IMPALA PLATINUM HOLDINGS LIMITED - Consolidated interim results (reviewed) for the six months ended 31 December 2016
23 February 2017 7:05
IMP 201702230003A
Consolidated interim results (reviewed) for the six months ended 31 December 2016
Impala Platinum Holdings Limited
(Incorporated in the Republic of South Africa)
Registration No 1957/001979/06
JSE share code: IMP
ISIN: ZAE000083648
ADRs: IMPUY
("Implats" or "the Company" or "the Group")
Consolidated interim results (reviewed) for the six months ended 31 December 2016
Key features
Safety
- Regrettably four employees suffered fatal injuries at Impala Rustenburg during the period under review
- Over the last five years, the Group has invested significantly in safety initiatives
- Implats has 13 safety "millionaire" sites, three of which have operated for over 15 years without a fatal
incident.
Market
- Overall demand for platinum group metals (PGMs) remained strong, while supply constraints continue
- On a fundamental basis, the platinum market experienced a fifth consecutive deficit year.
Prices
- Platinum and palladium showed positive gains
- Rand revenue per platinum ounce rose 14.1% to R24 921.
Strategic response
- Continued focus on cash preservation and profitability in a low metal price environment
- Ongoing capital expenditure remains a focus area.
Operational performance
- Gross refined platinum production increased by 12.5% to 778 500 ounces
- Zimplats, Two Rivers, Mimosa and Impala Refining Services (IRS) deliver good operational performances
- Difficult operating environments continued to challenge the operational performance of Impala Rustenburg and Marula.
Liquidity
- Generated R1.8 billion in cash from operations before changes in working capital
- Gross cash of R5.4 billion
- Net debt of R1.1 billion
- R4.0 billion of unutilised facilities available until 2021.
Implats refined
778 500 oz
Group refined platinum production
Mine-to-market operations impala refining services (IRS)
Impala - 318 700 oz Third-party concentrate purchase recycling
Zimplats - 118 300 oz* and toll treatment - 149 000 oz
Marula - 41 200 oz*
Mimosa - 57 900 oz*
Two Rivers - 93 400 oz*
Refined platinum ounces indicated above have been rounded for illustrative purposes.
*Ex-Impala Refining Services (IRS)
Group performance
Operating statistics Six months Six months
ended ended Year ended
31 December 31 December 30 June
2016 2015 2016
Gross refined production
Platinum (000oz) 778.5 692.1 1 438.3
Palladium (000oz) 468.4 414.0 885.4
Rhodium (000oz) 91.4 84.2 185.1
Nickel (t) 8 283 8 475 17 001
IRS metal returned (toll refined)
Platinum (000oz) - - 0.1
Palladium (000oz) - 0.9 1.5
Rhodium (000oz) - - -
Nickel (t) 1 596 1 830 3 509
Sales volumes
Platinum (000oz) 730.7 764.9 1 511.6
Palladium (000oz) 463.6 419.7 905.5
Rhodium (000oz) 94.2 94.7 197.1
Nickel (t) 7 173 6 495 14 184
Prices achieved
Platinum (US$/oz) 1 009 963 961
Palladium (US$/oz) 674 632 586
Rhodium (US$/oz) 672 803 735
Nickel (US$/t) 9 924 10 598 9 483
Consolidated statistics
Revenue per platinum ounce sold (US$/oz) 1 775 1 624 1 627
(R/oz) 24 921 21 843 23 413
Average exchange rate achieved (1US$=R) 14.04 13.45 14.39
Closing exchange rate for the period (1US$=R) 13.74 15.48 14.69
Tonnes milled ex-mine (000t) 9 262 9 898 18 426
PGM refined production (000oz) 1 553.3 1 378.3 2 907.5
Group unit cost per platinum ounce (US$/oz) 1 623 1 666 1 507
(R/oz) 22 797 22 380 21 731
Headline earnings (Rm) (508) 347 83
Gross profit margin (%) (1.7) (0.2) -
Capital expenditure (Rm) 1 592 1 892 3 560
Cash net of debt/(debt net of cash) (Rm) (1 107) (291) 19
Cash (utilised)/generated from/(used in) operations (Rm) (146) 976 2 731
Commentary
Introduction
The first half of financial year 2017 was characterised by an ongoing focus on the Group’s strategic response to
succeed in the continued low price environment and challenging operating conditions. Increased production and good cost
management were a feature at most operations over the past six months, with Impala Refining Services again delivering robust
cash flows. Safety remains our first priority and given the difficult 12 months experienced by Impala Rustenburg,
significant efforts continue to transform the safety culture at this operation.
Market review (all references to years in this section refer to calendar years unless otherwise stated)
The platinum market experienced a fifth consecutive fundamental deficit in 2016. The deficit this year was an
approximate 700 000 ounces and a further deficit of around 450 000 ounces is expected in 2017 provided investment demand is
maintained. The reduced deficit expected in 2017 is largely due to a modest decrease in industrial demand and declining
platinum jewellery demand in China, moderated by primary supply constraints from South Africa.
We estimate that by the end of 2017, supply deficits experienced since 2012 will have consumed approximately four
million ounces of platinum from above-ground stocks. Sustained demand in key market sectors, together with a more muted
supply outlook from the South African producers should support improved market fundamentals into the future.
Platinum, palladium and rhodium all showed positive gains in 2016, closing 3.3%, 23.5% and 16.6% higher at US$907,
US$676 and US$770 per ounce, respectively. This is in stark contrast to 2015, where platinum, palladium and rhodium traded
28%, 31% and 41% lower respectively. The average platinum price realised during the period under review was 7.1% higher
at US$1 015 per ounce compared to the previous comparable period, while palladium increased by 11.4% to US$680 per
ounce. Support for platinum came from a combination of rising vehicle sales in Western Europe, which grew for the third
consecutive year in 2016, investment demand in Japan and constrained PGM output from South Africa.
Palladium performed well on the back of increasing vehicle sales in China and the US. The rhodium price traded 16.3%
lower during the period under review averaging US$672 per ounce, despite increased demand from the automotive and
chemical industries.
Calendar year 2016 was positive for the automotive industry, with global light duty vehicle sales estimated to have
reached 93 million units on the back of continued growth in the US, Western Europe and China, despite a slowdown in sales
in Japan, Eastern Europe and Latin America. US light duty vehicle sales, which were largely sustained at 17.51 million
units, continue to be driven by low gasoline prices, widespread credit availability, an increase in leasing and
employment gains. Western European light duty vehicles demand was better than expected after the Brexit vote. Sales in this
region reached 13.95 million units, a 5.8% increase from 2015. Chinese light duty vehicle sales recorded a 14.9% year-on-year
growth reaching 24.38 million units. This was stimulated, in part, by tax cuts on small-engine vehicles. The Japanese
market was the exception with a decline of 1.5% to 4.97 million units in 2016. However, there are signs that this market
may be recovering demonstrated by 7.4% and 7.6% improvements in sales during November and December 2016 respectively.
Despite strong growth in the automotive sector and the continued adoption of stricter emission legislation globally,
the continued preference for palladium over platinum in catalyst systems remains a concern and is not sustainable in our
view. The automotive sector needs to align long-term use with the ratio in which the metals are mined to ensure
sustainable supply, which will require automakers to switch back to platinum in the near future. Current platinum/palladium
price differentials are at a six year high, providing strong financial impetus for such switching.
The Chinese market remains the major consumer of platinum jewellery globally. Structural changes in the Chinese
economy have impacted consumer behaviour and indications are that platinum jewellery retail sales may have dropped by as
much as 9% during 2016. However, other markets have offset some of the declines from China, particularly in India, which
has grown by 23%. In Japan, platinum jewellery continues to recover market share from white gold and is expected to have
grown by 1% during 2016. The US market experienced strong growth, capitalising on the low platinum price, and is estimated
to have grown by approximately 6% in 2016.
We continue to support the Platinum Guild International (PGI). Its stated strategy aims to arrest the decline in Chinese
jewellery demand by aligning its marketing efforts to the changing socio-economic landscape in China. Initiatives include
among others, targeting gem set, branded collections and higher sales volumes.
The platinum and palladium Exchange Traded Funds (ETFs) both experienced liquidations during 2016. Palladium liquidations were
significant at 640 000 ounces, largely due to strong market fundamentals and rising metal prices, which incentivised profit
taking. Platinum experienced strong investment demand for small bars and coins in Japan, with accumulative investment of
approximately 425 000 ounces during 2016, offsetting a modest 9 000 ounce ETF liquidation during the year. The World Platinum
Investment Council (WPIC) continues to prioritise strategic partnerships and investment products that will incentivise and
sustain future investment demand.
The platinum paper markets (NYMEX/TOCOM) remained relatively stable during 2016, with a modest 65 000 ounce decline.
Palladium, however, followed its strong physical supply/demand fundamentals and recorded an increase of 710 000 ounces
during the year.
The market fundamentals for platinum, palladium and rhodium remain well supported by resilient global demand and constrained
primary supply. Near-term, growing and unsustainable deficits in palladium will further underpin this market, and also support
platinum and rhodium as consumers seek to optimise their metal mix into the future. Fundamental deficits for both platinum and
palladium are expected to continue for the foreseeable future.
