africa and a drying up of capital investment in the industry.

Although there were no fall-of-ground fatal accidents and the lost-time injury frequency rate improved by 15.1% to 4.21 a million person-hours worked, nine people were killed in the 12-month period.

The new recognition agreement concluded with the Association of Mineworkers and Construction Union  for the Rustenburg mines provides a framework for the election of shop stewards.

The company intends inculcating a more direct relationship with its employees.

Non-managed production increased by 80% to 368 000 oz as a result of once-off treatment for third parties.

Ore milled at the Impala mine increased by 2.3% to 10.9-million tons while refined platinum decreased by 5.5% to 709 200 oz, owing to milled head grades being marginally lower at 4.32 g/t compared with 4.38 g/t last year.

Recoveries improved slightly to 85.3% from 84.7% last year as a result of better efficiency at the tails scavenging plant and lower opencast volumes milled.

Total development activity increased to 97.4 km compared with 96.8 km last year, as did on-reef development, which rose 13.6% to 29.7 km.

“Key to optimal performance at Impala, or at any mine for that matter, is having sufficient ore reserve flexibility. The mine is currently face-length constrained,” Goodlace commented, adding that Impala only mined an average of 17.4 km of face at an average panel length of 21.7 m and a face advance of 10.3 m a month.

The key to reversing this situation is to optimise development, equipping, construction and ledging activities on existing shafts and at the newly commissioned 20 and 16 shaft complexes.

The Rustenburg team is implementing optimal mine design, increasing on-mine motivation and increasing the skills and knowledge of the teams.

An improved mineral resource management approach has also been adopted.

Ore milled at the Marula mine increased 3.1% to 1.6-million tons, while platinum in concentrate increased by 3.8% to 71 700 ounces. Costs per platinum ounce in concentrate increased by 19.3%, lessened by an in-stope productivity increase of 8.5%.

Ore milled at Zimplats in Zimbabwe increased by 6.6% to 4.7-million tons while platinum in matte increased by 5.9% to 198 100 oz, despite a smelter fire necessitating a 21-day shutdown.

Platinum unit costs in matte increased by 5.5 offset by an increase in platinum production. The unit costs for the year were $1 307/oz in matte, down from last year.

Ore milled at the Mimosa mine in Zimbabwe increased by 2.5% to 2.4-million tons, but platinum in concentrate reduced by 5.4% to 100 300 oz.

Mimosa’s unit costs increased by 22.6% to $1 782/oz in concentrate.

Ore milled at Two Rivers mine in South Africa was 2.2% higher at 3.2-million tons, with platinum in concentrate increasing 8.2% to 162 200 oz. Costs an ounce in concentrate increased by 8% to R11 683/oz.  

The R6.4-billion capital spent was lower than the R8.1-billion of last year and went mainly on the Impala 20 Shaft project now in build-up, the recently commissioned Impala 16 Shaft project, the Impala 17 shaft-sinking project and the Phase 2 expansion project at Zimplats.

The 20 Shaft project achieved 352 000 ore tons and the build-up to full production of 125 000 oz is still planned for 2018.

Some 2 100 people, including contractors, are now employed at the shaft, which is currently mining Merensky reef.

The 16 Shaft project was commissioned in June and the first stoping is expected to start in the second quarter of 2014, securing 6 500 jobs for people currently employed at older Rustenburg shafts.

Full production of 2.7-million tons a year and 185 000 oz/y are planned for 2018, with mining of both Merensky and upper group two reef (UG2).

At the 17 Shaft project, which has been slowed down to preserve cash, the shaft will mine Merensky and UG2 from 2018, some two years later than previously envisaged.

Full production of 180 000 oz should be reached in 2023.

At Zimplats, the rated throughput of the new phase 2 concentrator plant has been achieved and the build-up of ore reserves through the new Mupfuti portal is on target.

Construction of the underground crusher at the portal – portal three – will begin in January for completion next August.

Full production from this project of 90 000 oz/y is planned from 2015, taking total Zimplats production to 270 000 oz/y.