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Implats’ Performance 
Chief executive officer’s review

Strategic advantage is built in the down cycle – and our measures to position the Group to take advantage of the next up cycle are well advanced.

“We firmly believe that the market fundamentals for PGMs remain strong

What is Implats’ response plan to the “lower-for-longer” PGM price scenario?

We developed a decisive operational response plan to mitigate the lower-for-longer metal price outlook and the dramatic decline in the PGM price basket. The principal focus is now being placed on cash preservation and profitability in the lower price environment. In a nutshell, the Group plans to reduce the 2016 capital budget by R1.3 billion to R4.2 billion.

Key initiatives to achieve this include reducing operating costs, reprioritising and rescheduling capital expenditure, and accelerating the implementation of the Impala Lease Area strategy.

Bottom-up assessment of all operations were conducted resulting in interventions at each operation, with specifically targeted measures to improve mining efficiencies and reduce operating costs. This resulted in a saving of R930 million. We are also taking other steps to reduce operating costs across the Group, including reducing head office costs; rescheduling development expenditure; reassessing and rescheduling major contracts; revising our support strategies; reducing remuneration spend and revising our management of ammonium sulphate stocks.

It nevertheless remains a priority for Implats to complete key capital projects that are expected to be value enhancing in the context of the current price outlook and also important to the long-term value for the Group. Our priority is thus to complete the development of 16 and 20 shafts in line with the strategy for the Impala Lease Area at a capital expenditure cost of R2.8 billion, which includes R1.1 billion off-reef development spend.

Development at 17 Shaft will be curtailed with capital expenditure reduced to R250 million for 2016.

We are closing the unprofitable mining areas, including the 8 Shaft and the 12 Shaft mechanised sections that are most at risk due to the current low price environment. The exact impact on employment is continuously assessed and will be mitigated where possible by redeploying employees to the replacement shafts. This is in line with the industry commitment to save jobs and ameliorate the impact of job losses in terms of the “Leaders’ Declaration” we co-signed on 31 August 2015.

Capital expenditure will also be reduced elsewhere across the Group – R45 million at Marula, US$50 million at Zimplats and US$13 million at Mimosa.

Given our revised capital schedule and envisaged closures, we are reducing production at Impala by 180 000 platinum ounces over the next five years and reducing output to between 815 000 and 830 000 platinum ounces a year by 2020.

We have secured an advanced agreement to extend the term of a portion of the revolving debt facilities to two and half years from one year previously. The quantum has been increased to R3.5 billion.

In addition, on 3 September 2015 the Group proposed an equity raising of up to R4.0 billion via an accelerated book building process to qualifying institutions. The equity raising was approved by shareholders on 6 October and was successfully executed on 7 October 2015.

What are the key opportunities for Implats in the medium term?

The restructuring of our debt and the capital raising exercise has enhanced our balance sheet. This will allow us to continue our capital expenditure programme though the cycle, including the 16 and 20 shafts. A new smelter project alongside the existing smelting facility could be advanced in consultation with the Zimbabwean government and in partnership with other PGM producers operating in that country as a response to addressing a broader beneficiation strategy.

Our smelters are being relined and now offer us an additional competitive advantage. In Rustenburg we are rebuilding the number 3 and 5 furnace and bringing number 4 furnace online. The Group also has capacity available at IRS that enables it to benefit from new opportunities and diversify its production exposure. We intend to be a leading player in this area.

We firmly believe that the market fundamentals for PGMs remain strong, despite the near-term price pressures. Strategic advantage is built in the down cycle – and our measures to position the Group to take advantage of the next up cycle are well advanced. We are confident of an improved performance in the year ahead.