IMPALA PLATINUM HOLDINGS LIMITED - Third Quarter Production Report for the period 1 January to 31 March 2014
16 May 2014 11:00
IMP 201405160014A
Third Quarter Production Report for the period 1 January to 31 March 2014
IMPALA PLATINUM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 1957/001979/06)
JSE Share code: IMP
ADR code: IMPUY
ISIN: ZAE000083648
(“Implats” or “group”)
THIRD QUARTER
PRODUCTION REPORT
FOR PERIOD 01 JANUARY TO 31 MARCH 2014
Johannesburg, 16 May 2014: Implats released third quarter production results for the
period 1 January to 31 March 2014 today. CEO Terence Goodlace commented: “Our good
start to the financial year was severely impacted in the third quarter by the protracted wage
strike at our Impala Rustenburg operation. Whilst all other operations maintained their
strong safety and operational performances, production at Impala was significantly reduced
due to the closure of the mine during the strike.
“We remain committed to finding a negotiated wage settlement that is both affordable and
sustainable for the business, however, we expect the strike to constrain group performance
for the remainder of the financial year. All other operations should continue to meet planned
performance targets and the stockpiled concentrates from Marula, Mimosa and Two Rivers
will be processed in the current quarter.
The wage offer that has been tabled as part of the wage negotiations with AMCU is fair in the
current low platinum price environment. The human tragedy that is unfolding as a result of
our employees not earning any income and the violence and intimidation being experienced
on the platinum belt is devastating. Implats urges AMCU to moderate their demands and
accept the fair wage offer. Employees should be allowed to return to work, while the
leadership of AMCU and Impala can engage to find a long-term, viable solution for
employees.”
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Unaudited Unaudited Unaudited Unaudited
Operational information Quarter ended Quarter ended Nine months Nine months
31 March 2014 31 March 2013 31 March 2014 31 March 2013
Prices Achieved
Platinum US$/oz 1 400 1 651 1 419 1 570
Palladium US$/oz 730 728 725 657
Rhodium US$/oz 993 1 119 979 1 136
Nickel US$/t 13 986 17 516 13 964 16 840
Average exchange rate R/US$ 10.87 8.99 10.31 8.59
Implats Gross Refined Production
Platinum 000oz 205 341 992 1 206
Palladium 000oz 126 220 595 796
Rhodium 000oz 32 53 129 168
Nickel 000t 3.21 3.74 11.31 11.46
Impala Production
Tonnes Milled 000 273 2 358 6 120 8 535
Grade (6E) g/t 4.26 4.31 4.33 4.27
% Merensky % 12.8 43.6 43.2 43.6
Refined Platinum Production 000oz 21 189 411 557
Marula Production
Tonnes Milled 000 399 336 1 329 1 162
Grade (6E) g/t 4.23 4.19 4.25 4.20
Platinum in Concentrate 000oz 17 15 59 51
Zimplats Production
Tonnes Milled 000 1 423 1 068 4 404 3 249
Grade (6E) g/t 3.45 3.55 3.46 3.55
Platinum in Matte 000oz 58 64 174 138
Mimosa Production
Tonnes Milled 000 569 563 1 804 1 755
Grade (6E) g/t 3.94 3.94 3.92 3.95
Platinum in Concentrate 000oz 27 26 79 81
IRS Production
Refined Platinum Production 000oz 184 152 581 649
Unit Cost
Implats Unit Cost R/Pt oz 29 330* 15 823 18 304* 15 909
* including strike related costs
Safety
During the quarter under review, the fatal injury frequency rate improved by 26% to end the
period at 0.048 per million man-hours worked. The lost time injury frequency rate, which had
deteriorated in the first six months of the financial year, also improved, but still ended the
period marginally lower than the rate achieved at the end of the previous financial year
(4.27 per million man-hours, compared to 4.21 achieved in FY2013).
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Despite these improvements, it is deeply regrettable that an employee was electrocuted in a
sub-station in the Mineral Processing plant in Rustenburg in early January 2014. The board
of directors and the management team have extended their sincere condolences to the
family, friends and colleagues of the deceased.
