Implats best bet in platinum race  
Charlotte Mathews

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IMPALA Platinum (Implats) is the platinum counter offering the best risk-reward trade-off in view of prospects for the metal, Coronation Fund Managers portfolio manager Hugo Nelson says . 

He said in an recent article that although platinum recently breached the $900/oz level, its continued march to $1000/oz is not certain. Its price is driven by vehicle catalyst makersÆ inelastic demand and more elastic jewellerydemand.

SAÆs mines produce 77% of world platinum and, if the rand strengthened to a point where the platinum-mines viability was threat ened, the dollar price would have to rise to ensure continued supply. 

This contrasts with gold, where SA produces less than 10% of global supply and the demise of SAÆs mines would have no direct effect on the gold price. Nelson said Implats remained attractive not only because of its exposure to platinum mining, but as it has certain assets that are not fully appreciated by the market.

One of these is its investment in Zimplats. Zimbabwe accounts for 60% of ImplatsÆ reserves and re ources but only 5% of group profit.

Any asset associated with Zimbabwe depresses the marketÆs appetite, as was the case when Impala bought Zimplats. 

As soon as the sociopolitical turmoil in Zimbabwe normalised, the disparity between ImplatsÆ assets and profit contribution would be addressed, Nelson said.

Attractions of the primary-product market and the blue-sky opportunities in Zimbabwe are enhanced by ImplatsÆ defensive earnings pattern. 

It has a more flexible cost structure than other miners owing to the dollar-based cost structure of its toll-refining business. 

If metal prices decline, the cost base declines. The Royal Bafokeng royalty, calculated as a percentage of profits, cushions negative profit periods. Though 60% of ImplatsÆ assets are hardly contributing, Impala will earn R50 a share next year, putting the business on an attractive price: earnings multiple. 

Management has showed a shareholder-friendly attitude by buying back shares, Nelson said.

Implats is due to report its results for the year to June on Friday.