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Implats’ Performance 
Chief executive officer’s review

The Group’s priorities have been materially rebalanced to focus on shorter-term cash preservation and profitability in a low price environment while we continue our investment in key capital projects.

“We are pleased to have achieved all of our operational and financial targets

Terence Goodlace
Chief executive officer

What were the main successes and challenges in FY2015?

These results reflect good operational execution, but we have been affected by a number of external factors – not least of which are the continued low PGM price environment, the constrained power supply in South Africa as well as numerous “section 54” safety stoppages issued by the Department of Mineral Resources (DMR).

We have successfully started implementing, and seen the first benefits, of our strategy first communicated in February 2015. Premised on a “lower-for-longer” PGM price environment, our five key strategic objectives are to maintain prudent investment through the cycle, maintain strategic optionality and position the Group for the future, improve efficiencies and profitability through operational excellence and safe production; conserve cash wisely – especially while metal prices remain depressed – and maintain Implats’ social licence to operate.

We are pleased to have achieved all of our operational and financial targets – save for Marula given the strike action and safety stoppages at that operation – and we have also succeeded in our cash preservation objectives.

In addition we have secured our balance sheet via the recent equity raising exercise and debt extension facilities while maintaining our planned expenditure on employee housing and social and labour plan commitments.

Importantly, notwithstanding the metal price environment, the completion of 16 and 20 shafts will result in the Impala Lease Area being in the lower cost quartiles. Our intention in transforming the Impala Lease Area is to create a more concentrated mining operation with access to new, modern shaft complexes making better use of the invested fixed cost base, with higher mining efficiencies and lower unit costs. Over the next five years it is planned to change the proportion of Merensky to UG2 to 50%, which is important for efficient smelter operation.

Explain the key components of your safety performance

The Group’s safety strategy is premised on achieving zero harm and specifically demands safe behaviour, an inherently safe work environment and leading safety practices.

We continue to mitigate safety and health risks by implementing an internal work stoppage programme. This is a very proactive programme that requires working teams to stop and fix hazards or sub-standards identified by line management and service departments. During the year under review, 4 016 of these stoppages occurred.

Since the 2010 financial year our fatal injury frequency rate has improved from 0.122 to 0.058 per million man-hours worked. Over the same period we significantly reduced total accidents and ended the period with the total injury frequency rate of 9.78 per million man-hours worked having reduced from a rate of 15.21 in the 2010 financial year.

It is worth celebrating some of the remarkable safety achievements our teams have recorded at individual operations: Impala Services and Springs Refineries achieved 10 million fatality-free shifts, 7A and 12 shafts at Impala and Mimosa achieved 5 million fatality-free shifts, Zimplats achieved 3 million fatality-free shifts and Impala’s 9, 14 and 20 shafts all achieved 1 million fatality-free shifts.

The Group recorded an all-time record during this period, which saw Implats work for more than six months without a fatal accident.

Despite these improvements, we deeply regret that four of our employees at Impala Rustenburg and two contractors, as well as an employee at Marula, suffered fatal injuries during the year. The board and the management team have extended their sincere condolences to the families and friends of these colleagues and remain committed to achieving zero harm across all operations.

Outline your views on the regulatory landscape

Looking at South Africa in particular, the mining sector has significant potential to contribute towards economic growth through ongoing engagement and involvement, particularly with regard to meeting the imperatives of the National Development Plan, the Industrial Policy Framework and the Deputy President’s Framework Agreement. Mining is a significant contributor not only directly to the economy, but also through the indirect and induced multipliers. The mining sector as a whole contributes towards boosting infrastructure investment, creating employment and export earnings as well as fighting unemployment, poverty and inequality. There is general agreement on the need for a vibrant mining sector for the future performance of the South African economy.

That said, it will be very difficult to achieve higher, more balanced and more inclusive economic growth without the tradable export sectors, including mining, growing at a much higher and sustainable level. The mining sector’s potential continues to be hamstrung by policy uncertainty. In addition the rising cost of electricity and the insecurity of power supply are taking their toll. Unreliable supply has significantly dented investor confidence. A stable electricity pricing environment is critical to ensuring some form of investment is possible in the future.

The industry’s poor performance has also been worsened by an unusually challenging community and labour relations environment as a result of both workplace and social wage issues. And a continuing challenge for management has been the number of “section 54” safety stoppage instructions issued by the DMR.

We look forward to participating in the government’s Project Phakisa for the mining industry to seek ways to unleash our potential to secure inclusive growth for industry and country.

We will continue to engage the government on all issues that are inhibiting the growth and transformation of the mining sector.

Turning to Zimbabwe, we fully support the Zimbabwean government's attempts to grow its local economy. As one of the largest investors in the country we remain ready to do more, but require a supportive regulatory environment to live up to our potential to boost infrastructure development, employment, export earnings and local beneficiation/industrialisation.

Constructive discussions with the government of Zimbabwe continue with regard to the implementation of its indigenisation policy and a two-year deferral of the 15% export levy on unbeneficiated platinum has been announced.

What are your views on the PGM market in the short and long term?

Alongside all major commodities PGM prices have been adversely affected by a number of factors, including the abrupt slowdown of Chinese economic growth. It is important to take swift and robust action to manage the business in line with the price environment, but Implats continues to believe that the market fundamentals for PGMs remain attractive over the longer term. There is limited incremental PGM supply anticipated beyond recycling of above-ground stock, while demand is well positioned to benefit from the recovery in the global economy.

The fundamentals for PGMs remain robust even though above-ground stock continue to impact prices. The lack of capital investment by the platinum industry will curtail future supply from southern Africa and should, together with improving demand from recovering economies, augur well for these metals. Deficit markets, forecast for the next three to five years, are expected to steadily erode the level of inventories, positively impacting prices in the long term.