Prices
With the exception of palladium, all other metals traded approximately 10% lower in the nine-
month period, compared to the corresponding period in the prior year. Platinum averaged
US$1 419 per ounce which is 10% lower than the price achieved in the prior period
(US$1 570). The rhodium price was down by 14% at US$979 per ounce and the nickel price
down by 17% at US$13 964 per tonne. Palladium benefited from improved vehicle sales in
the US and China and traded at an average price of US$725 per ounce, 10% higher than
US$657 per ounce traded a year ago.
Despite lower metal prices, the Rand/US$ exchange rate provided some respite,
depreciating by 20% to average R10.31 to the US dollar, compared to a rate of R8.59
achieved in the prior period.
Production
Group production was significantly impacted by the unresolved industrial action at the Impala
Rustenburg operations which commenced on 23 January 2014.
Approximately 131 000 ounces of platinum production were lost at Impala in the quarter
under review as a result of the eight-week strike interruption. Production from other mining
operations, which typically accounts for approximately 45% of the group’s total production,
remained unaffected.
At group level, gross refined platinum production declined by 18% to 992 000 ounces in the
nine-month period ended 31 March 2014, compared to 1 206 000 ounces in the
corresponding period in the prior year.
Impala
Production at Impala was severely impacted by the Association of Mineworkers and
Construction Union (AMCU) led wage strike. The industrial action halted all mining and
mineral processing operations and, as a consequence, refined platinum production for the
nine months was 411 000 ounces. Normalised production, adjusting for the lost production
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of 131 000 platinum ounces due to the strike, would have yielded 542 000 platinum ounces
compared to the prior period production of 557 000 platinum ounces. Additional ounces
were lost due to the decision to safely stop all mining operations prior to the commencement
of the strike.
Stringent cash preservation initiatives were implemented as a result of the strike action.
These included force majeure notices to suppliers of all non-essential goods and services.
The strict application of the ‘no-work no-pay’ principle for striking workers yielded much lower
operating costs and lower capital expenditure. Operating costs incurred in this period only
included security and essential services and maintenance costs. Capital costs were also
significantly reduced and all capital projects, other than 17 Shaft, were stopped. Activities at
17 Shaft were curtailed in line with the cash preservation strategy.
The net result was that for the period of the strike, operating costs and capital expenditure
were curtailed by 67% (approximately R1.9 billion) in total.
Marula
Platinum in concentrate at Marula benefited from higher milled tonnes and improved ore
grades, rising 16% to 59 000 ounces of platinum for the nine-month period ended
31 March 2014, compared to 51 000 ounces platinum in the prior period. The operation
remains on track to reach the production target of 86 000 ounces of platinum in concentrate
by 2016.
Zimplats
Tonnes milled at Zimplats increased by 36% in the nine-month period ended 31 March 2014
as a result of the Phase 2 expansion project and a planned increase in the mining cut. As a
result of the increased mining cut, ore grades reduced by 3% to 3.46 g/t (6E) from 3.55 g/t
(6E) in the previous reporting period. Consequently, platinum in matte production increased
by 26% to 174 000 ounces of platinum, compared to 138 000 ounces platinum in the prior
corresponding period.
Quarter on quarter, platinum in matte decreased by 9% to 58 000 ounces of platinum,
compared to 64 000 ounces platinum in the prior period. This was as a direct result of higher
volumes of concentrate smelted in the corresponding period in the prior year, following
furnace outages and a subsequent concentrate build-up that was treated in this period.
Zimplats matte continued to be treated at the Springs Refinery during the strike.
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Management continues to engage actively with the Government of Zimbabwe in respect of
the indigenisation implementation plan, corporate taxation and royalty dispensation, and the
company’s commitment to primary beneficiation within Zimbabwe. Regarding beneficiation,
the company has committed to a first stage refurbishment of the existing Selous-based base
metal refinery to partially process the Zimplats matte. Progress will be disclosed as soon as
further agreement is reached with the Government of Zimbabwe.
