Impala Platinum (Implats) said yesterday the uncertain macroeconomic environment and the recent decline in dollar PGM pricing, heralded a period of rapid margin compression across the sector.
This would require decisive action and focus to preserve business sustainability, the group said in its integrated report released yesterday.
The platinum group metals (PGMs) miner's chairperson, Thandi Orleyn said it was worth noting, however, that the pricing decline had taken place in the context of a robust medium-term outlook for Implats’ primary products.
"The immediate focus is to implement targeted capital and cost interventions in response to market conditions, sustain investment across the projects key to ensuring regulatory compliance and strategic value creation, and prioritise shareholder returns, with a dividend policy founded on a minimum allocation of free cash flow generated before growth capital.
"At our new subsidiary, Impala Bafokeng, costs will be optimised, the metallurgical performance improved, and the Styldrift ramp-up completed," she said.
After acquiring Royal Bafokeng Platinum (RBPlat) in September, the group renamed it Impala Bafokeng.
"A definite highlight during the year was concluding the acquisition of RBPlat — now known as Impala Bafokeng — welcoming its more than 11 100 employees into the Implats fold, and starting the exciting work to integrate this important asset into the group.
"The acquisition unlocked a series of associated and meaningful empowerment transactions and significant additional public interest benefits. The transaction will increase growth opportunities for SMMEs owned or controlled by local businesses, and position them well for further sustainable growth as they benefit from support structures," Orleyn said.
She said Implats’ established partnership with the Royal Bafokeng Nation was aimed at prioritising and advancing ‘beyond compliance’ expenditure, targeting environmental, agricultural, enterprise, and skills development.
Implats CEO Nico Muller said Implats had navigated several regional challenges, most notably the increased frequency and severity of load curtailment in South Africa, which had a marked impact on production and operating continuity.
"Implats manages the lower stages of load curtailment by reducing power to its furnaces and concentrators, with mining and hoisting volumes impacted at higher stages. These mitigating actions result in a combination of ‘foregone’ and ‘deferred’ production volumes," he said.
Looking ahead, Muller said there were several revisions to forecast PGM supply and demand in 2023.
"Primary supplies continue to be challenged by the South African operating environment while processing maintenance will result in lower refined Russian supplies.
"Forecasts for secondary flows continue to be downgraded as scrap collections fall short of expectations in the face of rising interest rates, increased regulatory scrutiny, and still-weak new vehicle sales," he said.
Muller said while expectations for auto production and sales have enjoyed modest upgrades, forecasts for net metal demand by industrial users had been adjusted down to account for the destocking of inventory.
"Negative revisions to the outlook for Chinese jewellery demand have largely been countered by a stronger-than-expected performance in India, the US, and Europe.
"Our forecasts indicate fundamental deficits for each of the PGMs in 2023. However, the potential impact and pattern of industrial and auto OEM destocking, particularly in rhodium, will likely heavily influence physical market tightness, and hence pricing, during the year," he said.
BUSINESS REPORT