Despite a challenging operating environment, metals producer Impala Platinum (Implats) still managed to deliver a strong performance for its year ended June 30 2023 and was ranked No 3 in the Sunday Times Top 100 Companies.
Amid softening rand platinum group metals (PGM) pricing and lower refined production and sales, Implats recorded earnings before interest, tax, depreciation and amortisation (ebitda) of R36bn, headline earnings of R18.8bn and generated free cash flow of R14.2bn, after funding capital expenditure of R11.4bn and R4.9bn in the period for the acquisition of Royal Bafokeng Platinum (RBPlat).
The board declared a final dividend of 165c a share, resulting in a total dividend for 2023 of 585c a share.
CEO Nico Muller says enhanced operational flexibility, resilience and disciplined execution allowed the company to successfully navigate a series of domestic and regional challenges which compounded the impact of the softening dollar pricing, rand depreciation and persistent inflation.
This, he says, is testament to the skills and strength of the group’s people and standout performances at Impala Canada, Zimplats and Impala Rustenburg.
“We’ve improved our safety metrics and our sustainability journey is gaining momentum, with several accolades recognising environmental, social and governance [ESG] management,” he says.
A highlight of the past year was securing ownership of RBPlat — now called Impala Bafokeng. Muller says the business is advancing its plans to integrate and optimise Impala Bafokeng to ensure it receives maximum value from this important acquisition.
“The combined asset base of Impala Rustenburg and Impala Bafokeng will result in a more secure and sustainable Rustenburg operating complex in years to come, with a premier mine-to-market production base, well-capitalised infrastructure and long-term competitive positioning, enhanced by industry-leading integrated processing capability,” he says.
Implats’ impressive results were achieved against a backdrop of an uncertain macroeconomic environment and the recent material decline in dollar PGM pricing. The latter has heralded a period of rapid margin compression across the sector which, says Muller, requires decisive action and focus to preserve business sustainability.
It’s worth noting, he adds, that the pricing decline is taking place in the context of a robust medium-term outlook for Implats’ primary products.
Implats continues to be focused on delivering consistent and safe production, constructively collaborating with key stakeholders and entrenching operational agility and flexibility, he says.
“We’ve reviewed each operation in the context of current pricing and aligned their operating and capital plans to ensure an appropriate response to the reality of current PGM pricing,” he says. The business’s ability to do so, says Muller, was underpinned by a careful and consistent approach to balance sheet management, capital allocation and the group’s investment framework, which collectively guided the current capital expenditure profile.
Muller says Implats’ expansion projects are focused on the lowest-cost and most capital-efficient producing assets.
“To ensure each operation generates positive margins through the cycle, we’re implementing targeted capital and cost interventions in response to the current market conditions and will sustain investment across projects key to ensuring strategic value creation.”
The commitment, he says, is to prioritise shareholder returns, with a dividend policy founded on a minimum allocation of free cash flow generated before growth capital.
In response to the rising cost and unreliable supply of electricity, Implats has developed an energy security and decarbonisation strategy which includes forward-looking energy requirements and energy technology options for each operation.
Its decarbonisation strategy targets carbon neutrality by 2050, with a short-term target to reduce carbon emissions 30% by 2030, using 2019 as the baseline year. All new mines will have at least 30% renewable energy and each operation with at least five years of life-of-mine remaining will have a renewable energy source by 2025.
Muller reports that good progress has been made on several renewable energy projects and initiatives, with each project including a social impact contribution to ensure a just transition.
Power reduction agreements are in place between its South African operations and Eskom to mitigate the safety risk to employees and contractors through timely communication. Power-saving initiatives have been implemented across all operations, while backup generators ensure safe evacuations and keep critical processes energised at South African operations.
Zimplats concluded a power securitisation agreement with the Zimbabwe Electricity Transmission and Distribution Co and signed a 50MW hydropower electricity agreement with the Zambia Electricity Supply Corp, thus increasing its proportion of renewable energy use to 67%.
Zimplats is also midway through constructing a $37m (R704m) solar plant at the Selous Metallurgical Complex, while feasibility studies are under way at Impala Rustenburg (140MW) and Marula (30MW) for the construction of photovoltaic facilities both for energy security and to improve the group’s carbon footprint.
Impala Canada’s grid-supplied energy is 100% renewable (hydropower), while the operation uses carbon-based fuels (diesel, petrol and propane) for mobile equipment and heating.
Understanding that businesses can only be profitable and competitive if sustainability is a key strategic focus, Implats is committed to being a responsible metals producer, creating economic opportunity for its communities and protecting its natural environment. Sustainable development is one of the six strategic objectives supporting the group’s strategy.
The recipe for Implats’ success, says Muller, are the skills and strength of its people, a fit-for-purpose strategy and a clearly defined purpose.
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