Safety review
The realisation of zero harm remains the Group’s key priority and the strategic focus is centred on a cultural transformation
among employees, supported by effective leadership, supervision and compliance with leading safety practices to create an
inherently safe working environment. Success demands a strong resolve from every employee and the leadership of representative
unions and government. To this end, management continues to engage with all stakeholders and is leading the process with the
ultimate goal of having every workplace free from serious injury and fatal incident.
Over the past five years, the Group has invested significantly in safety initiatives, resulting in significant improvements in
safety performance across all operational units - with many setting new safety records. Currently, Implats has 13 safety
"millionaire" sites, 12 of which have operated for more than two years without a fatal incident, including four with over four
years and three who have worked for over 15 years without a fatal incident.
Despite a keen focus on safe operational performance, safety remains a significant challenge for some of the Rustenburg mining
operations. In particular, multiple fatalities at 14 Shaft and 1 Shaft during the past 12 months had a significant impact on our
safe production efforts. While no fatal incidents were recorded across other Group operations, regrettably four employees
suffered fatal injuries at Impala Rustenburg during the six months ended 31 December 2016 (three in the first quarter and one in
the second). The board of directors and the management team express their sincere condolences to the friends, families and
colleagues of the deceased.
Targeted behaviour change programmes continue to be implemented across the Rustenburg operation and training in high
risk occupations including rock drill operators (RDO), scraper winch operators, panel operators, loco operators and TMM
operators has been completed. The desired safe work behaviours are now being entrenched. In addition, a comprehensive
multi-stakeholder health and safety awareness campaign was conducted at the Rustenburg operation. Management will continue
to boost safe production compliance and drive the change from a dependent to an interdependent culture, where every
employee looks after their own safe behaviour and the safety of others. In addition, employees who have an elevated risk of
experiencing a safety incident due to ill health, emotional and financial concerns or are compromised are identified,
monitored and assisted to mitigate against further safety incidents.
Strategic response
Several initiatives were announced in February 2015 in response to persistently low US dollar metal prices. Key
strategic objectives included cost optimisation, reprioritising and rescheduling capital expenditure, implementing the Impala
lease area strategy, which aims to transform Rustenburg into a more concentrated mining operation, and strengthening the
Group balance sheet.
The reduction in operating costs realised a saving of about R1.4 billion in 2016. Further initiatives are being
pursued to contain costs below inflation. Despite the impact on production as a result of the 14 Shaft fire and other
safety-related incidents, Group unit costs benefited from increased production volumes, as well as cost containment in response
to low dollar metal prices, increasing by only 1.9% to R22 797 per platinum ounce in the period under review from R22 380 in
the prior comparable period.
Capital expenditure remains a focus area and the estimated spend for financial year 2017 is R4.0 billion. In the first
six months R1.6 billion was spent, a 15.9% reduction from the previous comparable period (H1 FY2016: R1.9 billion). The
majority of the capex was spent at Impala (R1.2 billion) - mainly on the completion of 16 and 20 shafts in Rustenburg -
and projects at Zimplats (R353 million). The new shafts at the Rustenburg operations still require R2.0 billion to
complete, of which some R1.2 billion is expected to be spent in the current financial year.
Operational review
Zimplats, Two Rivers, Mimosa and Impala Refining Services (IRS) all delivered good operational performances. Difficult
operating environments challenged the performance at both Impala Rustenburg and Marula. Gross refined platinum production
during the six months to 31 December 2016 increased by 12.5% to 778 500 ounces, compared to 692 100 ounces in the previous
comparable period. This was largely due to a lock-up of platinum to accommodate planned furnace maintenance at the
Rustenburg smelters in the previous comparable period.
Managed operations
IMPALA PLATINUM
Mill throughput decreased by 14.4% to 5.0 million tonnes (H1 FY2016: 5.9 million). This was largely due to the temporary
closure of the decline section at 14 Shaft to effect repairs after the January 2016 fire, a delay in operations at 1
Shaft following the fall-of-ground incident in May 2016, reduced UG2 panel lengths and ongoing regulatory safety stoppages.
Re-establishing the decline section at 14 Shaft has progressed well and full infrastructure capacity is expected by
March 2017. The resizing of the UG2 conventional panel lengths across the operation in line with assessed ground conditions
and to significantly reduce the operational risk, has been completed.
Approximately 39 000 ounces of platinum (600 000 mined tonnes) were lost due to repair work at 14 Shaft during the six
months under review. The number of Section 54 safety stoppage instructions issued by the Department of Mineral Resources
(DMR) posed a significant challenge for the Rustenburg team. During the period under review, Impala recorded 58 Section
54 safety stoppages, which led to a direct loss of some 25 000 platinum ounces (400 000 mined tonnes), equating to
about R570 million in lost revenue. While Impala remains mindful of the safety issues that have affected its operations
over recent months, it continues to engage with the DMR to minimise the negative impacts of these stoppages on its safety
risk profile and operational performance.
Mill head grade was maintained at 4.15 g/t, despite a higher percentage of UG2 material treated during the period
under review. The additional Merensky Reef tonnage from the recommissioned 14 Shaft decline section, as well as the ongoing
ramp-up of production volumes from 16 and 20 shafts, will contribute to increasing mill head grades in the near future.
Refined platinum production decreased by 2.2% to 318 700 ounces (H1 FY2016: 325 900), due to a higher build-up of
processed material in the previous comparable period. The material built up in the period under review is expected to be
released by the fourth quarter.
Cash costs were well contained increasing by only 2.1% to R7.43 billion compared to expected mining inflation of 7.2%.
Lower production volumes offset the beneficial impact of various cost saving initiatives and unit costs increased by
4.4% to R23 304 per platinum ounce refined (H1FY2016: R22 326). Capital expenditure was reduced by 19.3% to R1.20 billion
(H1 FY2016: R1.48 billion), of which R581 million was spent on 16 and 20 shafts. The overall reduction was mainly due to
the deferment of ongoing capital and 17 Shaft being on low cost care and maintenance.
16 and 20 shafts are still scheduled to deliver combined annual production of 310 000 platinum ounces.
Impala remains focused on meeting its build-up target on stoping teams and delivering planned team efficiencies, while
delivering safe production to minimise avoidable work stoppages. A mining optimisation project was initiated with
external support to interrogate the mining cycle, supervisory management skills, change management and the contractor
strategy with the goal of securing and/or enhancing production from the shafts. This work started in January 2017 and is
expected to continue for nine months.
IMPALA REFINING SERVICES (IRS)
IRS remains a strategic competitive advantage for Implats and it once again contributed significantly to the Group’s
bottom line, despite low PGM prices. Over the six months to 31 December 2016, production increased 25.6% to 459 800
ounces of platinum from 366 200 ounces.
Platinum production from mine-to-market operations increased by 7.4% to 310 800 ounces (H1 FY2016: 289 300), due to
higher deliveries from Zimplats and Two Rivers. Third-party purchases and toll volumes increased from 76 900 to 149 000
platinum ounces, largely as a result of a release of in-process metal, while there was also a build-up in the previous
comparable period.
ZIMPLATS
Tonnes milled increased by 6% to 3.3 million tonnes (H1 FY2016: 3.1 million) as all mining units sustained outstanding
operational performances and benefited from increased production from the Mupfuti and Bimha mines. Platinum in matte
production (including concentrate sales to IRS) increased 5.2% to 137 100 ounces (H1 FY2016: 130 300).
Unit costs increased 2.0% in dollar terms to US$1 233 per platinum ounce in matte (H1 FY2016: US$1 209). In rand terms
unit costs increased 6.6% to R17 316 per platinum ounce in matte (H1 FY2016: R16 247) impacted by a weaker rand over
the period.
The redevelopment of the Bimha Mine is progressing well, with on-reef development offsetting re-establishment costs,
and full production, which will replace all current open pit operations, is expected from April 2018. The development of
the 2.2 million tonnes per annum Mupani mine was approved by the Zimplats and Implats Boards in November 2016. This
replacement portal for the Rukodzi and Ngwarati mines will access 4.65 million 4E ounces of reserves through
high-productivity, modern, mechanised mining methods at a total capital cost of US$260 million.
Implats supports and shares Zimbabwe’s aspirations to grow and diversify its PGM industry. A bankable feasibility
study for a second furnace has been approved and construction will commence as soon as management believes the construction
can be funded from internal cashflows.
Zimplats remains in discussions with the Government of Zimbabwe regarding its indigenisation implementation plan.
Zimplats has recently announced the implementation of an employee share ownership trust (ESOT), which now holds a 10% equity
stake in Zimplats’ operating subsidiary, Zimbabwe Platinum Mines (Private) Limited (Zimplats Pvt). The beneficiaries
are the permanent employees (excluding the executive directors and company secretary). The ESOT paid US$95 million for the
10% equity stake, vendor financed through an interest-bearing loan advanced by Zimplats Pvt to the ESOT. The ESOT will
repay the loan from a portion of dividends received from Zimplats Pvt.
MARULA
The operational performance at Marula was disrupted by members of the Winnaarshoek/Driekop community, who are
dissatisfied with the way in which their 50% interest in the Makgomo Chrome project is being managed by appointed/elected
community leaders. Members from the community applied to the DMR to intervene and, subsequent to the period under review, the
chrome operation has been suspended.
