JOHANNESBURG (miningweekly.com) – Platinum mining company Impala Platinum (Implats) posted higher headline earnings, greater revenue and improved production in the six months to December 31 but opted not to declare an interim dividend while caught in the teeth of the current hostile industrial relations climate.

The company, headed by CEO Terence Goodlace, reported 31%-better safety, benefitted from the tempering effect on costs of higher production and acheived 10.8%-higher headline earnings.

Cash net of overdraft rose from R275-million to R3.4-billion.

Despite overall output upliftment through better performances in Zimbabwe and on the eastern limb of the Bushveld Complex at Two Rivers and Marula, Impala Rustenburg, on the western limb, continues to lose production of 2 800 oz of platinum a day, worth R60-million a day in revenue, owing to the strike in the platinum belt of the North West province.

However, mine-to-market production rose 9.2% to 677 300 oz of platinum compared with the corresponding six months a year ago, mainly owing to the build-up of metal and higher volumes at Zimplats, in Zimbabwe, where the second phase of an expansion project is being ramped up.

Third-party production toll-treated by Impala decreased by 55.3% to 109 200 oz after the company cut deliveries from an insolvent recycling customer.

Consequently, gross refined platinum production decreased by 9.1% to 786 500 oz, which represents a blow to wholly owned subsidiary Impala Refining Services (IRS).

The cost rise was held at a moderate 2.2%, increasing the cost of producing an ounce of platinum to R16 310.

While capital expenditure (capex) fell to R2-billion, or 5.5%, in line with cash preservation, capex continues on the development of the three new shafts.

The financial performance was hit by lower global demand for platinum-group metals, mainly because of poor European economic growth, high above-ground stocks and the strike.

But this was offset by more production at Zimplats and the weaker rand:dollar exchange rate.

Revenue rose to R16.5-billion, which is R1.4-billion, or 9.5%, higher than in the six months to December 2012, with a 16.1% increase in the palladium price helping to claw back R357-million, and lower dollar metal prices being more than offset by the weaker average rand:dollar exchange rate achieved - at R10.09 compared with R8.43 in the corresponding period last year.

The higher mine-to-market production volumes from Impala, Zimplats and Marula contained costs, allowing headline earnings to rise R84-million, or 10.8%, to R860-million representing 142c a share.

However, a R550-million impairment of long-term receivables hit IRS.

Cash generated from operations amounted to R1.9-billion, which was down on the R3-billion in 2012.

Cash used as capex of R2.7-billion went on shaft building at Impala Rustenburg’s 20, 16 and 17 shaft projects.

The rise in cash of R3.4-billion was mainly owing to the convertible bond, which was raised post the comparable six-month period.

Net debt of R4.3-billion was up on the R3.2-billion at the end of June 2013.

Owing to the hostile current industrial relations climate, and as part of its continued cash conservation strategy, the board resolved not to declare an interim dividend.

Implats said that the quantity of available metal continued to surprise despite the strike and the rapid uptake of the recently launched South Africa-based platinum exchange traded fund, which by year end had become the largest in the world with more than 900 000 oz taken up in just over seven months.

This combination of mixed fundamental news was sufficient to see a significant sell-off in the futures markets where some 1.8-million ounces of platinum and just over one-million ounces of palladium were liquidated.

Global vehicle sales grew by 3.9% and 83-million cars were sold, the highest number ever recorded.

Platinum and palladium remained in a supply deficit for the year, but was bedevilled by above-ground stocks.

The focus at Impala Rustenburg remains on the development of the three new major shafts. At the end of this reporting period the ramp-up of 20 Shaft was on schedule, and first stoping production had commenced at 16 Shaft.

While the sinking of 17 Shaft is on target, the strike is impacting schedules and management will only be in a position to provide any definitive impact after employees return to work.

In the eastern Bushveld, tonnes milled at the Two Rivers platinum mine rose by 4.2% to 1.66-million and, together with improved processing efficiencies, resulted in an 8.3% increase in platinum production in concentrate to 90 100 oz. 

At the Marula platinum mine, also on the eastern limb, tons milled rose 12.6% to 0.93-million, with the operation remaining on track to increase production to 86 000 oz/y by 2016. Unit costs a platinum ounce in concentrate decreased by 4.9% to R18 188 owing to higher volumes.

In Zimbabwe, Mimosa mill throughput increased by 3.6% to 1.24-million tons and platinum production in concentrate amounted to 52 600 oz.