Platinum-group metals (PGMs) miner Impala Platinum Holdings Limited (Implats) is focused on mitigating the challenges of a constrained local economy through the diversification of its portfolio, debt reduction and investment in market development, as well as increasing community support.
“The domestic PGM industry has endured a period of substantial margin compression, caused by weak pricing and an uncertain demand outlook for its primary product, platinum,” explains Implats corporate affairs group executive Johan Theron.
This has been compounded by regulatory uncertainty in the mining sector, the impact of State-owned power utility Eskom’s insecure power supply, as well as rising calls from communities to fill the gaps left by the State’s inability to lift economic growth and provide basic services in areas where mining operations are located, he elaborates.
He argues that this has encouraged conservative approaches by boards and company management in terms of operating risk and investment plans.
Further, he notes that, given the state of the PGMs sector, most of the viable opportunities for changes to production and capital expenditure lie in quick payback projects linked to mine life extension at ageing assets.
“One should see capital expenditure levels pick up as producers look to expand the mineable footprint of existing assets,” Theron comments, adding that the project pipeline for new growth is limited by financing and processing constraints.
Implats aims to ensure the sustainability of the company’s operations, particularly as the long-term demand outlook for its primary metals from the automotive sector becomes less certain. This is owing to conflicting expectations on the rate of electrification of the global light-duty vehicle fleet from 2030 onwards.
“We have strict capital allocation priorities at Implats. As one of the first steps towards taking advantage of improved profitability, we looked to reduce debt through the early inducement of our convertible bond to strengthen our balance sheet and improve the cost of capital,” explains Theron.
Additionally, Theron stresses that Implats has taken advantage of a “mispriced asset” by acquiring palladium producer North American Palladium, now called Impala Canada.
“This transaction has enabled us to increase our exposure to shallow, mechanised, palladium-rich ounces at a time when we believe the market is short of readily available palladium supply.”
Implats refining and marketing group executive Sifiso Sibiya highlights how this has coincided with PGMs, such as palladium and rhodium, showing substantial price increases in the beginning of this year.
While the company does predict higher averages year-on-year, there is an expectation for “extreme physical tightness” to ease slightly, as refining pipelines normalise after the completion of maintenance cycles in the northern hemisphere and at domestic smelters and refineries.
“We produce material from polymetallic orebodies, and focus on producing in a safe, responsible, sustainable and efficient manner. We also benefit from a diverse source of ore feeds, as Implats has a suite of assets which help match its refined output to the ratio of expected demand.”
The company’s ore derives from a combination of ore from the Merensky and Upper Group 2 Reefs in the Bushveld Igneous Complex, and the Great Dyke Reef, in Zimbabwe, which both will now be supplemented with strong palladium exposure from Impala Canada, he comments.
While this diversification is beneficial, Sibiya stresses that the company emphasises safe and efficient operation, as opposed to targeting individual metals.
He states that Implats does not regard a focus on individual metals as a sustainable operating method because the nature of its orebodies does not allow for “cherry-picking” by grade or metal content.
Theron adds that Implats also increased its focus on securing the safety and wellbeing of its employees and surrounding communities, assisting, where possible, in creating living conditions and a wage structure that enables people to thrive and advance in society.
Fuel Cell Development
Other than the automotive sector, Sibiya expects to see increasing promotion and acceptance of the potential of hydrogen as a power source, to meet the demands of a decarbonising world.
“We have seen governments embrace the concept of adding hydrogen to future power mixes, and a number of original-equipment manufacturers are announcing plans to add fuel cell electric vehicles to their powertrain line-up,” suggests Sibiya.
Implats has developed a fuel cell road map, with partners such as research centre Hydrogen Infrastructure South Africa, fuel cell technology company HyPlat and analytical chemistry laboratory Mintek.
The company is also developing a special economic zone with the Gauteng Industrial Development Zone Company, focusing on fuel cell manufacture. Implats’ contributions to the project include donating land and the related fit-for-purpose preparations.
“Awareness and commentary on hydrogen as a power source and fuel cell development will increase. We can, however, expect meaningful growth in ounce demand to be delivered in the latter part of this decade. This growth should provide confidence to investors who have allocated funds to the longer-term view of value for platinum,” Sibiya concludes.