Despite these disruptions, which resulted in a loss of 5 600 ounces of platinum in concentrate, tonnes milled
increased 2.5% to 909 000 tonnes (H1 FY2016: 887 000). The head grade improved marginally to 4.42 g/t (H1 FY2016: 4.37 g/t)
benefiting from the optimisation initiative at Marula. Consequently, platinum in concentrate production increased 3.1% to 43
100 ounces (H1 FY2016: 41 800).
Unit costs increased 7.3% to R24 060 per platinum ounce in concentrate (H1 FY2016: R22 416). Capital expenditure was
limited to R58 million (H1 FY2016: R42 million) in an effort to preserve cash.
The optimisation of Marula’s existing infrastructure enables the mine to increase its targeted output to 90 000 ounces
of platinum per annum. However, community disruptions continue to impact the successful implementation of the optimisation
strategy. Stakeholder interventions to facilitate a resolution to the community disruptions are being prioritised by
management.
Non-managed operations
MIMOSA
Mimosa delivered another excellent operational performance. Tonnes milled improved 4.3% to 1.37 million tonnes (H1
FY2016: 1.31 million), while the head grade declined 2.4% to 3.83 g/t. This resulted in platinum in concentrate production
increasing to 60 900 ounces (H1 FY2016: 60 000). Unit costs increased 5.0% in dollar terms to US$1 539 per platinum
ounce in concentrate (H1 FY2016: US$1 466) due to higher mined tonnage that was not milled.
A further deferment of the 15% export levy on unbeneficiated platinum to 1 January 2018 has been regularised by the
Government of Zimbabwe. Mimosa continues to consult with the Government of Zimbabwe in this regard.
TWO RIVERS
Two Rivers also had a first-rate six months. Tonnes milled increased 2.8% to 1.75 million tonnes (H1 FY2016: 1.70
million), of which 58 700 tonnes was milled by Modikwa. The head grade was marginally lower at 4.03 g/t (H1 FY2016: 4.09
g/t). Platinum in concentrate production increased by 5.3% to 96 700 ounces (H1 FY2016: 91 800). Unit costs increased 6.6%
to R12 172 per platinum ounce in concentrate (H1 FY2016: R11 416).
Mineral Resources and Mineral Reserves
There has been no material change to the technical assumptions, assessment criteria, and information relating to the
Group’s Mineral Resource and Mineral Reserves, or legal title to its mining and exploration activities, as disclosed in
the integrated report for the financial year ended 30 June 2016.
Main features relating to Implats’ Mineral Resources and Mineral Reserves as at 31 December 2016 relative to 30 June
2016 are:
- Estimated total attributable Mineral Resources decreased by 1% (3 Moz 4E) to 362Moz; the total attributable platinum
ounces decreased by 1.5 Moz Pt to 193 Moz
- The attributable platinum Mineral Resources remain dominated by Zimplats and Impala; the Zimplats Mineral Resources
make up the bulk of these (49%)
- Total attributable Mineral Reserves increased by 9% (4 Moz 4E) to 43 Moz; the attributable platinum ounces increased
by 2 Moz to 23.6 Moz
- The main contributor to the variance in Mineral Reserves is the inclusion of Portal 6 (Mupani mine) at Zimplats.
The revised Implats Mineral Resource and Mineral Reserve statement, as at 30 June 2017, will provide the detailed
updated assessment and reporting criteria.
After the end of the period under review, on 13 January 2017, the Government of Zimbabwe issued, through a Government
Gazette Extraordinary, a preliminary notice in terms of which the Government has given fresh notice it intends to
compulsorily acquire land measuring 27 948 hectares within Zimplats’ special mining lease area. The new notice has repealed
all previous notices issued by the government in respect of its proposed compulsory acquisition of this portion of the
mining lease area. Zimplats lodged an objection on 10 February 2017 and is engaging positively with the Government of
Zimbabwe in this regard.
Financial performance
Revenue at R18.2 billion was R1.4 billion or 8.3% higher than the comparative six months as a result of:
- A negative volume variance of R75 million. The negative variance is due to an inventory draw down for the six months
to December 2015, which was not repeated in the six months under review, partially offset by higher production volumes.
- A positive dollar metal price variance of R714 million resulting from the average dollar revenue basket per platinum
ounce sold of about US$1 775, which was about US$151 or 9.3% higher than the comparative period. The average prices
achieved for platinum and palladium were 4.8% and 6.6% higher, while rhodium and nickel dollar prices were 16.3% and
6.4% lower.
- A positive R749 million exchange rate variance was the result of the average rand-dollar exchange rate of R14.04/US$
being approximately 4.5% weaker than the R13.45/US$ achieved during the prior comparable period.
The average 4.5% depreciation in the value of the South African rand benefited the rand revenue basket per platinum
ounce, which rose 14.1% to R24 921.
Cost of sales at R18.5 billion increased by R1.7 billion from the comparable six months. The main contributors to this
increase were:
- An increase in operating costs of R546 million or 5.0% to R11.5 billion. The increase of 5.0% was contained below the
mining inflation of 5.8%, comprising South African operations mining inflation of 7.2% and Zimplats rand inflation
which was at 0.9%;
- A share-based compensation expense of R79 million compared to a credit of R138 million in the previous comparable
period;
- An increase in the cost of metals purchased of R717 million as a result of higher volumes purchased by IRS and higher
rand metal prices.
As a result of the above, the Group generated a gross loss for the period of R318 million (H1 FY2016: R40 million
gross loss).
The R411 million loss before tax was an improvement from the comparable period’s pre-tax loss of R552 million, largely
due to an impairment charge of R257 million in the prior period. The pre-tax loss for both periods was not materially
impacted by exchange rate movements on the dollar bond due to the effectiveness of the hedge.
The major reason for the decline in headline earnings (a loss of R508 million compared to profit of R347 million for
the period to December 2015), was a tax credit in the comparable period due to a previously written-off amount owed by a
debtor.
Cash generated from operations (before changes in working capital) improved from R1.2 billion to R1.8 billion. An
increase in inventories of R1.2 billion and trade and other receivables of R230 million were largely responsible for the
reduction in cash from operations (after changes in working capital) to R446 million (H1 FY2016: R1 454 million). The
increase in inventories on the balance sheet was affected by an increased net realisable value adjustment of some R660
million.
Capital expenditure, amounted to R1.6 billion, of which R581 million was spent on 16 and 20 shafts.
Gross cash at the end of the period under review amounted to R5.4 billion. Debt (excluding leases and net of the cross
currency interest rate swap) amounted to R6.5 billion resulting in net debt at 31 December 2016 of R1.1 billion (June
2016: R19 million cash net of debt).
The balance sheet remains strong with unutilised facilities of R4.75 billion, R4.0 billion of which is available until
2021. This liquidity provides security and flexibility to address upcoming debt maturities as well as to service the
ongoing needs of the business.
Given the continued cash conservation strategy, the board has resolved not to declare an interim dividend for the six
months to 31 December 2016.
Prospects
Looking ahead, the challenges and uncertainties confronting the southern African PGM mining industry remain
significant and will continue to constrain primary metal supply.
Aligned with the forecasts for strong global demand for these metals - supported by growing vehicle sales, tightening
emission standards and the growing unsustainable use of palladium in automotive catalytic systems - the Group expects
fundamental market deficits to persist. This, coupled with reduced above-ground stock liquidity, bodes well for much
healthier future supply/demand fundamentals. However, near-term metal prices could remain muted given persistent global
political and economic factors impacting investor sentiment.
Against this outlook, the board recently approved the construction of the Mupani replacement mine at Zimplats, as well
as modernisation and detailed re-scheduling studies to restart the 17 Shaft replacement project at Impala Rustenburg in
two years’ time.
Despite a more positive market outlook, the operating environment in southern Africa remains fluid and challenging,
particularly at the more labour-intensive South African mines where safety challenges and community disruptions continue
to impede optimum performance.
Within this environment, Implats will continue to prioritise measures to achieve the Group’s safe production goals
(zero harm), preserve cash, enhance productivity and increase profitability. To this end, the Group will continue
implementing its strategic response plan, which has already yielded significant improvements, realised material cost
savings and secured the Group’s balance sheet. Further measures to bed down improvements and strengthen our response to the
challenging operating environment have been introduced, specifically at Impala Rustenburg where external technical capacity
has been secured to regain lost momentum after the recent safety incidents. The intervention targets safe production and
mining efficiencies to ensure the transition to a more concentrated, low-cost operation producing at least 800 000 platinum
ounces a year from 2020.
Given the severe impact of safety stoppages at Impala Rustenburg and the community disruptions at Marula in the first
half of the financial year, the full-year production estimates for these operations have been revised to 650 000 refined
platinum ounces and 80 000 platinum ounces in concentrate, respectively. The guidance for Zimplats, Two Rivers and
Mimosa remains unchanged at 260 000 ounces platinum in matte, and 175 000 and 115 000 ounces of platinum in concentrate,
respectively.
Gross refined platinum ounces for the Group is expected to reach 1.5 million ounces of platinum for the full financial
year.
