Wrap Text
Consolidated Annual Results 2018
IMPALA PLATINUM HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 1957/001979/06
Share codes:
JSE: IMP
ADRs: IMPUY
ISIN: ZAE000083648
ISIN: ZAE000247458
Consolidated Annual Results 2018
Key features for the year
IMPALA PLATINUM HOLDINGS LIMITED (IMPLATS) IS ONE OF THE WORLD'S FOREMOST PRODUCERS OF PLATINUM AND
ASSOCIATED PLATINUM GROUP METALS (PGMS). IMPLATS IS CURRENTLY STRUCTURED AROUND FIVE MAIN OPERATIONS
WITH A TOTAL OF 20 UNDERGROUND SHAFTS. OUR OPERATIONS ARE LOCATED WITHIN THE BUSHVELD COMPLEX IN
SOUTH AFRICA AND THE GREAT DYKE IN ZIMBABWE, THE TWO MOST SIGNIFICANT PGM-BEARING ORE BODIES
IN THE WORLD.
Financial
Gross profit improved by R2.1 billion to R1.6 billion. Earnings were impacted by impairments of R13.6 billion, mainly
due to the restructuring of Impala Rustenburg. The Group's funding strategy is supported by the forward sale of up to
R2 billion of the pipeline stock, which provides sufficient liquidity during the two year restructuring period.
Operational
Tonnes milled rose 5.6% and platinum in concentrate ounces were 1% higher following strong operational performances
across the Group. Refined platinum ounces declined by 4% and were impacted by the 77 000 platinum ounce build-up in
pipeline stocks, following the rebuild and fire at Impala Rustenburg's No. 5 furnace.
Market
The platinum market remains over-supplied, with good demand for palladium and rhodium.
Prices achieved
A 4% decline in the US dollar platinum price and a stronger ZAR:US$ exchange rate was offset by a 35% increase in the
US dollar palladium price and a 90% increase in the rhodium price, yielding a net 5% increase in the rand basket price
per platinum ounce.
Safety
Seven fatalities in the earlier part of the year were regrettable and unacceptable. Corrective measures taken
contributed to a seven-month fatality-free record for Implats.
Strategic response
Strong advances were made towards the stated policy of eliminating loss-making production, demonstrated by the
dramatic turnaround of Marula and the restructuring decision at Impala Rustenburg. The Group strategy to rebalance
its portfolio toward lower-cost, shallow, mechanisable assets was progressed through the acquisition of a 15% interest
in the Waterberg project.
Group performance
Year Year Year
ended ended ended
30 June 30 June Var 30 June Var
2018 2017 % 2016 %
OPERATING STATISTICS
Gross refined production
Platinum (000oz) 1 468.1 1 529.8 (4.0) 1 438.3 6.4
Palladium (000oz) 849.3 931.6 (8.8) 885.4 5.2
Rhodium (000oz) 198.5 203.5 (2.5) 185.1 9.9
Nickel (t) 16 226 17 464 (7.1) 17 001 2.7
IRS metal returned (toll refined)
Platinum (000oz) 140.2 14.5 - 0.1
Palladium (000oz) 67.0 8.9 652.8 1.5 493.3
Rhodium (000oz) 23.4 2.4 - 0.0
Nickel (t) 3 558 2 569 38.5 3 508 (26.8)
Sales volumes
Platinum (000oz) 1 354.7 1 468.9 (7.8) 1 511.6 (2.8)
Palladium (000oz) 769.9 903.7 (14.8) 905.5 (0.2)
Rhodium (000oz) 196.1 202.6 (3.2) 197.1 2.8
Nickel (t) 12 648 14 403 (12.2) 14 184 1.5
Prices achieved
Platinum ($/oz) 943 984 (4.2) 961 2.4
Palladium ($/oz) 975 723 34.9 586 23.4
Rhodium ($/oz) 1 501 788 90.5 735 7.2
Nickel ($/t) 11 488 9 992 15.0 9 483 5.4
Consolidated statistics
Average rate achieved (R/$) 12.82 13.66 (6.1) 14.39 (5.1)
Closing rate for period (R/$) 13.73 13.07 5.0 14.69 (11.0)
Revenue per platinum ounce sold ($/oz) 2 023 1 806 12.0 1 627 11.0
(R/oz) 25 935 24 670 5.1 23 413 5.4
Tonnes milled ex mine (000t) 19 355 18 332 5.6 18 426 (0.5)
PGM refined production (000oz) 2 924.6 3 099.5 (5.6) 2 907.5 6.6
Capital expenditure (Rm) 4 606 3 430 (34.3) 3 560 3.7
Group unit cost per platinum
ounce refined ($/oz) 1 919 1 661 (15.5) 1 507 (10.2)
(R/oz) 24 660 22 657 (8.8) 21 731 (4.3)
Group unit cost per platinum
ounce stock adjusted ($/oz) 1 785 1 675 (6.6)
(R/oz) 22 931 22 838 (0.4)
* Pmmhw - per million man-hours worked
** Restated to take into account ore milled at Mimosa
Introduction
The past year was pivotal for Implats as it embraced and advanced key strategies to align with the Group's
evolving geopolitical and macro-economic landscape. Both jurisdictions in which the company operates have
witnessed encouraging political changes, which will positively influence the industry and the Group's
business interests in the future.
In Zimbabwe, Zimplats successfully concluded the release of ground north of portal 10, which does not
form part of its 30-year mine plans. In addition, the special mining lease (SML) was successfully
converted into two new mining leases, which, combined with partial relief on export levies, will
enable the Zimbabwean assets to sustain and grow future financial returns.
Uncertainty in the South African policy and regulatory framework remains. However, a more collaborative
and trusting environment is being established, which enhances the likelihood of constructive outcomes
that will attract investors back to the mining sector. The Group remains committed to collaboration
with all stakeholders to ensure an attractive and sustainable industry.
While platinum group metal (PGM) rand basket pricing has remained depressed, the increase in US dollar
palladium and rhodium prices during the past year has been encouraging.
Implats remains confident in the long-term fundamentals for PGM demand with future opportunities for
palladium back-substitution with platinum in the manufacture of catalytic converters. However, platinum
price support is not expected in the near term and the Group has aligned company strategies accordingly.
Current market fundamentals require much improved industry discipline, particularly in discontinuing
unprofitable production. Implats cannot, and will not, support loss-making production and the remarkable
return to positive Group contributions from Marula, as well as the restructuring decisions announced at
Impala Rustenburg are therefore very pleasing. In addition, the acquisition of a 15% interest in the
Waterberg development project is a significant step in advancing the Group strategy towards lower-cost,
shallow, mechanisable assets.
Internally, the Group is reprioritising and rescheduling capital allocation decisions and focusing on
effective cash management to protect the balance sheet. Key business focus areas include improved
organisational effectiveness through enhanced accountability, performance management and effective
strategic decision making. Social responsibility, elimination of harm to the health and safety of
employees and preventing negative impact on the environment underpins the Group's operating philosophy
and remain key imperatives.
In addition, other initiatives have been progressed this past year, including:
- A much improved safety performance during the second half of FY2018
- Higher output at most operations
- A pleasing operational and financial turnaround at Marula
- Securing profitable third-party PGM toll treatment through Impala Refining Services (IRS) by
positioning the business within Impala where the processing assets are housed
The most significant step in the transformation of the Group, however, was announced after year-end when
the findings and recommendations of the Impala Rustenburg strategic review were released. Taking account
of the current operating environment and macro-economic realities, the outcome concluded that a radical
and urgent transition into a leaner, more concentrated and profitable operation is critical to support
the future success of the Group.
