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PGM market fundamentals stronger than current pricing suggests – Muller

Implats CEO Nico Muller

Implats CEO Nico Muller

31st August 2023

By: Marleny Arnoldi

Deputy Editor Online


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Impala Platinum (Implats) CEO Nico Muller says platinum group metal (PGM) market fundamentals are stronger than what current pricing suggests.

He also does not expect there to be further significant price declines.

Reflecting on the company’s results for the financial year ended June 30, Muller says the company had anticipated a fall in PGM prices - “admittedly it happened much faster than originally expected”.

He adds that the current prices are “not bad” compared with the last 15 years, particularly as 2021 and 2022 had record price spikes.

Implats declared a 63% lower dividend at R5.85 for the financial year, on the back of lower PGM prices.

This compares with the dividend of R15.75 it paid out in the prior financial year, when it reported a stellar R53-billion in earnings before interest, taxes, depreciation and amortisation (Ebitda).

The group posted a 32% year-on-year decline in Ebitda to R36-billion for the financial year under review.

Implats’ profit for the year amounted to R6.1-billion, marking an 81% decrease on the prior year’s profit of R33.1-billion.

Headline earnings per share (HEPS) came to R22.11 in the reporting period, which marks a 42% decline on the HEPS of R38.53 for the 2022 financial year.

Gross refined production of 2.9-million ounces compares with the 3.08-million ounces produced in the prior year.

Tonnes milled from the group’s managed operations increased by 7% year-on-year to 23.8-million tonnes, with higher reported volumes at Impala Rustenburg, Zimplats and Impala Canada, together with a consolidated contribution of 403 000 t from its newly acquired Royal Bafokeng Platinum (RBPlat) subsidiary, which all offset lower throughput at Marula.

Platinum, palladium, rhodium, iridium, ruthenium and osmium (6E) production at managed operations increased by 6% to 2.42-million ounces, and a maiden contribution of 43 000 oz in concentrate from RBPlat was recorded for the month of June. 6E concentrate production of 541 000 oz from joint venture operations was 1% lower year-on-year.

Implats realised an average platinum price of $962/oz in the year under review, an average palladium price of $1 763/oz and an average rhodium price of $11 696/oz, compared with prices of $1 008/oz, $2 211/oz and $16 544/oz for the three metals, respectively, in the prior year.

The group’s production was somewhat constrained owing to smelting capacity being unavailable during the scheduled rebuild of the Number 4 furnace in Rustenburg. The company also experienced load curtailment in the period, ending the year with about 245 000 oz of excess inventory.

Muller says the financial year was challenging amid widespread power shortages, softening prices, rand depreciation and persistent inflation.

Notable rand depreciation compounded the impact of high consumable and utilities inflation on the translated cost and capital expenditure (capex) at the group’s Zimbabwean and Canadian operations.

Total cash operating costs increased by 19% year-on-year, while unit costs benefitted from higher throughput at managed operations and, despite lower refined output, increased by 14% to R19 834/6E oz, compared with a unit cost of R17 364/6E oz in the prior year.

Capex at managed operations rose by 27% to R11.5-billion, compared with capex of R9.1-billion in the prior year, as spending on replacement and growth projects accelerated and the rand weakened against the dollar.

Implats’ stay-in-business spend of R7.3-billion, replacement capital of R2.3-billion and expansion capital of R1.9-billion increased by 16%, 61% and 41%, respectively, in the year under review, compared with the prior year.

The group’s financial performance was ultimately negatively impacted on by the retracement in rand PGMs pricing, lower refined production and sales, continued high levels of inflation and the accounting impact of end-of-period inventory valuations and impairments related to Impala Canada and RBPlat, as required by its consolidation.

Implats accounted for three significant one-off items in the 2023 financial year – a R10.9-billion impairment of the carrying value of Impala Canada, owing to the combined impact of a material decrease in the dollar palladium price profile and higher prevailing inflation; a loss of R1.8-billion on the remeasurement of the previously held equity investment in RBPlat at the date it became a subsidiary; and a R4.2-billion impairment of goodwill arising on the acquisition of RBPlat.

Implats, nonetheless, generated R14.2-billion in free cash flow, following capital investment of R11.4-billion at its managed operations. It ended the year with net cash after debt of R25.3-billion and liquidity headroom of R37-billion.

Muller says developing negative cash flows is not palatable to Implats, referring to the group’s Canadian operations; however, he adds that production from the region increased by 17% in the year under review and that the Canadian operation is not the highest-risk asset in the portfolio.

Instead, he highlights those projects with higher levels of capital requirements as higher-risk assets, including those owned and operated by Zimplats, in Zimbabwe.

The downturn in palladium pricing compounded margin compression from structural changes in the operating and cost context faced by Impala Canada, largely owing to the aftermath of Covid-19 and the subsequent supply-chain constraints, labour market tightness and hyper-inflationary pressures from rising global utility and consumables pricing.

Muller assures shareholders that teams are working to secure a sustainable value proposition for the asset, underpinned by the volume gains and operating momentum established in the 2023 financial year – specifically targeting mining from higher-grade areas.

Moreover, group production in the 2024 financial year will be supported by volume gains from increasing milling capacity at Zimplats and Two Rivers, while the improved operational stability established at Impala Rustenburg and Impala Canada will bode well for further efficiency gains.

Refined volumes will be impacted on by the planned rebuild of the Number 5 furnace.

Implats expects 6E refined production to be between 3.3-million and 3.45-million ounces for the 2024 financial year.

Group unit costs are forecast to rise by between 6% and 10% to R21 000/oz and R22 000/oz on a stock-adjusted basis.

Group capex will be between R12.5-billion and R13.5-billion, including growth capital of at least R3-billion.

Implats continues to extend life-of-mine development at several of its operations, as well as projects aimed at increasing beneficiation capacity.


Muller says there have been several revisions to forecast PGMs supply and demand in 2023 and that primary supplies continue to be challenged by the South African operating environment, while processing maintenance will result in lower refined Russian suppliers.

Forecasts for secondary flows continue to be downgraded as scrap collection falls short of expectations in the face of rising interest rates, increased regulatory scrutiny and still-weak new-vehicle sales.

While expectations for automotive production and sales have enjoyed modest upgrades, forecasts for net metal demanded by industrial users have been adjusted down to account for the destocking of inventory.

Negative revisions to the outlook for Chinese jewellery demand have largely been countered by a stronger-than-expected performance in India, the US and Europe.

“Our forecasts indicate fundamental deficits for each of the PGMs in 2023. However, the potential impact and pattern of industrial and automotive manufacturer destocking, particularly in rhodium, and the flow of discounted metal flows from Russia will likely heavily influence physical market tightness, and hence pricing, during the year,” Muller explains.

The uncertain macroeconomic environment and the recent material decline in dollar PGMs pricing heralded a period of rapid margin compression across the sector, which requires decisive action and focus to preserve business sustainability.

Meanwhile, Implats remains focused on delivering consistent and safe production, constructively collaborating with key stakeholders and entrenching operational agility and flexibility.

“It is imperative that each operation generates positive margins through the cycle. The group is advancing targeted capital and cost interventions in response to the current market conditions.”

Implats will sustain investment across projects to ensure regulatory compliance and strategic value creation.

Muller reiterates the commitment is to prioritise shareholder returns, with a dividend policy founded on a minimum allocation of free cash flow generated before growth capital.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online


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