Unit costs are expected to be approximately R22 200 per platinum ounce for the full financial year with Group capital
expenditure forecast at about R4 billion.
The financial information on which this outlook is based has not been reviewed and reported on by Implats’ external
auditors.
Change in leadership
The board of directors has expressed its appreciation to Terence Goodlace for his significant contribution and guidance
to the Group. Terence resigned as chief executive and executive director with effect from 1 December 2016. Nico Muller
has been appointed as chief executive and an executive director of Implats with effect from 3 April 2017.
Approval of the interim financial statements
The directors of the Company are responsible for the maintenance of adequate accounting records and the preparation of
the interim financial statements and related information in a manner that fairly presents the state of the affairs of
the Company. These interim financial statements are prepared in accordance with International Financial Reporting
Standards and incorporate full and responsible disclosure in line with the accounting policies of the Group which are
supported by prudent judgements and estimates.
The interim financial statements have been prepared under the supervision of the chief financial officer, Ms B Berlin,
CA(SA).
The directors are also responsible for the maintenance of effective systems of internal control which are based on
established organisational structure and procedures. These systems are designed to provide reasonable assurance as to
the reliability of the financial statements, and to prevent and detect material misstatement and loss.
The interim financial statements, have been prepared on a going-concern basis as the directors believe that the
Company and the Group will continue to be in operation in the foreseeable future.
The interim financial statements, as set out on pages 14 to 26, have been approved by the board of directors and are
signed on their behalf by:
Dr MSV Gantsho GS Potgieter
Chairman Acting chief executive officer
Johannesburg
23 February 2017
Independent Auditor’s Review Report On Interim Financial Statements
To the Shareholders of Impala Platinum Holdings Limited
We have reviewed the condensed consolidated interim financial statements of Impala Platinum Holdings Limited in the
accompanying interim report, which comprise the condensed consolidated statement of financial position as at 31 December
2016 and the related condensed consolidated statements of comprehensive income, changes in equity and cash flows for the
six months then ended, and selected explanatory notes.
Directors’ Responsibility for the Interim Financial Statements
The directors are responsible for the preparation and presentation of these interim financial statements in accordance
with the International Financial Reporting Standard, (IAS) 34 Interim Financial Reporting, the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council and the requirements of the Companies Act of South Africa, and for such internal control as the
directors determine is necessary to enable the preparation of interim financial statements that are free from material
misstatement, whether due to fraud or error.
Auditor’s Responsibility
Our responsibility is to express a conclusion on these interim financial statements. We conducted our review in
accordance with International Standard on Review Engagements 2410, Review of Interim Financial Information Performed by the
Independent Auditor of the Entity. ISRE 2410 requires us to conclude whether anything has come to our attention that
causes us to believe that the interim financial statements are not prepared in all material respects in accordance with the
applicable financial reporting framework. This standard also requires us to comply with relevant ethical requirements.
A review of interim financial statements in accordance with ISRE 2410 is a limited assurance engagement. We perform
procedures, primarily consisting of making enquiries of management and others within the entity, as appropriate, and
applying analytical procedures, and evaluate the evidence obtained.
The procedures in a review are substantially less than and differ in nature from those performed in an audit conducted
in accordance with International Standards on Auditing. Accordingly, we do not express an audit opinion on these
interim financial statements.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the accompanying condensed
consolidated interim financial statements of Impala Platinum Holdings Limited for the six months ended 31 December 2016
are not prepared, in all material respects, in accordance with the International Financial Reporting Standard, (IAS) 34
Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Pronouncements as issued by the Financial Reporting Standards Council and the requirements of the Companies
Act of South Africa.
PricewaterhouseCoopers Inc.
Director: AJ Rossouw
Registered Auditor
23 February 2017
Consolidated statement of financial position
As at As at As at
31 December 31 December 30 June
2016 2015 2016
(Rm) Notes (Reviewed) (Reviewed) (Audited)
Assets
Non-current assets
Property, plant and equipment 5 48 386 50 539 49 667
Exploration and evaluation assets 385 385 385
Investment property 173 - 173
Investment in equity-accounted entities 3 343 3 635 3 342
Deferred tax - 80 37
Other financial assets 321 147 312
Derivative financial instruments 6 907 1 311 1 137
Prepayments 10 073 10 246 10 180
63 588 66 343 65 233
Current assets
Inventories 7 8 759 8 941 8 201
Trade and other receivables 4 192 3 482 3 504
Other financial assets 2 55 12
Prepayments 814 650 1 121
Cash and cash equivalents 5 346 6 288 6 762
Assets classified as held for sale 8 288 203 183
19 401 19 619 19 783
Total assets 82 989 85 962 85 016
Equity and liabilities
Equity
Share capital 20 044 19 504 19 547
Retained earnings 30 829 31 475 31 200
Other components of equity 4 392 5 809 5 161
Equity attributable to owners of the Company 55 265 56 788 55 908
Non-controlling interest 2 478 2 644 2 548
Total equity 57 743 59 432 58 456
Liabilities
Non-current liabilities
Deferred tax 7 745 9 232 8 553
Borrowings 9 7 987 8 879 8 715
Other financial liabilities - 28 -
Sundry liabilities 402 371 443
Provisions 1 062 950 1 082
17 196 19 460 18 793
Current liabilities
Trade and other payables 6 374 5 749 6 355
Current tax payable 774 713 645
Borrowings 9 735 458 564
Other financial liabilities 70 39 66
Sundry liabilities 32 57 89
Liabilities classified as held for sale 8 65 54 48
8 050 7 070 7 767
Total liabilities 25 246 26 530 26 560
Total equity and liabilities 82 989 85 962 85 016
The notes on pages 19 to 26 are an integral part of these condensed interim financial statements.
Consolidated statement of profit or loss and other comprehensive income
Six months Six months
ended ended Period ended
31 December 31 December 30 June
2016 2015 2016
(Rm) Notes (Reviewed) (Reviewed) (Audited)
Revenue 18 195 16 807 35 618
Cost of sales 10 (18 513) (16 847) (35 722)
Gross loss (318) (40) (104)
Other operating income 445 425 647
Other operating expenses (54) (44) (198)
Impairment - (257) (307)
Royalty expense (259) (268) (514)
Loss from operations (186) (184) (476)
Finance income 196 169 368
Finance cost (385) (342) (705)
Net foreign exchange transaction gains/(losses) 138 (932) (559)
Other income 120 681 547
Other expenses (529) (102) (154)
Share of profit of equity-accounted entities 235 158 262
Loss before tax (411) (552) (717)
Income tax (expense)/income (47) 715 583
Profit/(loss) for the period from continuing operations (458) 163 (134)
Profit from discontinued operations 8 130 55 91
Profit/(loss) for the period (328) 218 (43)
Other comprehensive income/(loss), comprising items that
may subsequently be reclassified to profit or loss:
Available-for-sale financial assets 13 (5) (7)
- Deferred tax thereon (3) 1 -
Share of other comprehensive income of equity-accounted entities (125) 451 342
- Deferred tax thereon 12 (45) (34)
Exchange differences on translating foreign operations (900) 3 119 2 380
- Deferred tax thereon 117 (407) (311)
Other comprehensive income/(loss), comprising items that will
not be subsequently reclassified to profit or loss:
Actuarial loss on post-employment medical benefit - - (1)
- Deferred tax thereon - - -
Total comprehensive income/(loss) (1 214) 3 332 2 326
Profit/(loss) attributable to:
Owners of the Company (371) 204 (70)
Non-controlling interest 43 14 27
(328) 218 (43)
Total comprehensive income/(loss) attributable to:
Owners of the Company (1 140) 2 913 1 990
Non-controlling interest (74) 419 336
(1 214) 3 332 2 326
Earnings per share (cents per share):
From continued and discontinued operations
- Basic (52) 31 (10)
- Diluted (51) 31 (10)
From continued operations
- Basic (65) 25 (21)
- Diluted (65) 25 (21)
For headline earnings per share refer note 11.
The notes on pages 19 to 26 are an integral part of these condensed interim financial statements.