The implementation of the Impala Rustenburg plan will be phased in over the next two years to ensure
the transition occurs in a socially responsible manner. The key outcomes of the restructuring, which
is expected to be concluded by the end of the 2021 financial year, include:
- A reduced mining 'footprint' from 11 to six operating shafts as operations are stopped at end-of-life
and uneconomical shafts
- Production reducing from the previously guided 750 000 platinum ounces to 520 000 platinum ounces a year
- The total labour complement (employees and contractors) reducing from approximately 40 000 to 27 000
from 2021
This plan is expected to deliver a safer and profitable Impala Rustenburg centred on its best assets with
higher quality, long-life orebodies, lower operating costs and capital intensity. Importantly, it secures
employment for 27 000 employees and surrounding communities can continue to participate in Implats'
procurement, training and local economic development activities.
To initiate the restructuring process, Impala Rustenburg commenced a formal Section 189 labour reduction
process in early August 2018 that could affect 1 500 jobs. Of this, approximately 300 employees have already
exited the organisation due to natural attrition. It is expected that the total number of employees affected
by the Section 189 will reduce further as the normal and ongoing process of natural attrition continues.
Despite this, and throughout the implementation, there will be an overriding imperative to ensure that
forced job losses are minimised through various avoidance measures. These include the transfer of workers
to vacant positions at the 16 and 20 growth shafts, reskilling, voluntary separation, business improvement
initiatives and exploring commercial options to exit shafts that do not fit the long-term portfolio.
In addition to the structural changes, Impala Rustenburg will continue to look at ways to improve safety,
productivity and cost efficiency. Any material changes in the operating and business performance, or the
pricing environment, will be considered as management seeks alternatives to further optimise the business.
The phased approach to the implementation of the Impala Rustenburg restructuring plan will allow for
further options to be explored and afford each shaft the opportunity to improve profitability, while
allowing time to consult with government, unions and other stakeholders before any final decision is
made to close or exit an unprofitable shaft.
Safety and sustainability
The safety and health of employees remains a priority and it is with deep sadness and regret that the Group
reported seven work-related fatalities during the year – six of the fatalities occurred at Impala Rustenburg
and one at Marula. The Implats Board and management team extend their sincere condolences to families and
friends. The Group will continue to provide support to the dependants of the deceased.
Over the year, safety measures were tested, enhanced and altered, where necessary. Safety communication to
employees has been improved and the emphasis remains on ensuring effective leadership, responsible behaviour,
and driving a culture of personal accountability and interdependence. Ongoing collaboration with key
stakeholders and a shared vision of zero harm will continue to drive further improvements through awareness,
education, and the implementation of appropriate systems and best practice.
This renewed level of focus on safety resulted in a better performance during the second half of the year
and the Group operated for seven months without a fatal accident, which is an Implats record. Regrettably,
a fatal accident occurred at the Impala Rustenburg 16 Shaft in September 2018, which remains the subject
of an investigation.
The continued effort and focus on improving safety conditions has resulted in a 6.3% improvement in the
Group lost-time injury frequency rate (LTIFR) and 9.2% improvement in the Group total injury frequency
rate (TIFR). At year end, 11 of the 17 operations had achieved 'millionaire' fatality-free shifts status.
The operating philosophy at Implats is underpinned by a value system centred on long-term sustainability.
Interventions to reduce the impact of TB and HIV/Aids on our employees have had positive results, with a
43% reduction in new pulmonary TB cases recorded over the past five years and a 51% decline in Aids-related
deaths since 2014. No major environmental incidents were recorded during the past year and minor incidents
reduced by 13% from 35 to 31 incidents. Water recycling exceeded Group targets and ended the year on a
record high of 45% of total consumption.
Host communities remain vital stakeholders and social investment expenditure has escalated by nearly
30% year on year at the South African operations, despite the challenging financial conditions. Implats'
focus remains on housing, education, health and training. The Group is cognisant of the economic
challenges faced in most of the platinum producing areas and recognise the importance of a continued
contribution during these times.
The Implats Board and management team are also aware that shareholders, who own and have invested in the
Company, have received scant reward over the past five years. Decisive action has been taken in this
financial year to reposition the organisation, return it to profitability in a low-price environment
and better reward all stakeholders.
Operational review
The Group achieved encouraging operational improvements over the year. Platinum ounces in concentrate
were 1% higher at 1.57 million platinum ounces (FY2017: 1.56 million). This was mainly due to improved
operational performances from Impala, Marula, Mimosa and IRS, while Zimplats and Two Rivers reported
lower contributions.
Refined platinum production was impacted by a temporary stock build up of some 77 000 platinum ounces
at Impala Rustenburg, which remains available for sale in the next financial year. This inventory was
built up following furnace maintenance undertaken during the first half of the financial year and an
electrical failure at No. 5 furnace in February 2018.
Costs were well contained and, on a stock-adjusted basis, were largely unchanged at R22 931 per
platinum ounce. The Group spent R4.6 billion (FY2017: R3.4 billion) on capital projects during
the year, which is 34% higher than last year. This was largely due to higher spend on 16 and
20 Shafts and Zimplats' Mupani mine.
Impala Refining Services (IRS) maintained its significant cash generation to the Group, delivering
more than R1 billion.
Impala Rustenburg
Operational performance was negatively impacted in the first half of the year by mine stoppages following
five fatal incidents during September and October 2017. Mill throughput increased by 8% to 10.95 million
tonnes (FY2017: 10.12 million) from the previous year largely due to the 14 Shaft recovery after the
2016 fire (+725 000 tonnes), the 16 Shaft ramp-up (+455 000 tonnes) and performance improvements at
1, 11 and 12 Shafts (+200 000 tonnes). This was offset to some extent by lower volumes from 9 and 10
Shafts and the closure of 4, 7 and 7A Shafts (-670 000 tonnes).
The PGE milled head grade improved marginally due to an increase in the stoping to development ratio,
offset to some extent by the ore pass rehabilitation at 16 Shaft that resulted in some waste dilution.
The higher tonnage and grade resulted in a 3% improvement in platinum in concentrate production to
669 000 ounces (FY2017: 651 000).
A major furnace rebuild was undertaken on one of the three operating furnaces at the smelting complex
in the first half of the year. In February 2018, an electrical failure triggered a fire at the No. 5
furnace transformers. Owing to these events, a stock build-up of approximately 77 000 platinum ounces
occurred at the smelter, and refined platinum production for the year decreased by 11% to 581 000 ounces
(FY2017: 654 600).
Cash costs increased by 2.4% to R15.8 billion (FY2017: R15.4 billion). However, the build-up of in-process
stock and consequent lower refined metal output resulted in refined unit costs increasing by 15% to
R27 183 per platinum ounce (FY2017: R23 543). On a stock-adjusted basis, unit costs increased by only
1% to R24 005 per platinum ounce (FY2017: R23 856) on the back of higher production and a strong focus
on cost management.
Capital expenditure increased by 12% to R2.77 billion (FY2017: R2.47 billion) mainly due to increased
spend at 16 and 20 Shafts, as well as refurbishment and repair work at the No. 5 furnace. The cash
outflow of R4 billion, before financing and working capital movements, was 19% higher than the previous
year and included employee separation costs of R525 million, finance charges that were higher by
R159 million and increased capital spend of R295 million. Impala made a gross loss of R2.79 billion
in FY2018, a 4% improvement from the R2.91 billion loss for FY2017.
The 16 and 20 Shaft projects are critical to returning Impala Rustenburg to profitability. Both projects
were assessed as part of the strategic review process. As a result, some duplicate shaft ore pass systems
at 16 Shaft, as well as the upper 2 levels at 20 Shaft, were removed from the respective projects, without
materially impacting the build-up of these shafts to full production. The capital cost profile for 20 Shaft
has been optimised and will reduce by R445 million.
