Impala Platinum’s production declined by 4% to 1.8 million 6E ounces in H1 2024, while sales volumes increased by 5%. Expected headline earnings are forecasted to fall by 40-49%. Cost management strategies have not fully mitigated rising unit costs, and production challenges persist across various sites. Despite these hurdles, there are hopes for future market improvement.
Impala Platinum (Implats) experienced a 4% decline in production for the six months ending December 2024, amounting to 1.8 million 6E ounces. Despite a 5% increase in sales volumes, the company anticipates a significant plunge in interim earnings, further exacerbated by lower capital expenditures and a pessimistic outlook in the platinum group metals (PGM) market. Implats had indicated earlier that the PGM market will stay challenging in the near future.
With ongoing price weakness in the PGM sector, mining companies like Implats are implementing cost-cutting measures, including layoffs and reduced capital spending. Despite reorganizing and instituting retrenchments, interim costs per 6E ounce are projected to rise by 3% to R20,900 on a stock-adjusted basis. Improved effective costs stemmed from lower input inflation, labor savings, and favorable rand appreciation relative to the dollar for both Zimplats (Zimbabwe) and Impala Canada.
The company’s forecast for headline earnings shows a decrease between 40% and 49%, expected to range from R1.65 billion to R1.95 billion, with earnings per share between 184 cents and 217 cents. The reduction in headline earnings is attributed to an 8% decline in rand revenue per 6E ounce sold and the impact of a stronger rand offsetting higher sales volumes and better refined outputs. The capital expenditure has also dropped to R4 billion due to nearing completion of various projects.
Earnings before interest, taxes, depreciation, and amortization (EBITDA) for the half-year amounted to R6.5 billion. Johan Theron, Implats spokesperson, communicated that while there is hope for an improved physical market in the future due to macroeconomic trends and supply responses, the near-term outlook remains uncertain and potentially volatile.
Implats’ production metrics show an overall 4% fall to 1.82 million 6E ounces. Specific sites report varied performance: Impala Rustenburg output increased by 2% to 687,000 adjusted ounces, while Impala Bafokeng produced 254,000 ounces, helped by efficiency gains at Styldrift. Conversely, Marula faced challenges, leading to a 10% drop in production, while Zimplats’ output decreased by 15% due to operational constraints during smelter expansion.
At Impala Canada, production declined by 20% to 116,000 ounces, influenced by revised operating parameters. However, Two Rivers recorded a slight rise of 1% to 153,000 ounces. The Mimosa joint venture managed a 3% production increase to 129,000 ounces, despite facing difficulties from power outages. Despite a sales volume rise of 5% to 1.77 million 6E ounces, high inventory levels remain a concern.
The company concluded the review period with excess inventory of approximately 375,000 6E ounces. The weakened US dollar pricing and stronger rand led to a reduction in group sales revenue, netting around R23,800 per 6E ounce sold. This suggests that while volumes rose, the financial performance was adversely affected by currency fluctuations and pricing mechanisms within the struggling PGM market.
Impala Platinum’s production and earnings are significantly affected by the ongoing challenges in the PGM market, characterized by price declines and high operational costs. Despite slight increases in sales volumes, the company is navigating a complex financial landscape. Future expectations hint at a potential rebound in the PGM market, but the near-term outlook remains cautious due to prevailing economic factors and production challenges.
Original Source: www.newzimbabwe.com