Consolidated statement of changes in equity
Share-
Ordinary Share based Total share
(Rm) shares premium payments capital
Balance at 30 June 2016 18 17 252 2 277 19 547
Shares issued
- Employee Share Ownership Programme - 479 - 479
Shares purchased - Long-term Incentive Plan - (35) - (35)
Share-based compensation expense
- Long-term Incentive Plan - - 53 53
Total comprehensive income/(loss) - - - -
Profit/(loss) for the year - - - -
Other comprehensive income/(loss) - - - -
Transactions with non-controlling interest - - - -
Dividends - - - -
Balance at 31 December 2016 (Reviewed) 18 17 696 2 330 20 044
Balance at 30 June 2015 16 13 369 2 348 15 733
Shares issued
- Ordinary share issue 2 3 998 - 4 000
- Ordinary share issue transaction cost - (100) - (100)
- Implats Share Incentive Scheme - (16) - (16)
Share-based compensation expense
- Long-term Incentive Plan - - (113) (113)
Total comprehensive income/(loss) - - - -
Profit/(loss) for the year - - - -
Other comprehensive income/(loss) - - - -
Dividends - - - -
Balance at 31 December 2015 (Reviewed) 18 17 251 2 235 19 504
Balance at 30 June 2015 16 13 369 2 348 15 733
Shares issued
- Ordinary share issue 2 3 998 - 4 000
- Ordinary share issue transaction cost - (100) - (100)
- Implats Share Incentive Scheme - 2 - 2
Shares purchased - Long-term Incentive Plan - (17) - (17)
Share-based compensation expense
- Long-term Incentive Plan - - (71) (71)
Total comprehensive income/(loss) - - - -
Profit/(loss) for the year - - - -
Other comprehensive income/(loss) - - - -
Dividends - - - -
Balance at 30 June 2016 (Audited) 18 17 252 2 277 19 547
Consolidated statement of changes in equity (continued)
Foreign Attributable to:
currency Other Owners Non-
Retained translation components of the controlling Total
(Rm) earnings reserve of equity Company interest equity
Balance at 30 June 2016 31 200 5 092 69 55 908 2 548 58 456
Shares issued
- Employee Share Ownership Programme - - - 479 - 479
Shares purchased - Long-term Incentive Plan - - - (35) - (35)
Share-based compensation expense
- Long-term Incentive Plan - - - 53 - 53
Total comprehensive income/(loss) (371) (779) 10 (1 140) (74) (1 214)
Profit/(loss) for the year (371) - - (371) 43 (328)
Other comprehensive income/(loss) - (779) 10 (769) (117) (886)
Transactions with non-controlling interest - - - - 11 11
Dividends - - - - (7) (7)
Balance at 31 December 2016 (Reviewed) 30 829 4 313 79 55 265 2 478 57 743
Balance at 30 June 2015 31 271 3 024 76 50 104 2 258 52 362
Shares issued
- Ordinary share issue - - - 4 000 - 4 000
- Ordinary share issue transaction cost - - - (100) - (100)
- Implats Share Incentive Scheme - - - (16) - (16)
Share-based compensation expense
- Long-term Incentive Plan - - - (113) - (113)
Total comprehensive income/(loss) 204 2 713 (4) 2 913 419 3 332
Profit/(loss) for the year 204 - - 204 14 218
Other comprehensive income/(loss) - 2 713 (4) 2 709 405 3 114
Dividends - - - - (33) (33)
Balance at 31 December 2015 (Reviewed) 31 475 5 737 72 56 788 2 644 59 432
Balance at 30 June 2015 31 271 3 024 76 50 104 2 258 52 362
Shares issued
- Ordinary share issue - - - 4 000 - 4 000
- Ordinary share issue transaction cost - - - (100) - (100)
- Implats Share Incentive Scheme - - 2 - 2
Shares purchased - Long-term Incentive Plan - - - (17) - (17)
Share-based compensation expense
- Long-term Incentive Plan - - (71) - (71)
Total comprehensive income/(loss) (71) 2 068 (7) 1 990 336 2 326
Profit/(loss) for the year (70) - - (70) 27 (43)
Other comprehensive income/(loss) (1) 2 068 (7) 2 060 309 2 369
Dividends - - - (46) (46)
Balance at 30 June 2016 (Audited) 31 200 5 092 69 55 908 2 548 58 456
* The table above excludes the treasury shares. During the year, 8.87 million of these shares were
released by the Morokotso Trust (ESOP) after vesting, at an average price of R54.
The notes below are an integral part of these condensed interim financial statements.
Consolidated statement of cash flows
Six months Six months
ended ended Period ended
31 December 31 December 30 June
2016 2015 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Cash flows from operating activities
Cash generated from operations 446 1 454 4 140
Exploration cost (5) (8) (13)
Finance cost (313) (288) (589)
Income tax paid (342) (235) (859)
Net cash flow attributable to discontinued operation 68 53 52
Net cash from/(used in) operating activities (146) 976 2 731
Cash flows from investing activities
Purchase of property, plant and equipment (1 595) (1 902) (3 658)
Proceeds from sale of property, plant and equipment 27 13 42
Purchase of available-for-sale financial assets (3) - (152)
Purchase of held-to-maturity financial assets - - (70)
Proceeds from available-for-sale financial assets - - 23
Proceeds from held-to-maturity financial assets 4 - 40
Loans granted (1) (14) (2)
Loan repayments received 15 21 24
Finance income 204 181 393
Dividends received 89 167 439
Net cash flow attributable to discontinued operation - 1 1
Net cash used in investing activities (1 260) (1 533) (2 920)
Cash flows from financing activities
Issue of ordinary shares 479 3 900 3 902
Shares purchased - Long-term Incentive Plan (35) (16) (17)
Repayments of borrowings (348) (5) (13)
Proceeds from borrowings - 255 389
Net cash flow attributable to discontinued operation (7) (33) (46)
Net cash from financing activities 89 4 101 4 215
Net increase/(decrease) in cash and cash equivalents (1 317) 3 544 4 026
Cash and cash equivalents at beginning of period 6 788 2 597 2 597
Effect of exchange rate changes on cash and cash equivalents
held in foreign currencies (52) 214 165
Cash and cash equivalents at end of period 5 419 6 355 6 788
(Including held for sale cash equivalents)
Cash and cash equivalents at end of period 5 346 6 288 6 762
(excluding held for sale cash equivalents)
The notes on pages 19 to 26 are an integral part of these condensed interim financial statements.
Notes to the financial information
1. General information
Impala Platinum Holdings Limited ("Implats", "the Company" or "the Group") is one of the world’s leading producers of
platinum and associated platinum group metals (PGMs). Implats is structured around five mining operations and a toll
refining business in Springs in the Gauteng province. The mining operations are located on the Bushveld Complex in South
Africa and the Great Dyke in Zimbabwe, the two most significant PGM-bearing ore bodies in the world.
The Company has its listing on the securities exchange operated by JSE Limited in South Africa and a level 1 American
Depositary Receipt programme in the United States of America.
The condensed consolidated interim financial information was approved for issue on 23 February 2017 by the board of
directors.
2. Basis of preparation
The condensed consolidated interim financial statements have been prepared in accordance with International Financial
Reporting Standard (IFRS), IAS 34 Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the
Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council,
requirements of the Companies Act, 71 of 2008, and the Listings Requirements of the JSE Limited.
The condensed consolidated interim financial statements should be read in conjunction with the annual consolidated
financial statements for the year ended 30 June 2016, which have been prepared in accordance with IFRS.
The condensed consolidated interim financial statements have been prepared under the historical cost convention
except for certain financial assets, financial liabilities and derivative financial instruments which are measured at
fair value and some equity and liabilities for share-based payment arrangements which are measured using a binomial
option model.
The condensed consolidated interim financial information is presented in South African rand, which is the Company’s
functional currency.
Taxes on income in the interim periods are accrued using the tax rate that would be applicable to expected total
annual earnings.
3. Accounting policies
The principal accounting policies applied are in terms of IFRS and are consistent with those of the annual consolidated
financial statements for the year ended 30 June 2016.
4. Segment information
The Group distinguishes its segments between mining operations, refining services (which include metals purchased and
toll refined), chrome processing and other.
Management has determined the operating segments based on the business activities and management structure within the Group.
Capital expenditure comprises additions to property, plant and equipment (note 5).
Impala mining segment’s two largest sales customers amounted to 10% and 8% of total sales (December 2015: 13% and 10%) (June 2016: 10% each).
The statement of comprehensive income shows the movement from gross profit to total profit before income tax.
Six months ended Six months ended Year ended
31 December 2016 31 December 2015 30 June 2016
(Reviewed) (Reviewed) (Audited)
Gross Gross Gross
(Rm) Revenue profit Revenue profit Revenue profit
Mining
- Impala 17 920 (1 298) 16 529 (508) 35 051 (1 694)
Mining 7 078 (1 284) 7 428 (602) 14 556 (1 950)
Metals purchased 10 842 (14) 9 101 94 20 495 256
- Zimplats 3 352 463 2 746 90 6 753 555
- Marula 971 (173) 808 (226) 1 678 (398)
- Afplats - - - - - -
Inter-segment adjustment (4 346) (70) (3 568) (37) (8 456) (69)
External parties 17 897 (1 078) 16 515 (681) 35 026 (1 606)
Refining services 10 916 778 9 220 643 20 539 1 524
Inter-segment adjustment (10 618) (18) (8 928) (2) (19 947) (22)
External parties 298 760 292 641 592 1 502
Total external parties 18 195 (318) 16 807 (40) 35 618 (104)
Six months ended Six months ended Year ended
31 December 2016 31 December 2015 30 June 2016
(Reviewed) (Reviewed) (Audited)
Capital Total Capital Total Capital Total
(Rm) expenditure assets expenditure assets expenditure assets
Mining
- Impala 1 197 43 490 1 483 45 770 2 490 45 031
- Zimplats 353 16 356 367 18 602 981 17 560
- Marula 58 2 793 42 2 950 89 2 866
- Afplats (16) 3 041 - 3 056 - 3 059
Total mining 1 592 65 680 1 892 70 378 3 560 68 516
Refining services - 7 241 - 5 436 - 6 648
Other - 10 030 - 9 945 - 9 669
Total 1 592 82 951 1 892 85 759 3 560 84 833
5. Property, plant and equipment
Six months Six months
ended ended
31 December 31 December Year ended
2016 2015 30 June 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Opening net book amount 49 667 47 186 47 186
Additions 1 592 1 892 3 629
Interest capitalised 3 10 29
Disposals (13) (3) (13)
Transfer to investment property - - (223)
Depreciation (1 863) (1 703) (3 312)
Impairment - (257) (257)
Scrapping - (8) (106)
Rehabilitation adjustment (33) 40 143
Exchange adjustment on translation (967) 3 382 2 591
Closing net book amount 48 386 50 539 49 667
Capital commitment
Capital expenditure approved at 31 December 2016 amounted to R8 434 (December 2015: R8 139) (June 2016: R7 165)
million, of which R1 969 (December 2015: R1 611) (June 2016: R1 254) million is already committed. This expenditure
will be funded from internal cash flows and, if necessary, from borrowings.