In assessing production readiness, the rehabilitation of the C-pass and construction of the lower section
of D-pass at 16 Shaft still need to be completed to achieve full production. Some construction work at
20 Shaft remains outstanding and the project is now approaching completion in terms of the redefined
project scope. Production at 16 Shaft has ramped up significantly during the year as increased face
becomes available. Although the initial ramp-up was limited to the Merensky Reef, development access
to the UG2 has now made concurrent mining on most horizons possible. As previously reported, the
20 Shaft ramp-up is still being hampered by challenging geological conditions, which impacts face
availability. The mining plan is limited to the Merensky horizon and opening sufficient pit room to
provide mining flexibility is taking longer than anticipated. This has resulted in an increased focus
on development at the shaft. The future profitability and strategic optionality of the shaft will be
further evaluated and optimised in FY2019.
IRS
Impala Refining Services (IRS) continues to deliver a significant financial contribution to the Group.
During the year, IRS received a total of 889 000 platinum ounces in concentrate (FY2017: 890 000) from
Implats Group operations and third-party sources. Treatment and final production were constrained due
to the Impala Rustenburg smelter maintenance programme and transformer fire during the year. However,
refined platinum output was maintained at similar levels to the previous year at 887 000 ounces
(FY2017: 875 000). Cash flow of R1.23 billion (FY2017: R1.18 billion) was higher but was impacted
by an increased taxation charge and lower finance income received. Gross profit at IRS improved by
2% to R1.55 billion (FY2017: R1.52 billion) benefiting from a once-off toll contract – 140 000 ounces
of platinum (FY2017: 14 500) was returned to third-party customers during the year under review.
Post the end of the reporting period, and following Impala's acquisition of the metal purchase and toll
refining operations of IRS, it became a fully integrated division of Impala, which already processes all
the material acquired by IRS and conducts most of its regulatory and administrative duties. This secures
IRS's business tenure through the precious metals refining licence held by Impala and simplifies the
corporate structure and ongoing toll refining business model, with no adverse tax consequences for
either IRS or Impala. IRS, as a division of Impala, is likely to benefit from the net value-added
tax and income tax position of Impala.
Marula
The year under review saw a significant decline in community protests and disruptions. Continued
engagement processes by the Marula team, and an intervention with the assistance of the Department
of Mineral Resources to resolve the community chrome dispute, have been successful in mitigating
protest action. Discussions with the various stakeholders are ongoing to secure a sustainable
long-term resolution.
Consequently, Marula delivered an excellent operational performance. Tonnes milled increased by
a significant 23% to 1.84 million tonnes, while PGE head grade improved marginally to 4.33g/t.
Platinum production in concentrate rose 25% to 85 000 ounces (FY2017: 68 000), the highest annual
production level achieved to date at this operation. The higher volumes, together with well
contained costs, resulted in a 15% improvement in unit costs to R24 877 per platinum ounce
(FY2017: R29 278). On the back of this strong performance, and further supported by a higher
PGM price basket due to improved palladium and rhodium prices, Marula realised a substantial
turnaround in cash flow before financing and working capital movements, delivering a R77 million
cash contribution, reversing the outflow of R839 million in the previous year. Marula reported a
R47 million gross profit in FY2018, significantly up from a gross loss of R586 million in the
previous year.
Zimplats
Zimplats sustained its excellent safety and production performance. Tonnes milled and PGE head
grade were maintained at 6.6 million tonnes (FY2017: 6.7 million) and 3.48g/t (FY2017: 3.49g/t).
Platinum production was down 4% to 271 000 platinum ounces in matte (FY2017: 281 000), impacted
by a small lock-up in the smelter. Costs were well contained, increasing only 5% to US$1 313 per
platinum ounce in matte (FY2017: US$1 249), affected by lower volumes, an increase in labour costs
and the impact of a stronger rand on goods and services procured from South Africa.
The re-establishment of Bimha Mine was completed and the operation returned to full production
in April 2018. The Mupani decline development remains ahead of schedule and is targeting ore contact
by April 2019. Capital expenditure rose significantly to US$135 million (FY2017: US$63 million) as
the Bimha and Mupani developments advanced. Cash flows were lower due to the higher capital
expenditure, but the operating entity remains cash generative. Gross profit improved on the back
of higher US dollar metal prices and increased from R1.29 billion (US$95 million) in the previous
year to R2.05 billion (US$160 million) in FY2018. Zimplats declared a dividend of US$65 million
(R820 million), post the financial year-end.
In June 2018, Zimplats agreed to release to the government of Zimbabwe land measuring 23 903 hectares
within Zimplats' mining lease area. Following this release of ground, Zimplats now holds two separate
and non-contiguous pieces of land measuring in aggregate 24 632 hectares. As part of this agreement,
Zimplats' SML was converted into two new mining leases with effect from 31 May 2018, which are valid
for the life of mine of Zimplats' mining operations. As a result, Zimplats' corporate tax rate changes
from 15.45% to 25.75%. However, additional profits tax associated with the SML is no longer applicable.
This secures the operating subsidiary's mining tenure, positioning it to sustain and grow future
financial returns.
Mimosa
Mimosa remains a steady performer and once again delivered a strong operating result.
Tonnes milled were 3% higher at 2.80 million (FY2017: 2.73 million), while PGE head grade was
maintained at 3.84g/t (FY2017: 3.83g/t). Record production was achieved, and platinum production
increased by 3% to 125 000 ounces in concentrate (FY2017: 122 000). Costs were flat at US$1 521 per
platinum ounce in concentrate (FY2017: US$1 511). Capital expenditure increased significantly to
US$44 million (FY2017: US$33 million) largely due to increased capital development and the extension
of the conveyor belt system. Cash flows before financing and working capital were maintained at
US$28 million. Gross profit of R751 million (US$60 million) (FY2017: R183 million) (US$14 million)
was underpinned by the increase in US dollar metal prices.
The envisaged export levy on unbeneficiated platinum has been lowered to 5% for exported concentrates
and deferred by the government of Zimbabwe to 1 January 2019. Two expansion studies are being progressed
as a potential alternative to the development of a smelter and Mimosa continues to consult with the
government to secure a mutually beneficial outcome.
Two Rivers
The planned mining of low-grade split-reef areas and consequential lower recoveries impacted Two Rivers'
operational performance during the year. Tonnes milled were maintained at similar levels to the previous
year at 3.46 million tonnes (FY2017: 3.50 million), given that 59 000 tonnes were toll-treated at a
neighbouring mine during the previous financial year. The PGE head grade reflected split-reef mining
and decreased by 7% to 3.63g/t (FY2017: 3.90g/t). As a result, platinum in concentrate declined by
11% from the previous year to 163 000 ounces (FY2017: 182 000). The lower production impacted operating
costs, which rose by 12% to R14 517 per platinum ounce (FY2017: R12 925).
The deepening of the main decline led to capital expenditure being 55% higher at R454 million
(FY2017: R293 million). This, together with the lower volumes, affected cash flows, which were
6% lower at R529 million. The lower volumes also affected gross profit, which was 9% lower at
R989 million (FY2017: R1 081 million).
Waterberg
Waterberg represents a large scale PGM resource with an attractive risk profile, given its shallow
nature and high palladium content. This facilitates fully mechanised production with the potential
for the project to have among the lowest operating costs in the PGM sector. The definitive feasibility
study (DFS) is progressing satisfactorily and is expected to be completed towards the end of this
financial year. Implats will have 90 business days following approval of the DFS to determine whether
it wishes to exercise its option to acquire control of the project, and a further 90 business days
to confirm acceptable financing arrangements.
Financial review
Revenue for the year declined by 3% to R35.9 billion (FY2017: R36.8 billion), despite higher rand
basket prices, impacted by lower sales volumes. The lower sales volumes resulted in a negative variance
of R3.4 billion as approximately 77 000 additional platinum ounces were built up in process stock in
the year. Overall, dollar metal prices were 12% higher year on year resulting in a positive variance
of R4.7 billion, but was partially offset by a negative variance of R2.3 billion arising on a 6%
stronger rand.
