Implats posts 41% interim earnings jump, reinstates dividend

Image courtesy of Impala Platinum

South Africa’s Impala Platinum Holdings Ltd (Implats) on Thursday posted a 41% rise in half-year earnings, reinstated dividends and halted closure of two shafts, after higher metals prices and improved operations boosted profits.

One of the world’s largest producers of autocatalyst materials platinum and palladium, Implats, which previously struggled with operational supply issues and low platinum prices, has turned a corner, buoyed by surging palladium and rhodium prices.

The miner reported headline earnings per share, the main profit measure in South Africa, of 436 cents for the six months ended Dec. 31, compared with 310 cents in the year-earlier period.

Implats, which has not paid a dividend since 2013, declared an interim dividend of 1.25 rand per ordinary share.

Proud part of the portfolio

The company said it would further delay and in some cases halt the planned closure of some of its shafts at its flagships Rustenburg operations after higher metals prices and an improved operational performance.

Implats said it would continue operating 12 and 14 shafts for the foreseeable future, securing 10,000 jobs.

The company would also continue to mine 1 shaft for its remaining life of three years, securing 2,500 jobs, and mine out 9 shaft, in around 18 months.

Implats said it would continue operating 12 and 14 shafts for the foreseeable future, securing 10,000 jobs

“We saw significant improvement in Rustenburg particularly our 12 and 14 shafts. They have surpassed our expectations and have become a proud part of our portfolio,” chief executive officer Nico Muller said.

The miner in 2018 planned to cut about a third of its workforce – more than 13,000 jobs – at Rustenburg over two years, and reduce the number of active shafts to six from 11, which would have cut the company’s output by about a third by 2021.

Earnings before interest, tax, depreciation and amortization (EBITDA) for the period rose by 1.8 billion rand ($118.13 million) to 7.6 billion rand.

Shares in Implats were up 1.89% at 146.71 rand by 0941 GMT.

Palladium and rhodium, widely used in vehicle exhausts to reduce harmful emissions, have climbed as tighter environmental regulations force carmakers to buy more of the precious metals used in catalytic converters.

This has boosted profits at miners such as Implats, Sibanye-Stillwater and Anglo American Platinum after several years of losses.

“Sustained operating performances from mining operations, together with robust rand PGM (platinum group of metals) pricing, offset short-term challenges associated with concentrator maintenance and constrained smelter availability,” Implats said.

Implats inventory increased by 135,000 ounces after maintenance at its smelter and a furnace rebuild at its Zimbabwe operations, Zimplats. Nationwide power cuts implemented by struggling state-owned utility Eskom had also impacted its smelter.

Improved cash

Implats’ improved cash position also enabled it to fund the acquisition of Impala Canada through a combination of cash, a forward sale of metal and debt.

The company completed the 10.9 billion rand acquisition of North American Palladium, marking its first purchase outside Africa, and bringing its net debt to 1.9 billion rand by the end of Dec. 31.

Muller said the company would look at further options in North America including exploration to extend the life of the current mine, greenfields projects and potential M&A.

Implats, which had free cash flow of 5 billion rand at the end of the period, said it would first focus on strengthening the balance sheet and having sufficient capital to run the operations and then look at opportunities to add value and return cash to shareholders.

($1 = 15.2377 rand)

(By Tanisha Heiberg; Editing by Tom Hogue, Subhranshu Sahu and Nick Macfie)

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