Impairment
Impairment in the prior year related to the closure of the Impala 12 Shaft mechanised section.
6. Derivative financial instrument
Implats entered into a Cross Currency Interest Rate Swap (CCIRS) amounting to US$200 million to hedge certain aspects
of the foreign exchange risk on the US$ convertible bonds (note 9), being: exchange rate risk on dollar interest
payments and the risk of a future cash settlement of the bonds at a rand-dollar exchange rate weaker than R9.24/US$.
(US$200 million was swapped for R1 848 million on which Implats pays a fixed interest rate to Standard Bank of 5.94%.
Implats receives the 1% coupon on the US$200 million from Standard Bank on the same date which Implats pays bond holders.
In February 2018, Implats will repay the R1 848 million in return of the US$200 million.)
The CCIRS with Standard Bank is carried at its fair value of R907 (December 2015: R1 311) (June 2016: R1 137) million.
No hedge accounting has been applied.
7. Inventories
Six months Six months
ended ended
31 December 31 December Year ended
2016 2015 30 June 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Mining metal
Refined metal 328 635 259
In-process metal 2 848 3 305 2 522
Non-mining metal
Refined metal 1 520 1 321 1 267
In-process metal 3 233 2 721 3 360
Total metal inventories 7 929 7 982 7 408
Stores and materials inventories 830 959 793
8 759 8 941 8 201
The write-down to net realisable value comprises R159 (December 2015: R233) (June 2016: R106) million for refined
mining metal and R1 167 (December 2015: R555) (June 2016: R558) million for in-process mining metal.
Included in refined metal is metal on lease to third parties of 36 000 (December 2015: 36 000) (June 2016: 36 000)
ruthenium ounces.
Changes in engineering estimates of metal contained in-process resulted in an increase in-process metal of R356
(December 2015: R379) (June 2016: R384) million.
Non-mining metal consists mainly of IRS inventory. No inventories are encumbered.
8. Discontinued operation
The Implats board resolved to attempt to dispose of the Group’s 65% stake in Impala Platinum Chrome Proprietary
Limited (Impala Chrome). At the end of the reporting period, an official process to secure a buyer had commenced and
management consider it highly likely that the sale will be concluded within the next 12 months. Impala Chrome is therefore
presented as a discontinued operation.
The carrying amounts of the assets and liabilities within Impala Chrome are as follows:
Six months Six months
ended ended
31 December 31 December Year ended
2016 2015 30 June 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Assets
Property, plant and equipment 51 58 55
Inventories 1 4 1
Trade and other receivables 163 74 101
Cash and cash equivalents 73 67 26
288 203 183
Liabilities
Deferred tax 21 23 21
Trade and other payables 27 31 27
Current tax payable 17 - -
65 54 48
Below is an analysis of the net profit from discontinued operations:
Six months Six months
ended ended
31 December 31 December Period ended
2016 2015 30 June 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Revenue 289 169 314
Cost of sales (110) (108) (206)
Gross profit 179 61 108
Royalty expense (1) (1) (2)
Finance income - 1 1
Net foreign exchange transaction losses (5) 10 10
Profit before tax 173 71 117
Tax expense (43) (16) (26)
Net profit from discontinued operations 130 55 91
9. Borrowings
Six months Six months
ended ended Year ended
31 December 31 December 30 June
2016 2015 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Standard Bank Limited - BEE partners Marula 884 885 882
Standard Bank Limited - Zimplats facility 1 1 168 1 316 1 248
Standard Bank Limited - Zimplats facility 2 - 248 353
Convertible bonds - ZAR 2 616 2 536 2 575
Convertible bonds - US$200 million (note 6) 2 692 2 972 2 848
Finance leases 1 362 1 380 1 373
8 722 9 337 9 279
Current 735 458 564
Non-current 7 987 8 879 8 715
Beginning of the period 9 279 8 076 8 076
Proceeds - 255 389
Interest accrued 312 309 625
Interest repayments (241) (240) (492)
Capital repayments (348) (5) (13)
Exchange adjustment (280) 942 694
End of the period 8 722 9 337 9 279
Amendments to facilities
At 31 December 2016, the Group had signed committed facility agreements for a total of R4.75 (December 2015: R4.0)
(June 2016: R4.0) billion. All of these facilities remain undrawn. R0.75 billion of these facilities expire on
31 December 2017 and R4.0 billion expire end of 2021.
Subsequent to the half-year end, Zimplats increased its US$24 million facility (facility 2) to US$34 million.
Simultaneously, facility 1 was decreased from US$95 million to US$85 million and the terms of repayment extended
to US$37.5 million being repayable in December 2018 and the balance in December 2019. Reserve Bank of Zimbabwe
approval remains outstanding for the amendments to facility 1.
10. Cost of sales
Six months Six months
ended ended Period ended
31 December 31 December 30 June
2016 2015 2016
(Rm) (Reviewed) (Reviewed) (Audited)
On-mine operations 7 936 7 743 15 173
Processing operations 2 510 2 331 4 731
Refining and selling 677 675 1 294
Other costs 352 180 493
Share-based compensation 79 (138) 21
Depreciation of operating assets 1 863 1 703 3 312
Metals purchased 5 598 4 881 10 663
Change in metal inventories (502) (528) 35
18 513 16 847 35 722
11. Headline earnings
Headline earnings attributable to equity holders of the Company arises from operations as follows:
Six months Six months
ended ended Year ended
31 December 31 December 30 June
2016 2015 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Profit/(loss) attributable to owners of the Company (371) 204 (70)
Adjustments:
- Profit on disposal of property, plant and equipment (15) (10) (29)
- Impairment after non-controlling interest - 257 307
- Scrapping after non-controlling interest - 8 106
- Insurance compensation after non-controlling interest (175) (57) (172)
- Total tax effects of adjustments 53 (55) (59)
Headline earnings (508) 347 83
Weighted average number of ordinary shares in issue for
basic earnings per share (million) 717.54 655.02 682.19
Weighted average number of ordinary shares for diluted
earnings per share (million) 720.69 655.48 683.75
Headline earnings per share (cents)
From continued and discontinued operations
- Basic (71) 53 12
- Diluted (70) 53 12
From continued operations
- Basic (84) 46 2
- Diluted (84) 46 2
12. Contingent liabilities and guarantees
As at the end of December 2016 the Group had bank and other guarantees of R1 269 (December 2015: R1 202) (June 2016:
R1 267) million from which it is anticipated that no additional liabilities, other than what has been provided for, will
arise.
13. Related party transactions
- The Group entered into PGM purchase transactions of R1 782 (December 2015: R1 687) (June 2016: R3 693) million with
Two Rivers, an associate company, resulting in an amount payable of R860 (December 2015: R939) (June 2016: R958)
million. It received refining fees to the value of R16 (December 2015: R14) (June 2016: R30) million.
- The Group previously entered into sale and leaseback transactions with Friedshelf, an associate company. At the end
of the period, an amount of R1 230 (December 2015: R1 233) (June 2016: R1 232) million was outstanding in terms of the
lease liability. During the period, interest of R63 (December 2015: R63) (June 2016: R127) million was charged and a
R66 (December 2015: R61) (June 2016: R125) million repayment was made. The finance leases have an effective interest
rate of 10.2%.
- The Group entered into PGM purchase transactions of R1 386 (December 2015: R1 583) (June 2016: R3 015) million with
Mimosa, a joint venture, resulting in an amount payable of R725 (December 2015: R666) (June 2016: R800) million. It
also received refining fees and interest to the value of R147 (December 2015: R149) (June 2016: R291) million.
These transactions are entered into on an arm’s-length basis at prevailing market rates.
- Key management compensation (fixed and variable) was R44 (December 2015: R32) (June 2016: R59) million.
14. Financial instruments
Six months Six months
ended ended Year ended
31 December 31 December 30 June
2016 2015 2016
(Rm) (Reviewed) (Reviewed) (Audited)
Financial assets - carrying amount
Loans and receivables 7 763 8 247 8 740
Financial instruments at fair value through profit and loss2 907 1 342 1 137
Held-to-maturity financial assets 70 39 70
Available-for-sale financial assets1 174 22 157
8 914 9 650 10 104
Financial liabilities - carrying amount
Financial liabilities at amortised cost 13 556 13 762 14 113
Borrowings 8 722 9 337 9 279
Commitments 70 67 66
Trade payables 4 753 4 350 4 759
Other payables 11 8 9
13 556 13 762 14 113
The carrying amount of financial assets and liabilities approximate their fair values.