Cost of sales were well contained and reduced by 8% to R34.3 billion as costs were deferred due to
the stock build-up. Gross profit improved by R2.1 billion to R1.6 billion (FY2017: loss of R529 million).
Group unit costs on a stock-adjusted basis were well managed, increasing marginally from R22 838 to
R22 931 per platinum ounce as approximately R1.0 billion was realised from various cost saving
initiatives at Impala.
Despite the increase in gross profit, earnings for the year were adversely impacted by impairments
of R13.6 billion, of which R13 billion relates to the impairments of assets at Impala Rustenburg
following the outcome of the strategic review and R611 million relates to the Afplats assets.
Earnings were further impacted by a once-off, non-cash, deferred taxation charge of R1.2 billion
arising from a change in the Zimplats tax rate from 15.45% to 25.75% (following the conclusion of
the conversion of the SML into new mining leases), separation costs of R525 million, increased net
finance costs as a result of higher costs on the 2022 convertible bonds, as well as a reduction in
the cash balances at Group level. Consequently, the loss after tax increased by 33% to a loss of
R10.8 billion from a loss of R8.1 billion in the previous year.
Free cash outflow for the year was R4.2 billion, as an additional R3.2 billion was locked up in
working capital, largely due to the inventory build-up, while capital expenditure increased by
R1.2 billion. Capital expenditure at Impala increased by R295 million, while at Zimplats it
increased by R875 million, which was mainly spent on the development of Mupani and Bimha.
Impala Rustenburg used R6.6 billion of cash after funding the additional inventory build-up
of R3.1 billion, separation costs and R2.8 billion of capital expenditure, of which R1.4 billion
was in respect of 16 and 20 Shafts.
At year-end, the Group had adequate headroom of R6.2 billion comprising gross cash on hand of
R3.7 billion (FY2017: R7.8 billion) and R2.5 billion in unutilised bank debt facilities.
The R4 billion revolving credit facilities and the convertible bonds mature in 2021 and 2022,
respectively. The Group remains well within all its debt covenants.
Market review
Since the global financial crisis, the platinum market has been fundamentally over-supplied for
the most part, with only the period of the industry-wide strike of 2014 and subsequent recovery
being the exception. The Volkswagen scandal that broke in September 2015 has accelerated the
erosion of diesel passenger car demand in Western Europe and there has been rapid contraction
of the Chinese jewellery market since 2015, leaving demand off its peak and still falling.
Combined with steady increases in recycling, these developments have driven the platinum price
down over the past three years. There is market consensus for softer platinum demand for at
least the next three years.
Lower prices have triggered shaft and mine closures across South Africa's Bushveld region, removing
almost 1.5 million ounces of annual capacity to date. It is widely acknowledged that at least
one million ounces of platinum have been produced at a loss in South Africa every year since 2012.
Producers have been adapting to a sustained low-price environment through significant restructuring
and streamlining of portfolios to the lowest-cost, most efficient assets. Implats' peers have shed
high-cost assets, diversified regionally and sought to become more vertically integrated. Similarly,
this necessitated Implats taking the bold action to address inefficiencies and limit cash burn and a
rising cost base at Impala Rustenburg, all aimed at reinstating profitability to secure longevity
in this increasingly competitive industry.
The fundamentals for both palladium and rhodium remain strong, premised on forecast growth of the
global automotive sector, coupled with tighter emissionss with palladium, forecasts for the rhodium
market are for strengthening fundamentals. In what is currently a close-to-balanced market, forecasts
now see this moving into relatively deep deficits sooner than previously anticipated.
Implats' rand basket PGM pricing forecast has consequently been revised further downwards. The
pdated price forecasts are, however, conservative when benchmarked against the latest consensus
data, with real prices in the updated forecast appreciating at a compound annual growth rate of
2.5% over a six-year forecast period.
Mineral Resources and Mineral Reserves
There have been material changes in the attributable Group Mineral Resource estimate, which reduced
by 57.8 million platinum ounces. The change is dominated by the release of land at Zimplats. The
strategic decision to exit certain prospecting rights at Imbasa and Inkosi and the Impala/Royal
Bafokeng Resources Platinum (Pty) Ltd Unincorporated Joint Venture also contributed notably to
the reduction. The estimate as at 30 June 2018 is dominated by Zimplats and Impala Rustenburg,
which together contribute some 74% of the total attributable Group Mineral Resources.
Overall the attributable Group Mineral Reserve estimate did not change significantly and decreased
by 1.2 million platinum ounces to 21.2 million platinum ounces. The resultant estimate as at
30 June 2018 is based on a material reduction at Impala Rustenburg following the detailed strategic
review, and a material increase at Zimplats due to the conversion of some Upper Ores (>11-degree slope)
to Mineral Reserves. Furthermore, the addition of the RE portion of Kalkfontein at Two Rivers had a
positive impact on the combined Group Mineral Reserves. Some 47% of the attributable Group Mineral
Reserves (platinum) is located at Zimplats and a further 36% at Impala.
Prospects and outlook
The South African PGM industry continues to face unprecedented challenges and uncertainties.
Consensus forecasts remain for softer platinum demand for at least the next three years, with
the introduction of stricter heavy-duty diesel emission regulations and a recovering global
economy presenting upside for platinum, but only over the longer term. The immediate fundamentals
for both palladium and rhodium remain strong, largely due to expected growth in the global
internal combustion engine automotive market and tighter emissions regulations.
Sustained lower metal prices and a weak rand have had a significant impact on the PGM industry.
It is imperative that Implats becomes a viable concern at current PGM prices and it has, therefore,
been bold in its actions to create and share value sustainably with all stakeholders in a lower
platinum pricing environment.
Implats' focus in the short to medium term is to continue its strategic journey to transform into
a PGM producer mining mechanised, low-cost orebodies with more appropriate metal mixes. This includes
the determined and necessary repositioning of Impala Rustenburg to ensure the operation can contribute
to the long-term success of the Group and its local communities. Prudent management of Implats'
financial and cash resources during the two-year restructuring process remains a key priority. The
implementation of the strategic review will not only strengthen Impala Rustenburg's position in the
prevailing price environment but will also significantly improve the strategic position of the Implats
Group to sustainably deliver improved returns to all stakeholders in the medium to long term.
Both South Africa and Zimbabwe have seen positive changes in political leadership, which have resulted
in meaningful dialogue with the regulators. Signals of greater policy consistency have provided confidence
in decision making, and opportunities for capital growth and expenditure plans.
In South Africa, the most recent revision of the Mining Charter has been released for public comment.
In our view, the principles outlined in the charter are, in the main, conducive to the growth and
development of the minerals industry and we will continue to engage constructively to contribute
towards a satisfactory outcome of the process.
Longer-term, the minority interest we acquired in the Waterberg project, with the option to acquire
majority ownership, provides additional geographic and commodity diversity for the Group – away from
deep, labour-intensive conventional operations.
For the next financial year, platinum production estimates are as follows:
- Group refined platinum production – between 1.50 and 1.60 million ounces
- Impala – between 650 000 and 690 000 ounces
- Zimplats – between 270 000 and 280 000 ounces
- Two Rivers – between 160 000 and 170 000 ounces
- Mimosa – between 115 000 and 125 000 ounces
- Marula – between 85 000 and 95 000 ounces
- IRS third-party toll refining – between 170 000 and 180 000 ounces
The Group's operating cost, excluding the cost of retrenchment, is expected to be between R23 900
and R24 800 per platinum ounce. Capital expenditure is planned at between R4.1 billion and R4.3 billion.
Our approach to maintaining a social licence to operate will remain underpinned by the Group's belief
that sustainable businesses operate in a harmonious, supportive and beneficial manner for all key
stakeholders. Implats will continue to deliver effectively on the social and labour plan commitments
in South Africa and the targeted corporate social investments in Zimbabwe.
