Impala likely to pass on dividend

JOHANNESBURG - Impala Platinum (Implats), an 87 percent-shareholder in Zimbabwe Platinum Mines Limited (Zimplats), may pass on the final dividend when it announces its year-end results, scheduled for August 29 ? a development that would restrict returns to shareholders at a very modest 35c/share versus the R1,95/share payout in the previous financial year.

Already, it’s known that shareholders can also expect a hefty R2,3bn write-down as a supplier to its refining business — Impala Refining Services (IRS) ? defaults on cash payments.

This is the none too happy news for a company that is still regarded among the best placed to capitalise on a recovery in the platinum price, whenever that arrives.

On the face of it, Implats will close the financial year only slightly better shaped than when it started’, but deeper within the organisation, there are some important changes taking place.

CEO, Terence Goodlace’s strategy has been to tackle grassroots issues starting with safety.

The death of three miners in the fourth quarter at Implats’ flagship Lease Area in Rustenburg shows, however, the difficulty of changing the company’s culture.

Yet good safety practices naturally evolve into efficiency, according to Goodlace who, like many CEOs newly-appointed in these difficult times for mining, has a strong operational background.

For instance, he once worked as a shift boss for former mining house Gencor’s mining unit, Genmin.

All in all, he has worked underground for some 20 years of his career.

Speaking at the group’s interim results presentation in February, Goodlace acknowledged being surprised at the level of deterioration in the mining activities, especially of the Lease Area.

He said at the time Implats needed to get back to developing its ore bodies properly, improving efficiencies, and safety.

The graphs on Implats’ productivity make for some worrying scenarios, however.

From just under 35 square metres per man, crew efficiency fell to just under 20 sqm per man in the second quarter of the 2012 financial year.

The efficiency rate has recovered somewhat to 25 sqm per man by the first half of the 2013 financial year, but nowhere near levels Goodlace expects.

Costs are a concern too which is why there’ll be questions regarding progress in wage talks with the Association of Mineworkers & Construction Union (AMCU), now the recognised union on all of Implats’ operations.

AMCU has shown itself to be spikey in its gold negotiations thus far where it only speaks for 17 percent of the industry.

Perhaps it matters that there is no central bargaining in the platinum sector yet; nonetheless, there’s no knowing if there’ll be rapid progress in its one-on-one discussions with platinum companies such as Implats.

Group unit costs of R9,889 per refined platinum ounce in the first half of the 2010 financial year increased to R11,287 per refined ounce some two years later.

However, a year after that ? in the first half of the current financial year ? unit costs were R15,983/oz — a direct function of agreeing to several wage adjustments.

There’s also the likelihood of an increase in the R550m impairment Implats said it would have to book from non-delivery of long-term receiveable-related to a toll treatment agreement with supplier A1.

Following the issue of court papers in the US, there could be a total non-delivery in the receiveable of R1,76bn of which as much as R1,2bn has not yet been provided for by Implats.

The other major theme in Implats’ life will be the future of its platinum operations in Zimbabwe which it holds through Zimplats.

Goodlace declared earlier this year that the company has finally achieved certainty having agreed to sell 51 percent of its stake in Zimplats to the government.

No sooner had the deal been inked that Robert Mugabe, the re-elected president of Zimbabwe, said the sale could not be approved as it had the imprimatur of a vendor-financed deal which Zimbabwe was not (could not) do.

The minister for Indigenisation, Empowerment and Youth, Savior Kasukuwere acknowledged he’d made “mistakes” which firmly creates the prospect that Mugabe intends to expropriate the asset.

There’s no support for expropriation in Zimbabwe’s Constitution but whether Implats takes the legal route on this matter will be a worthy question shareholders will pose at the results presentation.

 

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