Mimosa
Platinum in concentrate at Mimosa amounted to 79 000 ounces of platinum for the nine-
month period ended 31 March 2014, compared to 81 000 ounces in the corresponding
period in the prior year. Performance remains on plan with steady-state throughput capacity.
IRS
Refined platinum volumes at IRS decreased by 10% to 581 000 ounces of platinum for the
nine-month period ended 31 March 2014, compared to 649 000 ounces platinum in the
corresponding period in the prior year. The decrease in production over the reporting period
is largely attributed to the cessation of deliveries of autocatalysts from a recycling customer
in the prior period.
Refined platinum for the quarter under review increased by 21% to 184 000 ounces platinum,
compared to 152 000 ounces of platinum in the prior period. The increase in production for
the quarter ended March 2014 is primarily as a result of increased metal receipts from
Zimplats.
Unit Cost and Cash
Group unit costs for the nine months increased by 15% to R18 304 per platinum ounce,
which included strike related costs net of operational costs savings. On a normalised basis,
adjusting for the savings on operational costs and the 131 000 ounces of lost platinum
production, unit costs would have been R17 077 per platinum ounce – a 7.3% increase on
the comparable nine month period.
At 31 March 2014, group debt (including leases) amounted to R7.8 billion. Gross cash was
R5.2 billion resulting in a net debt position of R2.6 billion. The group had not drawn down on
any of its committed facilities during this period.
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Outlook
Impala remains committed to finding a negotiated wage settlement that is both affordable
and sustainable for the business. To this end, the company has offered to increase wages
over a five year period by a range of 7.5% to 10% annually. The settlement offer goes some
way to meeting AMCU’s demand and would increase the minimum cash remuneration for
entry level underground employees to R12 521 per month (R150 252 per annum) by
July 2017. No increases have been granted to management for the year and the CEO has
not accepted any increases, bonuses and share options since having joined the company in
July 2012.
The economic realities of the company and the industry cannot be ignored by AMCU. We
have resolved with the other platinum mining companies that are also being affected by the
strike to communicate our settlement offer directly to employees. The re-opening of the mine
will only be considered when the risk of violence and intimidation can be eliminated. Impala
remains hopeful that AMCU will moderate their demands and accept the fair wage offer and
allow employees to return to work.
During the period of the strike to date, Impala has lost approximately 246 000 ounces of
platinum production, equivalent to revenue of R5.4 billion, while employees have forfeited
wages of approximately R1.4 billion. All other operations should continue to meet planned
performance targets and the stockpiled concentrates from Marula, Mimosa and Two Rivers
will be processed in the current quarter. As a result, group refined platinum production for
the final quarter of FY2014 is expected to be roughly 150 000 ounces. After metal returns to
toll customers, group refined platinum sales are expected to be approximately 1 200 000
ounces for the full financial year. This will include approximately 150 000 ounces of platinum
that will be drawn down from metal inventories (pipeline and refined stocks), with no further
excess stocks immediately available for draw down and/or sale.
The full impact of the cash preservation measures can only be fully assessed once the
Impala Rustenburg operations have resumed and the situation has normalised. Cash
preservation will be maintained for the duration of the strike and it is estimated that total cash
expenditure will be curtailed by 70% - 75% as a result. The resumption of normalised
production levels at Impala Rustenburg, once the strike ends and operations resume, are
expected to take at least three months to achieve. Consequently, no further production is
expected from this operation in the final quarter of FY2014.
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The group will continue to support customers through this difficult period, taking into account
available metal and individual customer needs. Local customers will be prioritised to
preserve local beneficiation and manufacturing jobs. No force majeure notices to customers
are expected, as customers have agreed to receive reduced metal deliveries.
Enquiries should be directed to:
Johan Theron (Group Executive: Corporate Relations)
+27 11 731 9013/43
+27 82 809 0166
Johan.Theron@implats.co.za
Johannesburg
16 May 2014
Sponsor
Deutsche Securities (SA) Proprietary Limited
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