1 Level 1 of the fair value hierarchy - Quoted prices in active markets for the same instrument
2 Level 2 of the fair value hierarchy - Significant inputs are based on observable market data with the rand-dollar
exchange rate of R13.74/US$ being the most significant. These instruments are valued on a discounted cash flow basis.
Consolidated interim results (reviewed) for the six months ended 31 December 2016
Impala Operations (ex-mine) key statistics
- for the six months ended 31 December 2016
December December
2016 2015 Var %
Mining revenue (Rm) 7 078 7 428 (4.7)
Platinum 4 467 4 942 (9.6)
Palladium 1 396 1 267 10.2
Rhodium 356 485 (26.6)
Nickel 219 209 4.8
Other 640 525 21.9
Mining cost of sales (8 362) (8 030) (4.1)
On-mine operations (5 588) (5 600) 0.2
Processing operations (1 435) (1 297) (10.6)
Refining and selling operations (304) (313) 2.9
Corporate costs (100) (66) (51.5)
Share-based payments (68) 102 (166.7)
Depreciation (1 219) (1 053) (15.8)
Increase in metal inventories 352 197 78.7
Mining gross loss (1 284) (602) (113.3)
Royalty expense (179) (196) 8.7
Profit from metal purchased transactions (14) 94 (114.9)
Sale of metals purchased 10 842 9 101 19.1
Cost of metals purchased (10 859) (9 005) (20.6)
Change in metal inventories 3 (2) 250.0
Gross margin ex-mine (%) (18.1) (8.1) (123.5)
Sales volumes ex-mine
Platinum (000 oz) 318.7 382.6 (16.7)
Palladium 148.7 150.3 (1.1)
Rhodium 37.5 45.4 (17.4)
Nickel (tonnes) 1 651 1 525 8.3
Prices achieved ex-mine
Platinum (US$/oz) 1 001 957 4.6
Palladium (US$/R) 672 626 7.3
Rhodium 677 797 (15.1)
Nickel (US$/t) 9 244 9 941 (7.0)
Exchange rate achieved ex-mine (1US$=R) 14.00 13.48 3.86
Production ex-mine
Tonnes milled (000 t) 5 046 5 892 (14.4)
% UG2 milled (%) 60.0 54.6 9.9
Development metres (total) (metres) 43 227 49 358 (12.4)
Head grade (5PGE+Au) (g/t) 4.15 4.15 -
Platinum refined (000 oz) 318.7 325.9 (2.2)
Palladium refined 148.7 155.4 (4.3)
Rhodium refined 43.9 46.2 (5.0)
Nickel refined (000 t) 1 651 1 974 (16.4)
PGM refined production (000 oz) 612.5 637.5 (3.9)
Total cost (Rm) 7 427 7 276 (2.1)
(US$m) 529 542 2.3
per tonne milled (R/t) 1 472 1 235 (19.2)
(US$/t) 105 92 (14.0)
per PGM ounce refined (R/oz) 12 126 11 413 (6.2)
(US$/oz) 863 849 (1.6)
per platinum ounce refined (R/oz) 23 304 22 326 (4.4)
(US$/oz) 1 659 1 662 0.1
net of revenue received for other metals (R/oz) 15 111 14 698 (2.8)
(US$/oz) 1 076 1 094 1.6
Capital expenditure (Rm) 1 197 1 483 19.3
(US$m) 85 110 22.8
Labour including capital at period end (no) 41 383 41 921 1.3
Own employees 31 514 32 128 1.9
Contractors 9 869 9 793 (0.8)
Centares per panel man per month (m2/man) 20.2 24.4 (17.2)
Marula key statistics
- for the six months ended 31 December 2016
December December
2016 2015 Var %
Revenue (Rm) 971 808 20.2
Platinum 488 423 15.4
Palladium 356 283 25.8
Rhodium 76 59 28.8
Nickel 14 13 7.7
Other 37 30 23.3
Cost of sales (1 144) (1 034) (10.6)
On-mine operations (925) (832) (11.2)
Processing operations (112) (105) (6.7)
Share-based payments (5) 5 (200.0)
Treatment charges (2) (2) -
Depreciation (100) (100) -
Gross (loss) (173) (226) 23.5
Royalty expense (25) (27) 7.4
Gross margin (%) (17.8) (28.0) 36.4
Sales volumes in concentrate
Platinum (000 oz) 41.6 41.7 (0.2)
Palladium 42.5 43.2 (1.6)
Rhodium 8.7 8.8 (1.1)
Nickel (t) 133 153 (13.1)
Prices achieved in concentrate
Platinum (US$/oz) 837 745 12.3
Palladium 603 480 25.6
Rhodium 622 485 28.2
Nickel (US$/t) 7 726 6 407 20.6
Exchange rate achieved (1US$=R) 13.97 13.63 2.5
Production
Tonnes milled (000 t) 909 887 2.5
Head grade (5PGE+Au) (g/t) 4.42 4.37 1.1
Platinum in concentrate (000 oz) 43.1 41.8 3.1
Palladium in concentrate 44.1 43.3 1.8
Rhodium in concentrate 8.9 8.8 1.1
Nickel in concentrate (t) 137 153 (10.5)
PGM in concentrate (000 oz) 112.7 110.3 2.2
Total cost (Rm) 1 037 937 (10.7)
(US$m) 74 70 (5.7)
per tonne milled (R/t) 1 141 1 056 (8.0)
(US$/t) 81 79 (2.5)
per PGM ounce in concentrate (R/oz) 9 201 8 495 (8.3)
(US$/oz) 655 632 (3.6)
per platinum ounce in concentrate (R/oz) 24 060 22 416 (7.3)
(US$/oz) 1 713 1 668 (2.7)
net of revenue received for other metals (R/oz) 12 854 13 206 2.7
(US$/oz) 915 983 6.9
Capital expenditure (Rm) 58 42 38.1
(US$m) 4.1 3.1 32.3
Labour including capital at period end (no) 4 738 4 678 (1.3)
Own employees 3 626 3 529 (2.7)
Contractors 1 112 1 149 3.2
Centares per panel man per month (m2/man) 26.1 24.7 5.7
Zimplats key statistics
- for the six months ended 31 December 2016
December December
2016 2015 Var %
Revenue (Rm) 3 352 2 746 22.1
Platinum 1 637 1 393 17.5
Palladium 994 752 32.2
Rhodium 110 85 29.4
Nickel 276 233 18.5
Other 335 283 18.4
Cost of sales (2 889) (2 656) (8.8)
On-mine operations (1 423) (1 311) (8.5)
Processing operations (751) (731) (2.7)
Corporate costs (200) (75) (166.7)
Share-based payments (6) 31 (119.4)
Treatment charges (16)
Depreciation (544) (550) 1.1
Change in inventories 51 (20) 355.0
Gross profit 463 90 414.4
Intercompany adjustment* (65) (25) (160.0)
Adjusted gross profit 398 65 512.3
Royalty expense (55) (45) (22.2)
Gross margin (%) 13.8 3.3 318.2
Sales volumes in matte
Platinum (000 oz) 136.2 128.4 6.1
Palladium 112.0 107.1 4.6
Rhodium 11.9 11.6 2.6
Nickel (t) 2 412 2 441 (1.2)
Prices achieved in matte
Platinum (US$/oz) 855 807 5.9
Palladium 632 523 20.8
Rhodium 659 541 21.8
Nickel (US$/t) 8 145 7 108 14.6
Exchange rate achieved (1US$=R) 14.04 13.44 4.5
* The adjustment relates to sales by Zimplats to the Implats Group which were still in the pipeline
at period end.
Production
Tonnes milled (000 t) 3 306 3 119 6.0
Head grade (5PGE+Au) (g/t) 3.48 3.46 0.6
Platinum in matte (000 oz) 137.1 130.3 5.2
Palladium in matte 112.2 106.7 5.2
Rhodium in matte 12.0 12.0 0.0
Nickel in matte (t) 2 433 2 489 (2.2)
PGM in matte (000 oz) 291.3 277.9 4.8
Total cost (Rm) 2 374 2 117 (12.1)
(US$/t) 169 158 (7.0)
per tonne milled (R/t) 718 679 (5.7)
(US$/t) 51 51 -
per PGM ounce in matte (R/oz) 8 150 7 618 (7.0)
(US$/oz) 580 567 (2.3)
per platinum ounce in matte (R/oz) 17 316 16 247 (6.6)
(US$/oz) 1 233 1 209 (2.0)
net of revenue received for other metals (R/oz) 4 807 5 863 18.0
(US$/oz) 342 436 21.6
Capital expenditure (Rm) 353 367 3.8
(US$m) 25.1 27.3 8.1
Labour including capital at period end (no) 5 887 5 443 (8.2)
Own employees 3 029 3 136 3.4
Contractors 2 858 2 307 (23.9)
Tonnes milled per employee costed*** (t/man/ 1 246.5 1 207.0 3.3
annum)