The financial information on which this outlook is based has not been reviewed and reported on by
Implats' external auditors.
Directorate and management
During the year under review, independent non-executive director Mr Hugh Cameron passed away after a
short illness. Mr Cameron served as a non-executive director and chairman of the audit committee.
Dr Nkosana Moyo and Ms Albertinah Kekana, both non-executive directors, and Ms Brenda Berlin,
executive director and chief financial officer, all resigned from the Board during the year
under review. The Board extends its sincere appreciation for their dedicated contribution.
Several new appointments were made during the year and in the period immediately after year-end:
Mr Udo Lucht was appointed as a non-executive director, Ms Lee-Ann Samuel joined Implats as an
executive director responsible for human resources, Ms Dawn Earp was appointed as an independent
non-executive director and chairman of the audit committee, Mr Preston Speckmann was appointed as
an independent non-executive director and member of the audit committee, and Ms Meroonisha Kerber
joined Implats as chief financial officer and executive director.
Approval of the financial statements
The summarised financial statements is extracted from the audited information, but is not itself
audited. The directors of the Company take full responsibility for the preparation of the summarised
financial statements for the period ended 30 June 2018 and that the financial information has been
correctly extracted from the underlying consolidated financial statements.
The directors of the Company are responsible for the maintenance of adequate accounting records and
the preparation of the consolidated financial statements and related information in a manner that
fairly presents the state of the affairs of the Company. These consolidated financial statements
are prepared in accordance with International Financial Reporting Standards and incorporate full
and responsible disclosure in line with the accounting policies of the Group which are supported
by prudent judgements and estimates.
The consolidated financial statements have been prepared under the supervision of the acting
chief financial officer Mr B Jager, CA(SA).
The directors are also responsible for the maintenance of effective systems of internal control
which are based on established organisational structure and procedures. These systems are designed
to provide reasonable assurance as to the reliability of the consolidated financial statements, and
to prevent and detect material misstatement and loss.
The consolidated financial statements have been prepared on a going-concern basis as the directors
believe that the Company and the Group will continue to be in operation in the foreseeable future.
The consolidated financial statements have been approved by the board of directors and are signed
on their behalf by:
MSV Gantsh NJ Muller
Chairman Chief executive officer
Johannesburg
13 September 2018
Consolidated statement of financial position
for the year ended 30 June 2018
2018 2017
Notes Rm Rm
Assets
Non-current assets
Property, plant and equipment 6 36 045 47 798
Exploration and evaluation assets - 385
Investment property 90 89
Investment in equity-accounted entities 7 4 317 3 316
Deferred tax 4 757 389
Available-for-sale financial assets 198 179
Other financial assets 175 148
45 582 52 304
Current assets
Inventories 8 11 745 8 307
Trade and other receivables 4 409 3 736
Other financial assets 3 2
Prepayments 724 1 293
Cash and cash equivalents 3 705 7 839
20 586 21 177
Total assets 66 168 73 481
Equity and liabilities
Equity
Share capital 20 491 20 000
Retained earnings 12 302 22 982
Foreign currency translation reserve 4 324 3 746
Other components of equity 96 79
Equity attributable to owners of the Company 37 213 46 807
Non-controlling interest 2 380 2 425
Total equity 39 593 49 232
Liabilities
Non-current liabilities
Provision for environmental rehabilitation 1 225 1 099
Deferred tax 5 485 4 390
Borrowings 9 7 925 8 373
Derivative financial instruments 10 50 1 233
Sundry liabilities 285 356
14 970 15 451
Current liabilities
Trade and other payables 8 086 6 902
Current tax payable 992 702
Borrowings 9 2 427 1 088
Sundry liabilities 100 106
11 605 8 798
Total liabilities 26 575 24 249
Total equity and liabilities 66 168 73 481
The notes below are an integral part of these summarised financial statements.
Consolidated statement of profit or loss and other comprehensive income
for the year ended 30 June 2018
2018 2017
Notes Rm Rm
Revenue 35 854 36 841
Cost of sales 11 (34 277) (37 370)
Gross profit/(loss) 1 577 (529)
Other operating income 180 1 191
Other operating expenses (944) (325)
Impairment 12 (13 629) (10 229)
Royalty expense (350) (561)
Loss from operations (13 166) (10 453)
Finance income 350 411
Finance cost (1 051) (811)
Net foreign exchange
transaction (losses)/gains (662) 154
Other income 1 404 398
Other expenses (300) (883)
Share of profit of
equity-accounted entities 383 496
Loss before tax (13 042) (10 688)
Income tax credit 2 249 2 590
Loss for the year (10 793) (8 098)
Other comprehensive income/(loss),
comprising items that may subsequently
be reclassified to profit or loss:
Available-for-sale financial assets 19 14
Deferred tax thereon (3) (3)
Share of other comprehensive income/(loss)
of equity-accounted entities 108 (219)
Deferred tax thereon (11) 22
Exchange differences on translating
foreign operations 650 (1 555)
Deferred tax thereon (84) 203
Other comprehensive income/(loss),
comprising items that will not be
subsequently reclassified
to profit or loss:
Actuarial (loss)/gain on
post-employment medical benefit (1) 2
Deferred tax thereon - -
Total comprehensive loss (10 115) (9 634)
(Loss)/profit attributable to:
Owners of the Company (10 679) (8 220)
Non-controlling interest (114) 122
(10 793) (8 098)
Total comprehensive loss
attributable to:
Owners of the Company (10 070) (9 554)
Non-controlling interest (45) (80)
(10 115) (9 634)
Loss per share (cents per share)
Basic (1 486) (1 145)
Diluted (1 486) (1 145)
The notes below are an integral part of these summarised financial statements.
Consolidated statement of changes in equity
for the year ended 30 June 2018
Share-
based Total
Ordinary Share payment share Retained
shares premium reserve capital earnings
Rm Rm Rm Rm Rm
Balance at 30 June 2017 18 17 614 2 368 20 000 22 982
Bond conversion option (note16.6) - 450 - 450 -
Shares purchased - Long-Term
Incentive Plan (note 13) - (78) - (78) -
Share-based compensation expense - - 119 119 -
Total comprehensive (loss)/income - - - - (10 680)
Loss for the year - - - - (10 679)
Other comprehensive income/(loss) - - - - (1)
Dividends - - - - -
Balance at 30 June 2018 18 17 986 2 487 20 491 12 302
Balance at 30 June 2016 18 17 252 2 277 19 547 31 200
Shares issued (note 13)
- Employee Share Ownership Programme - 479 - 479 -
Conversion option settlement (note16.4) - (79) - (79) -
Shares purchased - Long-Term
Incentive Plan (note 13) - (38) - (38) -
Share-based compensation expense - - 91 91 -
Total comprehensive income/(loss) - - - - (8 218)
(Loss)/profit for the year - - - - (8 220)
Other comprehensive income/(loss) - - - - 2
Transaction with non-controlling interest - - - - -
Dividends - - - - -
Balance at 30 June 2017 18 17 614 2 368 20 000 22 982
The table above excludes the treasury shares.
The notes below are an integral part of these summarised financial statements.
