Impala Platinum: costs hit profits

Listen to this article

00:00
00:00

Shares in Impala Platinum fell by as much as 3.4 per cent on Monday morning in Johannesburg following the release of a trading statement from the South African mining company detailing a fall in half-year profits.

The statement, warning shareholders ahead of the company’s half-year results on Thursday, says basic earnings per share for the six months ending December 31, 2012 are expected to be up to 79 per cent lower than the equivalent period in 2011, at 120-138 cents.

In the statement, the company said the bulk of the expected decrease was caused by “a decrease in mine-to-market throughput [and] above inflation cost increases”. A $68m writedown on payments owed to the company added to the losses.

Implats, as Impala Platinum is known, is the world’s second largest platinum miner, producing 1.45m ounces in the 2012 financial year, and was impacted heavily by industrial disputes across the South African mining sector over the past year. Although the company’s workers did not engage in strike action during the peak of the unrest in August and September, its largest mine near Rustenburg was closed by a strike for six weeks from January to March 2012 and production there has yet to recover to 2011 levels.

At their lowest point on Monday, the shares reached 159 rand following heavy selling in early trading. However, the news was not a shock and by 14.00GMT the stocks had rebounded above R164, regaining most of the lost ground.

One mining analyst, speaking off the record, told beyondbrics that the earnings statement was not unexpected: “It has been a tricky period for platinum full stop, but Impala are ramping up production following the strikes.”

Another analyst, who also wished to remain anonymous, said: “Most people expected the results to be worse. But the key factor is that production is still weak. I think they may announce cuts on Thursday as a result of the cost increases and as a big, profitable producer that’s a big message to government.”

The company’s first quarter production report in November showed refined platinum production at its Impala mine to be 193,000 ounces in the quarter ending September 30, 2012, compared to 249,000 ounces a year previously. The company at the time said: “Operational performance continues to be impacted by the uncertain labour climate and as a result still remains well below planned levels”.

In the first half of 2012, South African mining companies suffered from falling platinum prices resulting from lowered demand from eurozone car makers. However, prices for the precious metal have rebounded since the onset of the strikes in August 2012 and in January, Anglo American Platinum, the world’s largest platinum producer, announced shaft closures and sales sufficient to reduce annual capacity by up to 400,000 ounces, pushing the metal toward an expected demand shortfall.

Related reading:
Platinum jumps on shortfall concerns, FT
Zimbabwe: Impala strikes $971m black ownership deal, beyondbrics

Copyright The Financial Times Limited 2017. All rights reserved. You may share using our article tools. Please don't copy articles from FT.com and redistribute by email or post to the web.