*** Average working cost employees.
Mimosa key statistics
- for the six months ended 31 December 2016
December December
2016 2015 Var %
Revenue (Rm) 1 788 1 509 18.5
Platinum 805 716 12.4
Palladium 436 377 15.6
Rhodium 42 36 16.7
Nickel 240 185 29.7
Other 265 195 35.9
Cost of sales (1 777) (1 527) (16.4)
On-mine operations (936) (778) (20.3)
Processing operations (300) (301) 0.3
Corporate costs (80) (103) 22.3
Treatment charges (161) (139) (15.8)
Depreciation (321) (197) (62.9)
Change in inventories 21 (9) 333.3
Gross profit/(loss) 11 (18) 161.1
Royalty expense (112) (90) (24.4)
Gross margin (%) 0.6 (1.2) 150.0
Profit for the six months (Rm) 124 12 933.3
50% attributable to Implats 62 6 933.3
Intercompany adjustment* - 1 (100.0)
Share of profit in Implats Group 62 7 785.7
Sales volumes in concentrate
Platinum (000 oz) 57.2 58.1 (1.5)
Palladium 46.1 46.9 (1.7)
Rhodium 4.6 4.6 -
Nickel (t) 1 572 1 603 (1.9)
Prices achieved in concentrate
Platinum (US$/oz) 1 002 917 9.3
Palladium 673 598 12.5
Rhodium 647 586 10.4
Nickel (US$/t) 10 870 8 581 26.7
Exchange rate achieved (1US$=R) 14.04 13.44 4.5
* The adjustment relates to sales by Mimosa to the Implats group which were still in the pipeline
at period end.
Note: These results have been equity accounted.
Production
Tonnes milled (000 t) 1 366 1 310 4.3
Head grade (5PGE+Au) (g/t) 3.83 3.93 (2.4)
Platinum in concentrate (000 oz) 60.9 60.0 1.5
Palladium in concentrate 48.6 46.9 3.6
Rhodium in concentrate 5.2 5.0 4.0
Nickel in concentrate (t) 1 717 1 746 (1.7)
PGM in concentrate (000 oz) 129.8 126.9 2.3
Total cost (Rm) 1 316 1 182 (11.3)
(US$/t) 94 88 (6.5)
per tonne milled (R/t) 963 902 (6.8)
(US$/t) 68.6 67.1 (2.2)
per PGM ounce in concentrate (R/oz) 10 139 9 314 (8.9)
(US$/oz) 722 693 (4.2)
per platinum ounce in concentrate (R/oz) 21 609 19 700 (9.7)
(US$/oz) 1 539 1 466 (5.0)
net of revenue received for other metals (R/oz) 5 468 6 483 15.7
(US$/oz) 389 483 19.3
Capital expenditure (Rm) 248 248 -
(US$m) 17.7 18.5 4.3
Labour including capital (no) 1 348 1 388 2.9
Own employees 1 347 1 382 2.5
Contractors 1 6 83.3
Note: These results have been equity accounted.
Two Rivers key statistics
- for the six months ended 31 December 2016
December December
2016 2015 Var %
Revenue (Rm) 2 128 1 855 14.7
Platinum 1 089 1 034 5.3
Palladium 470 392 19.9
Rhodium 144 135 6.7
Nickel 40 35 14.3
Other 385 259 48.6
Cost of sales (1 478) (1 349) (9.6)
On-mine operations (960) (864) (11.1)
Processing operations (217) (184) (17.9)
Treatment charges (16) (15) (6.7)
Chrome costs (117) (131) 10.7
Depreciation (132) (138) 4.3
Change in inventory (36) (17) (111.8)
Gross profit 650 506 28.5
Royalty expense (80) (87) 8.0
Gross margin (%) 30.5 27.3 11.7
Profit for the six months (Rm) 402 302 33.1
49% attributable to Implats 197 148 33.1
Intercompany adjustment* 20 (20) 200.0
Share of profit in Implats Group 217 128 69.5
Sales volumes in concentrate
Platinum (000 oz) 94.8 91.2 4.0
Palladium 55.9 53.5 4.6
Rhodium 16.6 16.3 1.7
Nickel (t) 318.1 309.8 2.7
Prices achieved in concentrate
Platinum (US$/oz) 822 835 (1.5)
Palladium 602 540 11.5
Rhodium 619 609 1.6
Nickel (US$/t) 9 041 8 432 7.2
Exchange rate achieved (1US$=R) 13.97 13.59 2.8
* The adjustment relates to sales from Two Rivers to the Implats Group which at yearend was still
in the pipeline.
Note: These results have been equity accounted.
Production
Tonnes milled ex-mine (000 t) 1 747 1 699 2.8
Head grade (5PGE+Au) (g/t) 4.03 4.09 (1.4)
Platinum in concentrate (000 oz) 96.7 91.8 5.3
Palladium in concentrate 56.8 54.2 4.8
Rhodium in concentrate 17.0 16.5 3.0
Nickel in concentrate (t) 313 317 (1.3)
PGM in concentrate (000 oz) 207.1 198.1 4.5
Total cost (excluding Chrome) (Rm) 1 177 1 048 (12.3)
(US$/t) 84 78 (7.7)
per tonne milled (R/t) 674 617 (9.2)
(US$/t) 48 46 (4.3)
per PGM ounce in concentrate (R/oz) 5 683 5 290 (7.4)
(US$/oz) 405 394 (2.8)
per platinum ounce in concentrate (R/oz) 12 172 11 416 (6.6)
(US$/oz) 867 850 (2.0)
net of revenue received for other metals (R/oz) 2 637 3 900 32.4
(US$/oz) 188 290 35.3
Capital expenditure (Rm) 175 181 3.3
(US$m) 12 13 7.7
Labour including capital (No) 3 183 3 238 1.7
Own employees 2 414 2 422 0.3
Contractors 769 816 5.8
Note: These results have been equity accounted.
IRS key statistics
- for the six months ended 31 December 2016
December December
2016 2015 Var %
Revenue (Rm) 10 916 9 220 18.4
Platinum 6 069 4 915 23.5
Palladium 2 618 2 269 15.4
Rhodium 512 498 2.8
Nickel 693 692 0.1
Other 1 024 846 21.0
Cost of sales (10 187) (8 648) (17.8)
Metals purchased (9 504) (8 759) (8.5)
Processing operations (212) (198) (7.1)
Refining and selling operations (373) (362) (3.0)
Corporate costs (52) (39) (33.3)
Depreciation - -
Change in metal inventories (46) 710 (106.5)
Gross profit 729 572 27.4
Metals purchased - adjustment on metal prices and exchange (158) 403 (139.2)
Inventory - adjustment on metal prices and exchange 207 (332) 162.3
Gross profit in Implats Group 778 643 21.0
Metals purchased - fair value adjustment on metal prices 59 271 (78.2)
Metals purchased - foreign exchange adjustment 99 (673) 114.7
Gross margin (%) 6.7 6.2 8.1
Revenue (Rm) 10 916 9 220 18.4
Direct sales to customers 17 17 -
Sales to Impala 10 600 8 926 18.8
Toll income - external 281 275 2.2
Toll income - intercompany 18 2 800.0
Total sales volumes
Platinum (000 oz) 417.0 380.1 9.7
Palladium 284.6 269.3 5.7
Rhodium 56.2 49.3 14.0
Nickel (t) 4 853 4 970 (2.4)
Prices achieved
Platinum (US$/oz) 1 024 988 3.6
Palladium 648 643 0.8
Rhodium 639 773 (17.3)
Nickel (US$/t) 10 084 10 653 (5.3)
Exchange rate achieved (1US$=R) 14.21 13.09 8.6
Refined production
Platinum (000 oz) 459.8 366.2 25.6
Palladium 319.8 258.6 23.7
Rhodium 47.5 38.0 25.0
Nickel (t) 6 632 6 500 2.0
PGM refined production (000 oz) 940.7 740.8 27.0
Metal returned
Platinum (000 oz) - 0.1
Palladium - 0.9
Rhodium - -
Nickel (t) 1 596 1 830 (12.8)
Corporate information
Registered office
2 Fricker Road, Illovo, 2196
(Private Bag X18, Northlands 2116)
Transfer secretaries
South Africa: Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Ave, Rosebank, Johannesburg, 2196
(PO Box 61051, Marshalltown, 2107)
United Kingdom: Computershare Investor Services plc
The Pavilions, Bridgwater Road, Bristol, BS13 8AE
Sponsor
Deutsche Securities (SA) Proprietary Limited
Directors
MSV Gantsho (chairman), B Berlin (chief financial officer), HC Cameron, PW Davey*, A Kekana,
AS Macfarlane*, ND Moyo**, FS Mufamadi, B Ngonyama, MEK Nkeli, ZB Swanepoel, U Lucht***
*British
**Zimbabwean
***Alternate to A Kekana, appointed 28 October 2016
Group executive: corporate relations
Johan Theron
Tel: +27 (11) 731 9013
E-mail: johan.theron@implats.co.za
Group corporate relations manager
Alice Lourens
Tel: +27 (11) 731 9033
E-mail: alice.lourens@implats.co.za
For additional information on the Group, please go to
www.implats.co.za
Date: 23/02/2017 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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