Consolidated statement of changes in equity
for the year ended 30 June 2018 (continued)
Foreign Attributable to:
currency Other Owners Non-
translation components of the controlling Total
reserve of equity Company interest equity
Rm Rm Rm Rm Rm
Balance at 30 June 2017 3 745 80 46 807 2 425 49 232
Bond conversion option (note16.6) - - 450 - 450
Shares purchased - Long-Term
Incentive Plan (note 13) - - (78) - (78)
Share-based compensation expense - - 119 - 119
Total comprehensive (loss)/income 579 16 (10 085) (30) (10 115)
Loss for the year - - (10 679) (114) (10 793)
Other comprehensive income/(loss) 579 16 594 84 678
Dividends - - - (15) (15)
Balance at 30 June 2018 4 324 96 37 213 2 380 39 593
Balance at 30 June 2016 5 092 69 55 908 2 548 58 456
Shares issued (note 13)
- Employee Share Ownership Programme - - 479 - 479
Conversion option settlement (note16.4) - - (79) - (79)
Shares purchased - Long-Term
Incentive Plan (note 13) - - (38) - (38)
Share-based compensation expense - - 91 - 91
Total comprehensive income/(loss) (1 347) 11 (9 554) (80) (9 634)
(Loss)/profit for the year - - (8 220) 122 (8 098)
Other comprehensive income/(loss) (1 347) 11 (1 334) (202) (1 536)
Transaction with non-controlling interest - - - 11 11
Dividends - - - (54) (54)
Balance at 30 June 2017 3 745 80 46 807 2 425 49 232
The table above excludes the treasury shares.
The notes below are an integral part of these summarised financial statements.
Consolidated statement of cash flows
for the year ended 30 June 201
2018 2017
Notes Rm Rm
Cash flows from operating activities
Cash generated from operations 13 2 364 3 049
Exploration costs (4) (8)
Finance cost (1 025) (716)
Income tax paid (1 336) (1 312)
Net cash (used in)/from
operating activities (1) 1 013
Cash flows from investing activities
Purchase of property, plant and equipment (4 667) (3 432)
Proceeds from sale of
property, plant and equipment 26 49
Purchase of investment property (1) -
Acquisition of interest in associate - Waterberg 7 (425) -
Purchase of available-for-sale financial assets - (7)
Interest received from held-to-maturity
financial assets 3 7
Loans granted - (1)
Loan repayments received - 15
Finance income 182 426
Dividends received from
equity-accounted investments 253 279
Net cash used in investing activities (4 629) (2 664)
Cash flows from financing activities
Issue of ordinary shares,
net of transaction cost - 479
Shares purchased - Long-Term Incentive Plan (78) (38)
Repayments of borrowings (999) (4 593)
Cash from CCIRS - 728
Proceeds from borrowings net of transaction costs 1 500 6 278
Dividends paid to non-controlling interest (15) (54)
Net cash from financing activities 408 2 800
Net (decrease)/increase in
cash and cash equivalents (4 222) 1 149
Cash and cash equivalents at
the beginning of the year 7 839 6 788
Effect of exchange rate changes on cash an
d cash equivalents held in foreign currencies 88 (98)
Cash and cash equivalents at the end of the year 3 705 7 839
The notes below are an integral part of these summarised financial statements
Notes to the consolidated financial information
for the year ended 30 June 2018
1. General information
Impala Platinum Holdings Limited (Implats, Group or Company) is one of the world's foremost producer of platinum and
associated Platinum Group Metals (PGMs). Implats is currently structured around five main operations with a total of
20 underground shafts. The operations are located within the Bushveld Complex in South Africa and the Great Dyke in
Zimbabwe, the two most significant PGM-bearing ore bodies in the world.
The Company has its listing on the securities exchange operated by JSE Limited in South Africa, the Frankfurt Stock
Exchange (2022 US$ convertible bonds) and a level 1 American Depository Receipt programme in the United States of
America.
The summarised consolidated financial information was approved for issue on 13 September 2018 by the board of
directors.
2. Audit opinion
This summarised report is extracted from audited information, but is not itself audited. The annual financial
statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited
annual financial statements and the auditor's report thereon are available for inspection at the Company's registered
office and on the Company's website.
The directors take full responsibility for the preparation of the summarised consolidated financial statements and
that the financial information has been correctly extracted from the underlying annual financial statements.
3. Basis of preparation
The summarised consolidated financial statements for the year ended 30 June 2018 have been prepared in accordance with
the JSE Limited Listings Requirements (Listings Requirements) and the requirements of the Companies Act, Act 71 of 2008
applicable to summarised financial statements. The Listings Requirements require financial statements to be prepared in
accordance with the framework concepts and the measurement and recognition requirements of International Financial
Reporting Standards (IFRS), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and
Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, and contain the information
required by IAS 34 Interim Financial Reporting.
The summarised consolidated financial information should be read in conjunction with the consolidated financial
statements for the year ended 30 June 2018, which have been prepared in accordance with IFRS.
The summarised consolidated financial information has been prepared under the historical cost convention except for
certain financial assets, financial liabilities and derivative financial instruments which are measured at fair value
and liabilities for cash-settled share-based payment arrangements which are measured using a binomial option model.
The summarised consolidated financial information is presented in South African rand, which is the Company's
functional currency.
4. Accounting policies
The principal accounting policies applied in the preparation of the consolidated financial statements, from which the
summarised consolidated financial statements were derived, are in terms of IFRS and are consistent with those of the
previous annual financial statements. The following new standards and amendments to standards have become effective
or have been early adopted by the Group as from 1 July 2017 without any significant impact:
- IAS 19 - Employee benefits
- Improvements to IFRS Standards 2015-2017 Cycle
- IAS 28 - Investments in Associates and Joint Ventures
5. Segment information
The Group distinguishes its segments between the different mining operations, refining services, chrome processing and
an 'all other segment'.
Management has determined the operating segments based on the business activities and management structure within the
Group.
Capital expenditure comprises additions to property, plant and equipment (note 6).
The reportable segments' measure of profit or loss is profit after tax. This is reconciled to the entities consolidated
profit after tax.
Impala mining segment's two largest sales customers amounted to 11% and 8% of total sales (June 2017: 12% and 10%).
2018 2017
Profit/(loss) Profit/(loss)
Revenue after tax Revenue after tax
Rm Rm Rm Rm
Mining
- Impala 13 255 (12 332) 14 604 (9 860)
- Zimplats 7 485 40 7 038 576
- Marula 2 357 (30) 1 616 (732)
Impala Refining Services 22 044 1 210 21 711 1 292
Impala Chrome 226 47 432 127
All other segments - (117) - 29
Inter-segment revenue (9 513) - (8 560) -
Total segmental revenue/loss after tax 35 854 (11 182) 36 841 (8 568)
Reconciliation:
Share of profit of equity-accounted entities 383 496
Unrealised profit in stock consolidation adjustment (211) (51)
IRS pre-production realised on Group 217 42
Net realisable value adjustment made on consolidation - (17)
Total consolidated loss after tax (10 793) (8 098)
5. Segment information
2018 2017
Capital Total Capital
expenditure assets expenditure Total assets
Rm Rm Rm Rm
Mining
- Impala 2 766 29 936 2 472 35 696
- Zimplats 1 739 20 612 864 18 353
- Marula 101 3 796 113 3 393
Impala Refining Services - 8 334 - 8 402
Impala Chrome - 150 1 161
All other segments - 34 778 (16) 32 257
Total 4 606 97 606 3 434 98 262
Inter-company accounts eliminated (34 869) (26 279)
Investments in equity-accounted entities 4 317 3 316
Unrealised profit in stock, NRV and other
adjustments to inventory (886) (736)
Impala segment bank overdraft taken to cash - (1 091)
Other - 9
Total consolidated assets 66 168 73 481
6. Property, plant and equipment
2018 2017
Rm Rm
Opening net book amount 47 798 49 722
Capital expenditure 4 606 3 434
Interest capitalised 61 -
Disposals (26) (22)
Depreciation (note 10) (3 838) (3 702)
Impairment (13 244) -
Rehabilitation adjustment (34) 16
Exchange adjustment on translation 722 (1 650)
Closing net book amount 36 045 47 798
Capital commitment
Commitments contracted for 1 703 1 636
Approved expenditure not yet contracted 8 071 5 364
9 774 7 000
Less than one year 4 017 4 338
Between one and five years 5 757 2 662
9 774 7 000
This expenditure will be funded internally and, if necessary, from borrowings.
7. Investment in equity-accounted investments
2018 2017
Rm Rm
Summary balances
Joint ventures
Mimosa 2 268 1 961
Associates
Two Rivers 1 528 1 260
Makgomo Chrome 78 70
Friedshelf 33 25
Waterberg 410 -
Total investment in equity-accounted entities 4 317 3 316
Summary movement
Beginning of the period 3 316 3 342
Acquisition of interest in associate - Waterberg 425 -
Share of profit 473 472
Gain - Two Rivers change of interest 248 -
Share of other comprehensive income/(loss) 108 (219)
Dividends received (253) (279)
End of the period 4 317 3 316
Share of equity-accounted entities is made up as follows:
Share of profit 473 472
Movement in unrealised profit in stock (90) 24
Total share of profit of equity-accounted entities 383 496
8. Inventories
2018 2017
Rm Rm
Mining metal
Refined metal 1 381 350
In-process metal 4 585 2 977
5 966 3 327
Non-mining metal
Refined metal 776 993
In-process metal 4 120 3 252
4 896 4 245
Stores and materials inventories 883 735
Total carrying amount 11 745 8 307
The write-down to net realisable value comprises R250 million (2017: R78 million) for refined mining metal and
R1 268 million (2017: R948 million) for in-process mining metal.
Included in refined metal is ruthenium on lease to third parties of 45 000 (2017: 36 000) ounces.
Changes in engineering estimates of metal contained in-process resulted in an increase of in-process metal of
R435 (2017: R376) million.
Non-mining metal consists of inventory held by Impala Refining Services. No inventories are encumbered.
9. Borrowings
2018 2017
Notes Rm Rm
Standard Bank Limited - BEE partners Marula 887 889
Standard Bank Limited - Zimplats term loan 1 167 1 111
Standard Bank Limited - Zimplats revolving credit facility - 314
Convertible bonds - ZAR (2018) 9.1 - 303
Convertible bonds - US$ (2018) 9.2 - 380
Convertible bonds - ZAR (2022) 9.3 2 631 2 516
Convertible bonds - US$ (2022) 9.4 2 858 2 609
Revolving credit facility 9.5 1 510 -
Finance leases 1 299 1 339
10 352 9 461
Current 2 427 1 088
Non-current 7 925 8 373
Beginning of the year 9 461 9 279
Proceeds 1 500 6 278
Interest accrued 928 664
Interest repayments (689) (533)
Capital repayments (999) (4 593)
Conversion option on 2022 Bonds - (1 156)
Loss on settlement of 2018 Bonds - 8
Exchange adjustment 151 (486)
End of the year 10 352 9 461
9.1 Convertible bonds - ZAR (2018)
The remaining balance of the ZAR denominated bonds was repaid on 21 February 2018. The effective interest rate
was 8.5% (2017: 8.5%).
9.2 Convertible bonds - US$ (2018)
The remaining balance of the US$ denominated bonds was repaid on 21 February 2018. The effective interest rate
was 3.1% (2017: 3.1%).
9.3 Convertible bonds - ZAR (2022) (note 10.3)
The ZAR denominated bonds have a par value of R3 250 million and carry a coupon of 6.375% (R207.2 million) per
annum. The coupon is payable semi-annually for a period of five years ending 7 June 2022. The bond holder has
the option to convert the bonds to Implats' shares at a price of R50.01. The value of this conversion option
derivative was R676 million on issue. At the general meeting held by shareholders, shareholders' approval to
settle this option by means of Implats' shares was obtained, which has resulted in the bond being accounted for
as a compound instrument and resulted in the derivative being transferred into equity. Implats has the option to
call the bonds at par plus accrued interest at any time if the aggregate value of the underlying shares per bond
for a specified period of time is 130% or more of the principal amount of that bond. The effective interest rate
of the bond is 12.8%.
9.4 Convertible bonds - US$ (2022) (note 10.2)
The US$ denominated bonds have a par value of US$250 million and carry a coupon of 3.25% (US$8.1 million) per
annum. The coupon is payable semi-annually for a period of five years ending 7 June 2022. The bond holder has the
option to convert the bonds to Implats' shares at a price of US$3.89. The value of this conversion option derivative
was R559 million at initial recognition. Implats has the option to call the bonds at par plus accrued interest at
any time if the aggregate value of the underlying shares per bond for a specified period of time is 130% or more of
the principal amount of that bond. The effective interest rate is 8.38%. (Refer note 10 for additional information
regarding the conversion option and the CCIRS entered into to hedge foreign exchange risk on this bond.)
9.5 Revolving credit facility
During the current year, Implats drew down R1 500 million on the Standard bank facility. The facility bears interest
at 10.2%. The facility expires end of 2021.
10. Derivative financial instrument
2018 2017
Liability Notes Rm Rm
Cross-Currency Interest Rate Swap (CCIRS) (2022) 10.1 - 49
Conversion option - US$ convertible bond (2022) 10.2 50 547
Conversion option - ZAR convertible bond (2022) 10.3 - 637
50 1 233
10. Cross-Currency Interest Rate Swap (CCIRS) (2022)
Implats entered into a CCIRS amounting to US$250 million to hedge the foreign exchange risk on the US$ convertible
bond, being: exchange rate risk on the dollar interest payments and the risk of a future cash settlement of the bonds
at a rand-dollar exchange rate weaker than R13.025/US$. US$250 million was swapped for R3 256 million on which Implats
pays a fixed interest rate to Standard Bank of 9.8%. Implats receives the 3.25% coupon on the US$250 million on the
same date which Implats pays-on externally to the bond holders and the interest thereon. In June 2022, Implats will
receive US$250 million for a payment of R3 256 million.
The CCIRS is carried at its fair value of R21 million asset (2017: R49 million liability). No hedge accounting has
been applied.
10. Conversion option - US$ convertible bond (2022) (note 9.4)
The US$ bond holders have the option to convert the bonds to Implats shares at a price of US$3.89. The conversion
option was valued at its fair value of R50 (June 2017: R547) million at year end, resulting in a R497 million profit
for the period in other income.
10. Conversion option - ZAR convertible bond (2022) (note 9.3)
The ZAR bond holders have the option to convert the bonds to Implats shares at a price of R50.01. The conversion option
was accounted for in equity, upon receipt of shareholders approval to settle this option by means of Implats shares, at
a fair value of R625 million, resulting in a R12 million profit for the period in other income.
11. Cost of sales
2018 2017
Rm Rm
On-mine operations 16 392 16 341
Processing operations 5 340 5 055
Refining and selling 1 522 1 378
Corporate costs 710 736
Share-based compensation 82 88
Chrome operation - cost of sales 146 186
Depreciation of operating assets 3 838 3 702
Metals purchased 9 651 10 030
Change in metal inventories (3 404) (146)
34 277 37 370
12. Impairment
2018 2017
Rm Rm
Impairment of non-financial assets was made up of the following:
Prepaid royalty - 10 149
Property, plant and equipment 13 244 -
Exploration and evaluation assets 385 -
Investment property - 80
13 629 10 229
Refer to commentary above as well as the annual financial statements notes 3 and 4 for more detail regarding
the impairments.
13. Cash generated from operations
2018 2017
Rm Rm
Profit/(loss) before tax (13 042) (10 688)
Adjustments for:
Depreciation 3 838 3 702
Finance cost 1 051 811
Impairment 13 629 10 229
Other (51) (283)
5 425 3 771
Cash movements from changes in working capital:
Inventory (4 247) (593)
Receivables/payables 1 186 (129)
Cash generated from operations 2 364 3 049
14. Headline earnings
2018 2017
Rm Rm
Headline earnings attributable to equity holders of the
Company arise from operations as follows:
Loss attributable to owners of the Company (10 679) (8 220)
Remeasurement adjustments:
Profit on disposal of property, plant and equipment - (24)
Impairment 13 629 10 229
Gain - Two Rivers change in interest (248) -
Insurance compensation relating to scrapping of property,
plant and equipment - (154)
Total non-controlling interest effects of adjustments (159) -
Total tax effects of adjustments (3 771) (2 814)
Headline loss (1 228) (983)
Weighted average number of ordinary shares in issue for
basic earnings per share (millions) 718.55 718.04
Weighted average number of ordinary shares for diluted
earnings per share (millions) 722.11 721.79
Headline loss per share (cents)
Basic (171) (137)
Diluted (171) (137)
15. Contingent liabilities and guarantees
As at the end of June 2018 the Group had contingent liabilities in respect of guarantees and other matters arising in
the ordinary course of business from which it is anticipated that no material liabilities will arise. The Group has
issued guarantees of R109 (2017: R118) million. Guarantees of R1 477 (2017: R1 396) million have been issued by third
parties and financial institutions on behalf of the Group consisting mainly of guarantees to the Department of Mineral
Resources for R1 355 (2017: R 1 277) million.
16. Related party transactions
The Group entered into PGM purchase transactions of R3 749 (June 2017: R3 745) million with Two Rivers Platinum, an
associate company, resulting in a payable of R1 145 (June 2017: R1 034) million at year end. It received refining fees
to the value of R33 (June 2017: R32) million.
The Group previously entered into sale and leaseback transactions with Friedshelf, an associate company. At the end of
the period, an amount of R1 192 (June 2017: R1 215) million was outstanding in terms of the lease liability. During the
period, interest of R125 (June 2017: R130) million was charged and a R148 (June 2017: R147) million repayment was made.
The finance leases have an effective interest rate of 10.2%.
The Group entered into PGM purchase transactions of R3 372 (June 2017: R3 199) million with Mimosa, a joint venture,
resulting in a payable of R965 (June 2017: R844) million at year end. It received refining fees to the value of R285
(June 2017: R317) million.
These transactions are entered into on an arm's-length basis at prevailing market rates.
Fixed and variable key management compensation was R67 (June 2017: R60) million.
17. Financial Instruments
2018 2017
Rm Rm
Financial assets - carrying amount
Loans and receivables 6 295 9 943
Financial instruments at fair value through profit and loss(2) 21 -
Held-to-maturity financial assets 73 70
Available-for-sale financial assets(1) 198 179
Total financial assets 6 587 10 192
Financial liabilities - carrying amount
Financial liabilities at amortised cost 16 967 14 832
Borrowings 10 352 9 461
Other financial liabilities 69 74
Trade payables 6 535 5 289
Other payables 11 8
Financial instruments at fair value through profit and loss(2) 50 1 233
Total financial liabilities 17 017 16 065
The carrying amount of financial assets and liabilities approximate their fair values.
1 Level 1 of the fair value hierarchy - Quoted prices in active markets for the same instrument.
2 Level 2 of the fair value hierarchy - Valuation techniques for which significant inputs are based on observable
market data.
Forward looking and cautionary statement
Certain statements contained in this disclosure, other than the statements of historical fact, contain
forward-looking statements regarding Implats' operations, economic performance or financial condition,
including, without limitation, those concerning the economic outlook for the platinum industry, expectations
regarding metal prices, production, cash costs and other operating results, growth prospects and the outlook
of Implats' operations, including the completion and commencement of commercial operations of certain of
Implats' exploration and production projects, its liquidity and capital resources and expenditure and the
outcome and consequences of any pending litigation, regulatory approvals and/or legislative frameworks
currently in the process of amendment, or any enforcement proceedings. Although Implats believes that the
expectations reflected in such forward-looking statements are reasonable, no assurance can be given that
such expectations will prove to be correct. Accordingly, results may differ materially from those set out
in the forward-looking statements as a result of, among other factors, changes in economic and market
conditions, success of business and operating initiatives, changes in the regulatory environment and
other government actions, fluctuations in metal prices, levels of global demand and exchange rates and
business and operational risk management. For a discussion on such factors, refer to the risk management
section of the company's Integrated Annual Report. Implats is not obliged to update publicly or release
any revisions to these forward-looking statements to reflect events or circumstances after the dates of
the Annual Report or to reflect the occurrence of unanticipated events.
Disclaimer: This entire disclosure and all subsequent written or oral forward-looking statements
attributable to Implats or any person acting on its behalf are qualified by caution. Recipients hereof
are advised this disclosure is prepared for general information purposes and not intended to constitute
a recommendation to buy- or offer to sell shares or securities in Implats or any other entity. Sections
of this disclosure are not defined and assured under IFRS, but included to assist in demonstrating
Implats' underlying financial performance. Implats recommend you address any doubts in this regard
with an authorised independent financial advisor, stockbroker, tax advisor, accountant or suitably
qualified professional.
Date and sponsor details
13 September 2018
Johannesburg
Sponsor to Implats
Deutsche Securities (SA) Proprietary Limited
Contact details and administration
Registered office
2 Fricker Road
Illovo, 2196
Private Bag X18
Northlands, 2116
Telephone: +27 (11) 731 9000
Telefax: +27 (11) 731 9254
Email: investor@implats.co.za
Registration number: 1957/001979/06
Share codes:
JSE: IMP
ADRs: IMPUY
ISIN: ZAE000083648
ISIN: ZAE000247458
Website: www.implats.co.za
Impala Platinum Limited and
Impala Refining Services
Head office
2 Fricker Road
Illovo, 2196
Private Bag X18
Northlands, 2116
Telephone: +27 (11) 731 9000
Telefax: +27 (11) 731 9254
Impala Platinum (Rustenburg)
PO Box 5683
Rustenburg, 0300
Telephone: +27 (14) 569 0000
Telefax: +27 (14) 569 6548
Marula Platinum
2 Fricker Road
Illovo, 2196
Private Bag X18
Northlands, 2116
Telephone: +27 (11) 731 9000
Telefax: +27 (11) 731 9254
Zimplats
1st Floor
South Block Borrowdale Office Park
Borrowdale Road
Harare, Zimbabwe
PO Box 6380
Harare
Zimbabwe
Telephone: +263 (242) 886 878/85/87
Fax: +262 (242) 886 876/7
Email: info@zimplats.com
Sponsor
Deutsche Securities (SA) (Pty) Ltd
Impala Platinum Japan Limited
Uchisaiwaicho Daibiru, room number 702
3-3 Uchisaiwaicho
1-Chome, Chiyoda-ku
Tokyo
Japan
Telephone: +81 (3) 3504 0712
Telefax: +81 (3) 3508 9199
Company Secretary
Tebogo Llale
Email: tebogo.llale@implats.co.za
United Kingdom secretaries
St James's Corporate Services Limited
Suite 31, Second Floor
107 Cheapside
London
EC2V 6DN
United Kingdom
Telephone: +44 (020) 7796 8644
Telefax: +44 (020) 7796 8645
Email: phil.dexter@corpserv.co.uk
Public Officer
Ben Jager
Email: ben.jager@implats.co.za
Transfer secretaries
South Africa
Computershare Investor Services (Pty) Ltd
Rosebank Towers
15 Biermann Avenue, Rosebank
PO Box 61051, Marshalltown, 2107
Telephone: +27 (11) 370 5000
Telefax: +27 (11) 688 5200
United Kingdom
Computershare Investor Services plc
The Pavilions
Bridgwater Road
Bristol
BS13 8AE
Auditors
PricewaterhouseCoopers Inc.
4 Lisbon Lane
Waterfall City
Jukskei View
Johannesburg
2090
Corporate relations
Johan Theron
Investor queries may be directed to:
Email: investor@implats.co.za
Impala Platinum Holdings Limited
Tel: +27 11 731-9000
Fax: +27 11 731-9254
investor@implats.co.za
2 Fricker Road, Illovo, 2196
Private Bag X18, Northlands, 2116
www.implats.co.za
Date: 13/09/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
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